Which companies are most impressive to investors? We decided to find out.
While working on this month's report on private capital (see "Need Money?"), we naturally wondered which members of the just-published Inc. 500 were most likely to attract significant financial backing. So we asked three seasoned investors--their bios are listed below--to assess the new crop of companies and tell us which ones stood out.
Just so we're clear, the investors we talked to had access only to the information we published. Their analysis was based solely on browsing the profiles and does not reflect standard due diligence. And as one venture capitalist who turned down our interview request noted, if he were really interested in investing in one of these companies, he certainly wouldn't blab about it to us. With those qualifiers in mind, please read on.
Athenahealth (No. 421) 2005 revenue: $53.6 million
"I like that this company organizes and automates health care reimbursement. This is important to physician practices because they tend to be cash-poor, so they want to get money faster and with fewer rejections from insurance companies."
SkillsNET (No. 270) 2005 revenue: $10.7 million
"SkillsNET's Web-based programs give companies the ability to track internal talent in a sophisticated way. Large companies often have a hard time keeping track of--and maximizing--individuals within their organizations because they're so complex. Being able to tell a company where its resident talent lies is an interesting opportunity."
CaseStack (No. 259) 2005 revenue: $35.7 million
"CaseStack is in an area with a high degree of specialization: warehousing and transportation. That's something a specialist can do better than a company that's making Cheerios."
Craig Jones is the managing partner at Ticonderoga Capital, a bicoastal VC firm focused on health care and business services.
Limelight Networks (No. 71) 2005 revenue: $21.5 million
"There's an explosion of multimedia on the Web, and there's no question it's better for a company to have a third party do it. Akamai is a competitor to Limelight, but it's focused on general Internet content delivery, not multimedia. And I'd bet that these guys are more nimble than Akamai."
Global Market Insite (No. 93) 2005 revenue: $27 million
"It's going after market research, a big industry that's being disrupted by the Internet. Many people think market research is broken; it's not producing high-quality respondents that are producing predictable results."
StubHub (No. 8) 2005 revenue: $199 million
"I'm not bullish on standalone e-tailers selling hard goods online--given that, I like StubHub. It's a market for tickets, which are basically an information product. They're now printed at home, so you don't have to manage logistics. This is a fragmented group of buyers and sellers, and it has a big reseller market."
Alternative Energy Store (No. 440) 2005 revenue: $5.7 million
"From a consumer perspective, there's a growing awareness of environmental responsibility, but consumers still don't understand the options [for solar, wind, and other alternative energy sources]. There's nothing better than a person at a retail store to explain something and help you buy."
Raj Kapoor is a managing director of Mayfield Partners, a Silicon Valley VC firm that funds early-stage tech companies.
Learning Annex (No. 379) 2005 revenue: $36.5 million
"There's an opportunity to invest in education companies, and this model is portable and scaleable. The founder sold it, then bought it back, so he is experienced--the kind of guy we might like to back."
Partsearch Technologies (No. 453) 2005 revenue: $49.8 million
"We generally get nervous about distributors--low barriers to entry, little differentiation--but we like Partsearch. It sources a huge number of parts for its customers, the CompUSAs of the world. It also has a virtual inventory, which means it has created a network where it doesn't hold inventory on its books yet can source it quickly."
Hudson & Keyse (No. 99) 2005 revenue: $11.8 million Resurgence Financial (No. 28) 2005 revenue: $11.7 million
"Heading into a higher interest-rate environment, banks want to get distressed debt off their balance sheets for regulatory and accounting reasons. So there are nice opportunities for businesses, like these two, that buy distressed debt."
Daniel Eisenstadt is the director of private equity at CMS Companies in Philadelphia. It invests in small and midsize companies.