Published in Finance

Blue Medora raises nearly $7.5M amid ‘tough’ climate

BY Sunday, September 18, 2016 01:42pm

GRAND RAPIDS — Software development firm Blue Medora LLC raised nearly $7.5 million in capital in what one expert calls a “tough” but “good” environment for companies seeking investors.

The investment is part of an effort by the Grand Rapids-based company, which focuses on cloud system management, to raise up to $10 million in capital. Blue Medora reported the capital raise involved 10 investors at a minimum of $10,000, according to a recent filing with the federal securities regulators. 

The venture capital-backed company declined to comment on the ongoing fundraising effort, which follows a successful raise of $4.5 million in 2015 that included investments from Michigan eLab Capital Associates LLC of Ann Arbor, Grand Rapids-based Start Garden LLC and Holland-based Grand Angels. The company said at the time it planned to use the capital to build its engineering, sales and marketing teams to meet demand and accelerate new product development.

Blue Medora’s ongoing capital raise comes amid an active environment for companies seeking capital, especially compared to earlier in the decade. Despite the spike in activity, investors remain focused on “the same things they always have,” said Phil Torrence, managing partner at the Kalamazoo office of Honigman Miller Schwartz and Cohn LLP.

“The fundamentals haven’t changed at all. They’re looking for good technologies that either are going to effectively change the market or offer a solution to a current unmet need, make something better, and then, more importantly, (one that) has a ‘been there, done that, do it again’ management team,” said Torrence, who heads the financial institutions and corporate governance practice groups.

Torrence works with companies seeking capital. His practice group worked on 10 to 15 financings over the summer and has another 10 presently underway “that are at term sheet or later stage that will get closed.” Of those financings, a “fair number” are for companies based in Michigan, he said.

“It’s tough but it’s good. Deals are getting done,” Torrence said of the present fundraising environment that is “no question” better today than in the few years immediately following the Great Recession.

“For the good companies, for the ones that really have something, I think the market is there,” he said.

Later-stage financings, however, “are getting harder and harder to come by” because they require larger amounts of capital, and a slow market for initial public offerings limits the ability of investors to generate a future return, Torrence said. The IPO market right now is “pretty much limited” to drug development companies.

Most recently in Michigan, Livonia-based Gemphire Therapeutics Inc. raised $30 million in an August IPO that came in at half of what the company originally targeted in its April filing with federal regulators.

At the same time, venture capital firms nationally and in Michigan have been steering more investments to technology and software companies in recent years.

Venture capital investments in software firms totaled $8.74 billion through 379 deals nationally in the second quarter of 2016, according to the quarterly MoneyTree report from the National Venture Capital Association and PricewaterhouseCoopers. That compares to $7.47 billion in 505 deals in the same period of 2015.

Investment nationally in software firms totaled $23.69 billion through 1,816 deals in 2015. The total dollar amount was up 9 percent compared to 2014, when volume was slightly higher with 1,876 deals, according to data from the MoneyTree report. 

Both years were a significant jump from the $8.55 billion in 1,435 deals in 2012.

“The Blue Medoras of the world, they’re doing quite well,” Torrence said.

In Michigan, venture investments in software firms totaled $115.3 million through 15 deals in 2015, which compares to 10 deals for $20 million three years earlier. 

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