Chrysalis Ventures
2009 3rd Quarter Newsletter www.chrysalisventures.com
 

A View From the White House Jobs Summit:
Seeking Quality Jobs and Sustainable Growth

On December 3 President Obama called some 130 business and labor leaders to the White House to offer ideas on how to get Americans back to work. The National Venture Capital Association asked me to attend on behalf of the venture capital industry, and the Administration agreed that our sector, a major source of U.S. innovation, job creation and prosperity, should be represented. It was my honor to participate.

Administration initiatives that purportedly came out of this session ("cash for caulkers," small business tax credits, pressuring bankers to lend more) have been widely reported, so this report will aim toward the personal and impressionistic, rather than the complete and balanced … read more »

   

Chrysalis in the News


Below please find a few links to recent articles about Chrysalis and our team:


Quality Over Quantity: National VC Expert Mark Heesen, Chrysalis Ventures’ David Jones Jr. Discuss How Louisville Fits in Competitive VC World


So How Was The White House Jobs Summit?


Six Questions with VC-Triathlete David Jones Jr.


VC Chief: 2009 Is Year Of Triage


Chrysalis’ Jones Sees Opportunities In Healthcare, Communication Technology


Kentucky Venture Capital Firm Chrysalis Is Banking On Texas Companies


Betting on Health Care Start-Ups That Cut Costs

 

A View From the White House Jobs Summit:
Seeking Quality Jobs and Sustainable Growth

On December 3 President Obama called some 130 business and labor leaders to the White House to offer ideas on how to get Americans back to work. The National Venture Capital Association asked me to attend on behalf of the venture capital industry, and the Administration agreed that our sector, a major source of U.S. innovation, job creation and prosperity, should be represented. It was my honor to participate.

Administration initiatives that purportedly came out of this session ("cash for caulkers," small business tax credits, pressuring bankers to lend more) have been widely reported, so this report will aim toward the personal and impressionistic, rather than the complete and balanced.

The President kicked off the meeting by noting that good jobs come from private sector growth and that government alone cannot put the country back to work. He then tasked participants with breaking up into smaller groups, sharing ideas with his domestic cabinet and advisers, and reconvening for a "town hall meeting" format discussion.

In these smaller sessions, there seemed to be three constants.

(1) Participants bewailed the failure of banks to resume lending. The President and his cabinet railed against the big banks for greed and short-sightedness in an almost emotional way; small business representatives complained about tightened working capital lines and credit card standards.

(2) Labor and economists called for government to spend on infrastructure, especially transportation and data projects that would employ union labor. All economists in attendance urged that concerns about deficits and national debt should be ignored for now.

(3) Big business complained that the breadth of the Administration's agenda created uncertainty, which impeded investment and therefore hiring decisions. Each big business representative then suggested a federal fix for his or her sector.

I spoke at every opportunity about the role of innovation and risk-taking in the creation of the great companies and new industries in which America leads the world. I urged that we not blunt our edge in the short-term push for recovery, and expressed specific concern over

(1) the web of "one size fits all" regulation like Sarbanes Oxley that inhibits small, fast-growing companies' access to capital and has largely shut down the U.S. IPO market (even as Asian markets flourish);

(2) proposals to increase the capital gains tax rate, which has been a steady, predictable incentive for long term investing of time and money in venture capital; and

(3) immigration rules that expel and repel talent from our country, in ways that violate our best traditions and basic common sense.

In addition I joined the call for infrastructure investment – but focused on human capital rather than just roads, bridges and bandwidth. I praised the Administration's education policy initiatives and urged follow-thru despite short term pressure and incumbent opposition. And I urged focus on public health issues – specifically the obesity epidemic – by calling for a "lean tech" and "lean energy" revolution to accompany the clean tech and clean energy goals of the Administration.

My overwhelming sense was that participants were consumed with short term job creation and had little bandwidth for policies aimed at building strength in the 5 - 10 year time frame.

Also, both Administration and labor seemed to be in the grip of populist anger that could extend well beyond Wall Street. The President mentioned at least twice his goal of building an economy free of "bubbles," and at one point seemed to say that nothing valuable had come out of the last two decades of "purported" economic growth. I found this shocking, since the internet and the "flat world" it has spawned are, in my view, far more profound than an investment bubble.

Our smart, eloquent, calm President has a very hard job. I worry that his advisors and his Party (my Party) tend to be too confident in their brains and goodness, and will rely too heavily on regulation. But I take comfort in the belief that President Obama knows history, and that American history is a tale of breakthrough innovation replacing failed or complacent stasis.

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Exits

Stericycle Acquires MedServe for $182.5 Million

In December 2009, Stericycle, Inc. (NASDAQ:SRCL) completed its long-pending acquisition of Chrysalis portfolio company MedServe, Inc. following receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. MedServe, acquired for $182.5 million in cash, is now a wholly-owned subsidiary of Stericyle.

MedServe, a Houston-based provider of medical waste management services to hospitals and clinics, is engaged in the collection, transportation, treatment, and disposal of medical waste, hazardous waste, universal waste, and other regulated wastes; sharps management services; safety and compliance training services; and other related businesses. Under the leadership of MedServe Chairman and CEO Roger Ramsey and the active participation of Chrysalis Managing Director Koleman Karleski, the company has pursued an aggressive roll-up strategy augmented with “better, faster, cheaper” medical waste processing technology which resulted in reduced processing costs to its customers. MedServe grew to become the second largest medical waste management provider in the nation prior to the Stericycle acquisition.

View the complete press release here

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New Investments

My Health Direct Raises $4 Million in Initial Round

In December 2009, Chrysalis was the sole investor in a $4 million Series A financing of Wisconsin-based My Health Direct, a provider of web-based access management solutions to healthcare providers and payers.

Founded in 2006, My Health Direct provides a web-based solution that enables nurses in Emergency Rooms to re-direct non-emergency patients to the appropriate setting in the community, with a confirmed appointment based on patient needs such as proximity, payer network, timeliness, and language. As a result, patients receive proper care quickly, while hospitals and clinics using My Health Direct cut costs by directing patients to the most appropriate healthcare professional. The company will use this new capital to hire sales and support professionals and to accelerate expansion both geographically and beyond the emergency room.

View the complete press release here

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NextImage Medical Raises $5 Million in Initial Round

In November 2009, Chrysalis invested $5 million in the Series A financing of San Diego-based NextImage Medical, Inc., a provider of next-generation radiology services to the workers’ compensation market. Chrysalis was the sole investor in the round.

Founded in 2008, NextImage Medical has developed a proprietary information technology platform for the $1.3 billion radiology vertical in the workers’ compensation medical marketplace. The NextImage platform streamlines scheduling, electronic archiving of images, and reporting. This results in consistent high-quality diagnostics, faster turnaround time, and better measurable outcomes in a more cost-effective manner. The company will use the capital to accelerate its market expansion and enhance its technology platform.

View the complete press release here

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Follow-on Financings

Achieve Raises Additional $1 Million

In October 2009, Chrysalis led a $1 million follow-on financing of Louisville-based Achieve CCA, a provider of debt management services to healthcare patients.

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Chronicity Raises Additional $2 Million

In August 2009, Chrysalis led the $2 million follow-on financing of Dallas-based Chronicity, a provider of integrative, retail clinical services for chronic health conditions. SSM co-invested in the round.

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Portfolio Company News

Paramount Launches ParamountClips.com Using Digitalsmiths Technology

In December 2009, Paramount Digital Entertainment announced the launch of www.ParamountClips.com, a fully automated, self-service clip portal which allows Paramount licensees to access the studio's digital film index of clips from over 80 of Paramount Pictures' most beloved and most successful films including "The Godfather," "Forrest Gump," "Grease," and "The Addams Family." Digitalsmiths, the innovative multi-screen media analysis, operations, and publishing technology provider, has utilized its VideoSense® technology to index, manage, distribute, and further monetize Paramount's vast digital film library.

Paramount's licensees can search for any element within the library, a list that includes specific actors, locations or lines of dialogue. VideoSense instantly combs through the collected metadata to locate relevant clips. Clips can then be reformatted, exported to any platform that plays video, and monetized. This new platform enables Paramount to create a 'digital blueprint' of its entire film library that can be monetized across multiple platforms.

Digitalsmiths products are used today by leading Hollywood studios, broadcasters, distributors, and publishers including Warner Bros., Telepictures and TMZ.com. Digitalsmiths has been named one of the "Top 45 Companies to Watch" by Dow Jones, one of the "OnHollywood Top 100" and "OnGlobal 250" by Always On, "Technology of the Year" by North Carolina's Council for Entrepreneurial Development (CED), and winner of the "Streaming Media Readers' Choice Awards."

View the complete press release here

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afterBOT Launches QuickReceipts, Based On Patent for Retail Industry Digital Receipt System

In December 2009, Atlanta-based afterBOT, Inc., a provider of digital receipt solutions for retailers, announced the Scottsdale test launch of QuickReceipts, a consumer service that provides a secure, online repository for consumer receipts from multiple retailers.

Developed in partnership with Intuit, a leading financial software firm, the QuickReceipts web site gives shoppers a simpler way to track expenses and handle returns and exchanges through managing their receipts online.  Participating shoppers’ purchase receipts are automatically uploaded from retailers through afterBOT’s recently patented TransAccess® digital receipts solution. Retailers benefit from QuickReceipts through the ability to create more effective and measurable targeted marketing and promotions, and improved customer service.

View the complete press release here

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Asterand to Acquire BioSeek Inc.

In November 2009, Asterand PLC (LSE: ATD), a leading provider of human tissue and human tissue-based services to pharmaceutical and biotechnology companies engaged in drug discovery research, announced it had signed an agreement to acquire BioSeek Inc., for $1 million in Asterand stock and up to $13 million in earnouts, subject to Asterand shareholder approval. San Francisco-based BioSeek is a pioneer in the application of predictive human biology to drug discovery through its unique human primary cell based disease models.

The proposed acquisition of BioSeek will be Asterand’s first step in a “buy and build” strategy to acquire businesses which offer highly complementary products and services to the human-tissue based products and services offered by Asterand.

View the complete press release here

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Leading Semiconductor Manufacturer ST-Ericsson Selects Open Kernel Labs as Mobile Virtualization Partner

In October 2009, Chicago-based Open Kernel Labs (OK Labs), the leading provider of virtualization software for mobile phones and broadband internet devices, announced that ST-Ericsson, a world leader in wireless platforms and semiconductors, had selected OK Labs as its mobile virtualization partner for joint projects featuring ST-Ericsson 3G multimedia chipsets and open OS platforms. This news means that the world’s two largest cellular baseband semiconductor manufacturers (Qualcomm and ST-Ericsson) now use OK Labs microkernel software.

View the complete press release here

Also this fall, seasoned mobile broadband executive Atish Guide joined the company’s board of directors. Most recently, Gude served as Senior Vice President and Chief Marketing Officer for Clearwire Corporation, a leading provider of advanced high-speed Internet services to consumers and businesses. Previously, Gude led Xohm, Sprint Nextel’s 4G business unit, and served as their SVP of Mobile Broadband Operations.

These two announcements follow on the heels of other significant activity for OK Labs: an introduction of an off-the-shelf virtualized version of Google’s Android operating system, a partnership with leading application delivery vendor Citrix to allow easily deployed and securely managed access to enterprise and desktop applications from wireless devices, and the news that OK Labs’ software allowed Motorola to release the world’s first fully virtualized smartphone.

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Cybera Named to 2009 Deloitte Technology Fast 500 and Inc. 5000

In September 2009, Nashville-based Cybera, a leading provider of managed service, private networking solutions, was ranked number 441 on the 2009 Deloitte Technology Fast 500 which recognizes the fastest growing technology, media, telecommunications, life sciences, and clean technology companies in North America. The Deloitte Technology Fast 500 is based on percentage of revenue growth over five years, indicating speed of growth—not current financial performance or profitability.

View the complete press release here

In October 2009, Cybera also announced that it had been named to the 2009 Inc. 5000 list of the fastest-growing private companies in America.  This recognition represents the third consecutive year Inc. has named Cybera to the list, which measures revenue growth for U.S.-based, privately held, independent companies.

View the complete press release here

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ConnectivHealth Rebrands as HealthTeacher

In September 2009, Nashville-based ConnectivHealth rebranded the healthcare publishing and information provider to reflect the company’s focus on further growing and developing HealthTeacher, a 10 year-old provider of online health, wellness, and prevention education resources for kindergarten through 12th grade. HealthTeacher provides teachers the resources, tools, and background material to educate students about making healthy lifestyle choices and is used by more than 20,000 teachers nationwide.

View the complete press release here

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Entrepreneur Profiles

Liz Griggs, CEO, NextImage Medical

Liz Griggs founded NextImage Medical, Inc., a provider of next-generation radiology services to the workers' compensation market, in 2007. In 1993, Liz founded One Call Medical Inc., a diagnostic radiology PPO, which she grew into one of the leading companies in the workers' compensation insurance medical marketplace and sold to TA Associates in 2003 for $115 million.

Prior to One Call, Liz worked in both the Boston and New York City offices of the investment bank Donaldson, Lufkin & Jenrette (DLJ) with clients that included large physician management groups and healthcare investment funds. Prior to joining DLJ, she worked in the healthcare financing arm of The Bank of Boston, where her experience included both lending and recapitalization transactions. Liz was selected as a finalist for the Ernst & Young Entrepreneur of the Year award in 1997 for her leadership role in building One Call Medical Inc.

A native of Maryland, Liz was a Dean's Scholar at the University of Delaware, where she graduated with a BS. She also attended the Harvard Business School's President's program.

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Steve Subar, President and CEO, Open Kernel Labs

Steve Subar co-founded Open Kernel Labs (OK Labs), a provider of virtualization software for mobile phones and broadband devices, following his term as 2005 Entrepreneur-in-Residence at NICTA, Australia’s Information and Communications Technology Research Centre of Excellence. While at NICTA, Steve was charged with indentifying industry-specific market opportunities and working with NICTA’s researchers and commercialization team to build a world-class company to exploit these gaps. It was from this exercise that Steve selected and spun-out OK Labs.

Prior to OK Labs, Steve was a Managing Partner at z2m4, a management consulting company focused on delivering portfolio company performance for growth-stage technology companies. Steve is also co-founder of Click-and-Done, a pioneer in e-business infrastructure and software for electronic billing in addition to Relavis Corporation, a leading publisher of relational database tools used to accelerate application design, development, and implementation.

Previously, as a senior executive at Mobius Management Systems (NASDAQ: MOBI), Steve was instrumental in growing revenues 275 percent over four years, leading to the company's successful IPO. Additionally, he was part of the management team at Computer Associates (NASDAQ: CA) that drove revenues from $30 million to more than $1.2 billion over a five-year period.

Steve holds a Bachelor of Science from Miami University’s School of Business with a concentration in Computer and Information Technology.

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Chrysalis News

John Willmoth Joins as Full-Time Venture Partner

John Willmoth, who initially joined Chrysalis as Executive-in-Residence in September 2007 and became part-time Venture Partner in August 2008, became a Venture Partner effective September 1, 2009. An expert in wireless communications and former Nextel executive, John’s focus is on technology investment opportunities including information and digital media, communications and mobility, and education technology. He serves on the board of directors for Continuum 700 LLC, Mobile Armor, and Open Kernel Labs.

View the complete press release here

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Matt Winn Promoted to Senior Associate

Matt Winn, who joined Chrysalis as an Analyst in January 2005 and became an Associate in January 2007, was promoted to Senior Associate effective September 1, 2009. He currently serves on the board of directors of iSqFt/Construction Software Technologies.

View the complete press release here

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Elizabeth Rounsavall Promoted to Director of Research and Analytics

Elizabeth Rounsavall, who joined Chrysalis as Associate in August 2007, has been promoted to Director of Research and Analytics, a new position to provide research and analytical support to the investment team for Chrysalis’ primary investment sectors: healthcare and technology.

View the complete press release here

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NVCA’s Venture Impact Report

In September 2009, the National Venture Capital Association’s released its fifth annual Venture Impact: The Economic Importance of Venture Capital-Backed Companies to the U.S. Economy measuring venture-backed jobs and revenues in the U.S. and segmenting that data further into geographical regions and industry sectors.  While we encourage you to read the full report, a few highlights which represent a strong testament to the value of venture capital to the U.S. economy and our important role in economic recovery include:

  • Venture-backed companies employed more than 12.1 million Americans in 2008

  • Venture-backed revenues were $2.9 trillion in 2008, equating to 21 percent of US GDP.

  • Venture backed companies grew jobs and revenues faster than their non-venture counterparts from 2006-2008.

About Chrysalis Ventures

Founded in 1993, Chrysalis Ventures manages one of Mid-America’s largest funds for early and growth-stage investments with approximately $400 million under management. Focused on partnering with entrepreneurs to build enduring businesses in industries undergoing significant transformation, Chrysalis has invested in over 60 companies primarily in the Healthcare and Technology sectors. Headquartered in Louisville, KY, Chrysalis has offices in Cleveland, Pittsburgh, and Ann Arbor.

Please let us know if you are aware of a company that might be a strong investment fit. We are always looking for the next great investment and hope you will approach us first with any ideas. Contact us at info@chrysalisventures.com or learn more about our team by visiting www.chrysalisventures.com.

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