BlueTree Allied Angels of Pittsburgh recently experienced a 28 percent compounded rate of return on the exit of medSage Technologies, LLC.
The company was acquired by Netherlands-based Royal Philips Electronics and will be part of the sleep business of the Philips/Respironics Home Healthcare Solutions Unit headquartered in Pittsburgh.
"We are really pleased," says Catherine Mott, chief executive and founder of BlueTree Capital Group and BlueTree Allied Angels "This is a classic angel deal. We invested in two rounds of $1.3 and $1.2 million at $7 and $10 per share and sold for $43 per share after holding the company four-and-a-half years."
With those two rounds, medSage was able to scale and start generating cash with no VC money required.
BlueTree Allied Angels stayed involved in building the company
Not only did BlueTree Allied Angels invest millions in medSage, the angels rolled up their sleeves and helped the company grow. One of the angels, who was on the medSage board and had built a division for a similar but not related company in Canada, stepped up as CEO when the former CEO experienced health issues.
"He scaled the company and drove to exit," says Mott. "Another member, who replaced him on the board, had exited from a couple of medical device companies. He was very instrumental in structuring the exit. He knew a lot of nuances that others didn't know. Other key angels also teamed in."
From the beginning, Mott says, medSage was courting Philips/Respironics. "It's a chapter right out of Basil Peters' book on exits," says Mott, referring to Early Exits by Basil Peters, angel investor and exit strategist.
Creating jobs and angel satisfaction
"This deal highlights the significance of angel investor groups", says Mott. "As organized private investors, we invest more than money; we invest our time, talent, experience, and contacts to help our portfolio companies be successful."
medSage developed a Web-based platform that allows home medical equipment companies to monitor patient compliance and track replacement equipment needs. It has forty employees. Those jobs remain in Pittsburgh and an additional fifty new jobs will be created.
"With medSage, our member/investors have helped launch a company that grew to be attractive enough to be acquired by a larger company who can capitalize on the opportunity to scale medSage's product line in the marketplace," says Mott.
"Not only do BlueTree investors on this project realize a double-digit return on their original investments," she says. "They will also have the satisfaction of seeing a company move on to the next level, which is an added benefit of angel investing, particularly since this company will remain in the Pittsburgh region."
BlueTree Allied Angels, which started in 2003 as a group of eight, has grown to 49 and has invested more than $16 million in 25 ventures. BlueTree is the only professionally-managed angel group in western Pennsylvania.
Mott says that angel investing in the region is on the uptick. BlueTree Allied Angels did double the investment in 2010 than the group had done in 2009. medsage is the group's third and most profitable exit.
"We are growing a satellite group two-and-a-half hours north in Erie, PA," she says. "Two other regions have asked us to come and start groups. It's an underserved market."
