Tom Shannon started getting nibbles from potential suitors for Prodesse in 2005, three years after he came on as president and CEO of the biotech firm based in Waukesha, WI.
The company was founded in 1996 by Kelly Henrickson, a Medical College of Wisconsin pediatrics and infectious diseases professor. Shannon and a professional management team came in to run it in 2002 after Henrickson recapitalized the business, Shannon said.
Prodesse (pronounced pro-DESS-uh) became a market leader in molecular testing for infectious respiratory diseases like the flu. As the company’s sales continued to swell, so too did management’s estimate of its worth, Shannon said. Buyers’ valuations of Prodesse also rose, but from a lower starting point than what Shannon and his team previously had in mind.
“Their expectation goes up, but it’s still from their framework,” Shannon said, chuckling as he recalled one potential buyer in particular that was never on the same page as Prodesse. “It took until 2009 to get a number I wanted.”
The magic number: $72 million, which Prodesse got from San Diego-based Gen-Probe. (Gen-Probe is now a subsidiary of Hologic, based in Bedford, MA.) All told, Prodesse exited for 16 times the amount Shannon said he and about 20 investors put into the business.
Prodesse is one of at least 19 major exits by technology-based startups in Wisconsin in the past six years, with deal size ranging from Madison-based Nerites’s $20 million sale to Kensey Nash, in 2011, to Hologic’s 2008 acquisition of Madison’s Third Wave Technologies for a whopping $580 million.
“Wisconsin has a lot of good companies,” said John Taylor, vice president of research for the National Venture Capital Association, based in Arlington, VA. “You can see that there are companies that get acquired and companies that go public, but it’s a smaller region of the country. You’re not going to see the numbers like we see in Silicon Valley.”
(Every other region in the U.S. is essentially chasing California, where 53 percent of venture dollars have funneled since the start of 2012, according to Taylor.)
In talking with Wisconsin investors and entrepreneurs, a major theme I’ve heard is that they’d like to see more in-state startups grow to the point of acquisition or an initial public offering.
Exits are crucial to the state’s startup ecosystem for a host of reasons, they said. These include grabbing the attention of large companies, private equity firms, VCs and entrepreneurs around the country; building up a stable of experienced serial entrepreneurs who (ideally) continue to start new companies in Wisconsin; and sprouting a crop of new angel investors who will take their returns and plow them into the next wave of startups.
That’s exactly what Prodesse’s
