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Could other Granite State tech companies be following in Dyn's footsteps?

New Hampshire Union Leader

November 26. 2016 5:29PM
Dyn headquarters is located at 150 Dow St. in Manchester. (DAVID LANE/UNION LEADER)

MANCHESTER - Who is the next Dyn?

In a deal rumored north of $600 million, the Millyard tech company announced last week that Silicon Valley giant Oracle was acquiring it, the second major technology acquisition of a New Hampshire company within a month.

"For tech companies, that dance can start at any time in a company's life if they have unique technology or have achieved early market success in a growing market led by larger companies who realize that company has what they need, and now," said Jesse Devitte, managing director and co-founder of Borealis Ventures, which invests in attractive companies, including Dyn.

Dyn, which helps move data traffic on the internet, employs more than 400 people, including more than 330 in Manchester. While the companies remained mum on the sale price, one tech expert speculated the deal was worth north of $600 million.

"All depends on what the acquiring company needs - usually a mix of great technology, market success, very talented team and strong financial performance - not speaking for Oracle of course but I know Dyn had that special brew cooking for sure," said Devitte, who couldn't comment on the sale.

Oracle in July announced it had bought cloud company NetSuite for about $9.3 billion. Media giant Hearst, meanwhile, paid a reported $2 billion last month for Camp Systems International Inc., which employs 70 of its 800 workers at its Merrimack headquarters.

Manchester High School West graduate Jeremy Hitchcock co-founded Dyn in 2001 at Worcester Polytechnic Institute with three fellow graduates. Today, Dyn counts Twitter, Netflix, Visa and Pfizer among its high-profile clients.

"(These are) New Hampshire kids who grew up to build a great company with a meaningful role today and legacy going forward in the way our world is connected - very cool," Devitte said.

Reasons vary for acquisitions, according to TK Kuegler, managing partner at Wasabi Ventures, which has built, financed and advised more than 200 startups and maintains a Manchester office. "Sometimes it is product or even team domain expertise," Kuegler said. "Other times it is revenues or profits. Other times it is a defensive acquisition."

Success attracts attention

"Sometimes companies get acquired because they are out of options (e.g. market is hard to continue to scale or they are short on fundraising options)," Kuegler said by email.

"Or a telltale sign is that they are growing quickly and large, agile companies take notice," Kuegler said. "Another telltale sign is when a company starts taking market share in a segment from a large company. Many large companies will acquire them to take out the competition."

Deloitte's Technology Fast 500, which ranks the fastest growing technology, life sciences, and energy tech companies in North America, listed Dyn and Newforma, a Manchester software company, on the list in 2015. This year, Newforma was the sole New Hampshire occupant.

Several people pointed to Newforma, which produces project information management software that is being used in, among other places, the construction of the Jeddah Tower in Saudi Arabia, which will become the world's tallest building.

Ian Howell, CEO of Newforma, congratulated Dyn on the Oracle deal but wouldn't entertain questions on his company's future.

"I prefer not to speculate on the possibility of any other future acquisitions," said Howell in a statement. "However, we are certainly proud to be a New Hampshire-based technology company, to create jobs and to have our employees come to work every day to strive to deliver value to our customers and shareholders.

Expecting a payout

"From a practical standpoint, any company that raises equity capital from outside investors understands that those investors will eventually require liquidity for their investment," Devitte said. "Usually companies bring in equity capital to accelerate the development of their technology and fuel their market success - and that's what catches the eye of potential acquirers."

Dyn last May received $50 million in financing.

"Every time a startup takes money it ups the expectations. And there are only two ways a VC gets a return on investment, IPO or acquisition," Kuegler said of venture capitalists.

Another potential acquisition target is DataGravity, which has received $92 million in funding in several waves. The Nashua company, which helps people store, protect, search and govern their data, said it employs fewer than 100 employees with 99 percent working in New Hampshire.

The company this year shifted its focus from a hardware to software platform.

"CEO Paula Long and the executive team are dedicated to continuing to build a thriving data security business that is currently focused on product innovation and customer acquisition," the company said in a statement last week. "They have no plans at this time to be acquired."

Hot properties

Dyn's transition from local to corporate ownership was escalated this year when the company received $50 million in new investment and named a new CEO - common steps along the path to acquisition or a public stock offering. Other Granite State tech companies are primed to follow a similar path.

"Lots of growing tech companies - Avitide, Newforma and Scribe Software are three we know well - others like Datagravity, Nanocomp and Single Digits are strong New Hampshire tech companies with unique trajectories, and then there is Adimab, which is more likely an IPO candidate at the right time," Devitte said.

Devitte's firm is an investor in Avitide, Newforma and Adimab and a former investor in Scribe Software.

Some speculated another acquisition target could be Plexxi, a Nashua company developing computer networking solutions. The company had raised $85 million as of last January, including money from Google's venture capital investment arm. (Plexxi's spokesman didn't return a phone message last week.)

Kuegler said it is "hard to speculate on who is the next one. There are a handful of possible candidates but none seem highly imminent."

Matt Cookson, executive director of the New Hampshire High-Tech Council, has seen the state's tech community attract a bigger media spotlight in recent years.

"There's definitely national attention on our ecosystem these days, and attracting this kind of attention (with the Oracle-Dyn deal) is positive. And we have several companies that have been receiving attention, so we should expect more of this type of (acquisition) activity as companies continue to look for a competitive advantage," Cookson said.

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