Ann Arbor: Targeted For Acquisition

Exits are abounding in Ann Arbor over the last few years. Start-ups are exiting stage left or right or even out the backdoor. Some are so big, like last October's $275 million HandyLab deal, they barely fit in the spotlight. Ann Arbor's latest exit, Accuri Cytometers, pushes the college town to center stage.

The numbers behind Becton, Dickinson and Co.'s acquisition of Accuri Cytometers aren't public yet, but there are a lot of major players in Ann Arbor's entrepreneurial ecosystem staying contentedly silent waiting for this deal to close. Tom Kinnear is the founding director of Accuri Cytometers and one of its first angel investors. He holds up the start-up's story as a textbook example of how a technology is supposed to be spun out of the University of Michigan, invested in, commercialized, grown, and exited in a way that maximizes the local impact.
"Success breeds success," says Kinnear, who is also the executive director of the Zell-Lurie Institute for Entrepreneurial Studies at U-M's Ross School of Business. "You'll see more funds and larger funds. You'll see more and more active angels. You'll also see people from a bigger geographic area want to be a part of Ann Arbor Angels."
How it happened
Accuri Cytometers developed a revolutionary, high-performance cell analysis system. Its Accuri C6 Flow Cytometer measures stats like T-cell counts, which is an instrumental tool in treating diseases such as AIDS and cancer. The technology came out of laboratories at U-M earlier this decade and launched the start-up in 2005. Along the way the company raised tens of millions of dollars in venture capital, created nearly 85 high-tech jobs (including 20 over the last year), and attracted major multi-national corporation Becton, Dickinson (commonly known as BD) to shell out for an acquisition that many are comparing to HandyLab.

"Accuri found a real need and was serving it very well," Kinnear says. "It made them a very attractive acquisition target."
Kinnear, like everyone else closely associated with the Accuri Cytometers, declined to discuss the specifics of the deal. However, he and others helped shed some general light on how a deal like Accuri Cytometers' takes place.
Two types of companies purchase start-ups: (1) Private equity firms that will try to maximize value and (2) large corporations in the same industry that serve as a strategic buyer to create synergies within their operations. The later is usually worth more money. Strategic acquisitions normally start with a partnership between the two firms where they will work closely together for months or years. That's how the relationship between life sciences giant BD began with HandyLab, before BD acquired and folded the medical device firm into its operations.
What makes Accuri Cytometers unique is there was no partnership. In this case, major corporations like BD were monitoring the promising Ann Arbor-based start-up and decided its technology possessed quite a bit of value. Midway through 2010, a suitor reached out about acquiring Accuri Cytometers. And then another. Neither were BD, even though earlier that year Accuri Cytometers made former HandyLab CEO Jeff Williams (who shepherded the BD acquisition there) its CEO. BD was among the eight suitors, all major multi-nationals of the same size of BD or larger. Six months later, BD announced the acquisition.
"That hasn't gone unnoticed by the rest of the country," says Chris Rizik, an investor in Arboretum Ventures (an early Accuri Cytometers investor) and CEO of the Renaissance Venture Capital Fund. "Ann Arbor is now seen as a technology hotbed."
What it means
Arboretum Ventures is just the tip of the iceberg when it comes to the local investment in Accuri Cytometers. Groups of angel investors, wealthy individuals who can write five-figure checks with a steady hand, from Ann Arbor, Grand Rapids, and Toledo made numerous early infusions. Then came Ann Arbor-based Arboretum and Plymouth Venture Partners with hefty sums of seed capital. So did the state's InvestMichigan! Growth Capital Fund and a number of out-of-state venture capital and private equity firms, such as Boston-based Fidelity Biosciences and Baird Venture Partners from Chicago.
"This is certainly an exclamation mark," says Kinnear, in reference to what Accuri Cytometer's deal says about the viability of Ann Arbor's entrepreneurial ecosystem. "Especially from the point of view of VCs that are looking to invest here." He adds that this success will open up more investment streams into Ann Arbor, both across the U.S. and in the Midwest. "This will make all of us more open," Kinnear says. "We'll be willing to look at deals from Grand Rapids to Ann Arbor."
The acquisitions of Accuri Cytomters and HandyLab aren't just an endorsement of the the University of Michigan and the investors who sink big checks with lots of zeros into its start-ups, bearing in mind that only one in 10 U-M spin-outs are acquired. It also shines a light onto the region's growing entrepreneurial ecosystem and the business people who are building it.
For instance, local software firm and creativity poster child Menlo Innovations stands to profit handsomely from the Accuri Cytometers acquisition. The Kerrytown-based company helped design and develop the software for Accuri Cytometers' flow cytometer. To make the deal work, Menlo Innovations traded a percentage of the revenue for its work for a stake in the company.
"Our relationship with Accuri was very well-known to the investor community," says Richard Sheridan, CEO of Menlo Innovations. "They found that very compelling. This was a situation where we only won if everyone won. The investors liked that aspect of it a lot."
Sheridan is quick to point out that this sort of local start-up synergy isn't just limited to the life sciences community. The skilled engineering and sciences workforce, executive-level talent, and growing entrepreneurial institutions like Ann Arbor SPARK make Tree Town well-suited to grow a variety of start-ups in a number of industries.
"We have developed the same type of ecosystem for high-tech start-ups," Sheridan says. "All of the infrastructure is here to pull companies together pretty quickly."
Where we're headed
The lineup of recent acquisitions in Ann Arbor speaks to that point view quite well. There are also local tech start-ups, like Mobiata and Cielo MedSolutions, that have realized successful exits. There are U-M spin outs like Arbor Networks, HealthMedia, HandyLab, and Accuri Cytometers that have achieved big liquidity events in recent years.
That list of companies is primed to expand in the next few years. U-M ranks in the Top 10 universities for spinning out its technology into start-ups. The university has made this type of technology transfer a priority in recent years, looking to become the major player in the emergence of Michigan's new economy.
"We feel we're doing very well, but we want to do better," says Ken Nisbet, executive director of U-M's Office of Tech Transfer, which played a key role in spinning out Accuri Cytometers from the university. "We expect an increase in the number of spin-outs but we are focusing on quality."
That pipeline is essential for the further development of Ann Arbor's entrepreneurial ecosystem. Not only does it keep supplying the seeds for the start-up exits of tomorrow, but it keeps the local talent employed and executives hungry for the next opportunity. For instance, this is Williams' third successful exit. It doesn't take much imagination for local entrepreneurs to realize there are plenty of other opportunities to feast.

"I will stay in Michigan as long as Michigan and Ann Arbor are a good environment to do these sorts activities," says Williams. He points out there was only one active venture capital firm in Ann Arbor (EDF Ventures) and no urgency from U-M to commercialize its technology when he came back to lead his first Ann Arbor-based start-up in 1997. Ann Arbor's current entrepreneurial ecosystem has "come a long, long way" since then, Williams says, emerging from its infancy to become a name brand hotbed for new economy-based start-ups. "We're at that next level now," Williams adds.

When you look at Ann Arbor's entrepreneurial landscape, the combination of U-M innovations, investment opportunity, and successful business leadership means that the ground is well-rooted for Michigan's new economy. Take a hard enough look and you can see how Accuri Cytometers is the region's low-hanging fruit.

"When something like this happens it's like a harvest," says Jen Baird, the former CEO of Accuri Cytometers who did most of the heavy lifting to make it what it is today and the current CEO of Accio Energy, an Ann Arbor-based alternative energy firm that is reinventing wind energy production. "After the harvest you can reinvest the capital into new opportunities."

Jon Zemke is the News Editor for Concentrate and Metromode. He is also the Managing Editor for His last feature was Total Investment: A Q&A with Bhushan Kulkarni.

All photos by Doug Coombe except where noted.


Chris Rizik at the Renaissance Venture Capital Fund offices in Ann Arbor

Tom Kinnear, photo by Peter Schottenfels

Richard Sheridan at the Menlo Innovations offices in Kerrytown

Ken Nisbet at the U of M Office of Tech Transfer

Jen Baird at Accio Energy

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