Call it a cautionary tale for entrepreneurs with a happy ending.
After enduring a failed sale to a venture-capital-backed California firm, managers of NoInk LLC in January bought back the assets of their shuttered company and resurrected it.
Now, just seven months later, they've sold NoInk again-this time to an acquirer who offers a better fit.
"So many small companies are desperate for money, but don't [just] take money at any cost," said NoInk President David Kerr. "Be aware of what any investor is going to bring."
On Aug. 3, Westminster, Colo.-based Global Healthcare Exchange LLC bought NoInk for an undisclosed sum. For NoInk, it was the end of 21 months of turmoil.
Indianapolis-based NoInk was conceived in 2000 when angel investor Bob Compton donated Palm Pilots to computer engineering students at Rose-Hulman Institute of Technology. Soon, the students pitched him a business plan for a wireless software company. For its first year, NoInk operated at the tech incubator Rose-Hulman Ventures.
The startup developed software applications for sales reps in the medical device and pharmaceutical industries. It landed contracts with major customers, including Indianapolis-based Guidant Corp., Warsawbased Biomet Inc. and Batesville-based Hill-Rom Inc. By October 2004, the company had two dozen customers around the country. More than 3,500 medical sales reps were using its software.
NoInk's growth attracted the attention of venture capitalists. In November 2004, Santa Clara, Calif.-based Everypath Inc. announced it had acquired NoInk for an undisclosed sum.
Everypath, which made handheld wireless software for a variety of industries, was backed by some of the largest venture capital firms in the country, including Trident Capital and U.S. Venture Partners.
But the deal turned sour. Everypath began dismantling NoInk's research and development team, a clear sign it wasn't interested in growing the subsidiary.
Worse, Everypath spent money at an alarming rate, Kerr said. Even though its sales topped $11 million, Everypath was far from profitable. It was as if the technology bubble had never burst.
Near year-end, Everypath received notice of a copyright lawsuit dating back to its inception. Faced with open liability from an unprofitable company, Kerr said, Everypath's investors chose to shutter it in January.
Kerr was stunned. He began calling NoInk's customers to share the bad news. With little alternative for their software's support, most were desperate. Scrambling, Kerr assembled a team that could keep them online. Then he and a handful of NoInk's former managers bought back their company's assets. Some customers wanted no more dealings with NoInk. And Kerr doesn't blame them.
"These are large companies," he said. "They're not too enamored about dealing with very small companies that have been incredibly unstable."
But to his surprise, 10 of the 25 customers NoInk had at its peak signed new contracts. Al Whitney, manager of global applications for Memphis-based Smith & Nephew, was among those who took a leap of faith on the new NoInk.
"Essentially, they became a startup again when they reorganized," he said. "I don't think we were alone [in re-signing]; that also gives you some degree of confidence. It's kind of a chicken and egg-who's going to go first?"
Looking for new investors, Kerr began negotiations with GHX, an electronic-trading platform for medical supplies and services that's used by 3,800 hospitals and suppliers in the United States and Canada.
GHX will process $16.8 billion in medical transactions this year. Its owners are a syndicate of medical companies-including many that are already NoInk customers. That makes GHX a better fit for NoInk, said GHX CEO Michael Mahoney.
"This is a growth play for us," he said. "It's not about acquiring a company and reducing head count."
But for NoInk, it's simply a relief to finally find a stable home after enduring so much volatility. The morale, Kerr said: Concentrate on your customer to succeed.
"It's the old clichÃ©-the customer is everything," he said. "But the revival of NoInk could never have happened if we didn't have a product they relied on and then focused on those customers."