News

JumpStart’s unpublicized (kind of) exit: MAX Endoscopy

It’s well-known among local investors that Cleveland-area economic development group JumpStart has achieved one exit (DIY Real Estate Solutions) since it began investing in Northeast Ohio startups in 2004. But what’s less known is that JumpStart had another exit of sorts last year, when a portfolio company was sold (and sold again), though it certainly […]

It’s well-known among local investors that Cleveland-area economic development group JumpStart has achieved one exit (DIY Real Estate Solutions) since it began investing in Northeast Ohio startups in 2004.

But what’s less known is that JumpStart had another exit of sorts last year, when a portfolio company was sold (and sold again), though it certainly wasn’t the type of exit JumpStart hoped for when it first committed money to Macedonia, Ohio-based medical device company MAX Endoscopy in late 2009. So, that makes it pretty understandable why JumpStart wouldn’t seek to publicize this (kind of) exit, though, in fairness, it is noted on the group’s website.

JumpStart chief investment officer Lynn-Ann Gries described the case of MAX Endoscopy as “not an exit in the classic sense,” and she’s right about that. (Disclosure: JumpStart is an investor in MedCity News’ parent company MedCity Media.)

Here’s what happened, with some help from Gries: In late 2010, MAX Endoscopy’s “controlling shareholders” (which did not include JumpStart) decided they didn’t want to continue the company’s operations. So, the inventor of MAX Endoscopy’s technology, Maryland gastroenterologist Dr. Michael Epstein, decided to buy the nearly dead company’s assets and form another company, Precision Endoscopic Technologies.

That second company, Precision, was then in late 2011 bought for an undisclosed sum by a third company, Massachusetts-based Optim, an endoscope manufacturer. Typically, a sale means an exit, if you define exit as some type of liquidity event, but in this case … not so much.

So, where does that leave JumpStart after its $385,000 investment in MAX Endoscopy, which developed an infrared coagulation system to treat hemorrhoids?

“JumpStart has an earn out and should benefit over time if the company is successful,” said Gries, who noted that the investment hasn’t thus far generated a positive return for JumpStart.

From JumpStart’s perspective, the organization likely considers itself fortunate that the possibility of a return on its MAX Endoscopy investment still exists, considering that the company was left for dead by its other investors.

“We’re pretty early investors, so an exit takes time, but we’re always hopeful that one is on the horizon,” Gries added.

And that brings up another question: Have there been any other kind of exits of JumpStart portfolio companies that haven’t been publicized before?

Ehhh, kind of. Two companies — digital marketing company Knotice and diagnostics company AnalizaDX — have paid back their notes in full, Gries said.

[Photo from flickr user RumAli]