Rand Capital Corp. hit pay dirt with a pair of its investments, pushing the value of the Buffalo venture capital firm's portfolio up by 84 percent to an all-time high in the fourth quarter.
"It was a blowout quarter," said Pete Grum, Rand's president. "The money we put out three years ago has worked out very well."
Two of those investments -- suburban Boston-based Innov-X Systems and Buffalo-based Internet content provider Synacor Inc. -- accounted for nearly all of the $7.8 million surge in Rand's assets.
Rand increased the value of its stakes in both companies to reflect higher prices that new investors paid during recent rounds of financing.
As a result, Rand said Thursday that the value of its investments soared to $16.8 million, or $2.93 per share, at the end of 2006 from $9.1 million, or $1.60 per share, at the end of September.
"I think we've got room to go," Grum said. "I like what a lot of our companies are doing."
Rand increased the value of its stake in Innov-X by more than $8 million to reflect the value that investors in a $29 million round of financing placed on the Woburn, Mass., company, which makes hand-held equipment that can analyze the composition of materials. In that round of financing, Innov-X paid off the $600,000 in debt that it owed to Rand, which then reinvested $1 million for an equity stake in the company. In all, Rand 's stake in Innov-X dropped from about 12 percent to 8.7 percent.
Innov-X has signed a deal to supply its elemental analysis equipment to a Danish shipping company and expects further demand for its products from new requirements in Europe and California restricting the use of hazardous substances in electronics.
"I think this can easily grow to be a $100 million company," Grum said.
Rand also wrote up the value of its stake in Synacor by $3 million after the Buffalo technology company, which runs "portals" or home pages for high-speed Internet services, completed a $17 million round of financing in October.
In that latest round, Synacor repaid a $350,000 loan from Rand, which then bought $508,000 in equity in the company. That boosted Rand's total investment in Synacor to $1 million, which typically is the most that Rand will invest in a single company.
Rand now estimates that its Synacor investment, which is equal to slightly less than a 5 percent ownership stake, is worth $3.8 million.
"We're betting more with our winners," Grum said.
Daniel Penberthy, Rand's executive vice president, said the shift from debt to equity stakes in both Innov-X and Synacor reflects the strengthening of those growing companies. "We're trying to start out in debt and work our way into equity and then sell the company," he said.
Rand also has finished selling all of its shares from its long-standing investment in Buffalo anesthesia and medical device manufacturer Minrad International. Rand sold its final 230,000 shares during the fourth quarter, capping an investment that roughly tripled in value since its initial investment in the mid-1990s.
Rand now has $4.3 million in cash and $1.9 million available through its Small Business Investment Co. for new investments. Rand expects to make about four to six investments this year, Penberthy said. "We've got more than enough money for the next 12 to 24 months," he said.
Rand also again wrote down the value of its original $822,000 investment in Amherst wine marketer Wineisit.com by another $295,000, bringing the value of that investment to $100,000. It trimmed its valuation of suburban Rochester home wiring systems maker USTec by $155,000 to $320,000 to reflect the partial repayment of its debt after the company was acquired earlier this week by On-Q/Legrand.
Rand's $550,000 debt investment in Adam Eve LLC, a high-end casual sportswear company in New York City that was founded two years ago by Buffalo native Adam Lippes, also was repaid in full.