Rand Capital Corp. President Allen F. "Pete" Grum is expecting an active year for the Buffalo venture capital firm.
"The upcoming year should be bright with exits and new investments," he said Thursday during the company's annual shareholders meeting.
About half the companies that Rand has invested in have been part of its portfolio for at least five years, and that typically is around the time when the venture firm starts looking for ways to cash out of its successful holdings, often through an acquisition of the portfolio company.
After the recession and the weakened capital markets put a damper on both corporate performance and merger activity for several years, Grum said both fronts now are showing improvement.
"The majority of our companies continue to grow, and business is robust at all of them," he said. Two of those companies, which he did not identify, recently were approached with offers from potential buyers.
The biggest deal for Rand during the past year came from its $1.3 million investment in Buffalo-based Internet content provider Synacor Inc., which went public in February at an initial price of $5 a share. That immediately gave a tidy paper profit to Rand, which holds a 3 percent stake in the company at an average cost of $1.30 per share. That paper gain has grown since then, with Synacor's share price now topping $7 a share.
While Rand sold almost 100,000 shares of its initial stake in Synacor, it still holds about 800,000 shares in the company, which are worth nearly $6 million at today's prices.
Rand, which generally prefers to sell its shares in portfolio companies that go public, most likely will divest its Synacor shares eventually, although Grum said he is in no rush to do so. The company currently is under restrictions that prevent it from selling more shares until August.
"Over time, we will" sell Rand's Synacor shares, Grum said after the meeting. "Whether it's over one year or two years or five years, only time will tell."
Overall, the value of Rand's portfolio grew by about 6 percent last year, finishing the year at $24.4 million, or $3.58 per share.
Rand also has expanded -- and extended -- the small business investment fund through the U.S. Small Business Administration. With its initial $5 million Small Business Investment Corp. set to expire soon, Rand reached an agreement with the SBA to extend its existing SBIC and add $1 million in capital to it. Rand has access to $2 of SBA funds for every $1 it invests in the SBIC. The increased equity stake also gives Rand more leeway to make larger investments in firms receiving funding through the SBIC, Grum said.
"This has really been our prime investment vehicle for the past 10 years," he said. "We now have the capital to continue and expand our investment process."