20 Companies to Watch
What puts a company on your radar?
Identifying companies to keep an eye on is an inexact science. For this article, Twin Cities Business considered a variety of factors. In some cases, we looked for companies growing at a rapid pace. At the same time, we also tracked businesses that have recently raised significant new financing.
In other cases, we focused on firms launching new products or those that have been part of a notable merger or transition. We examined companies both large and small. We considered public and private companies.
The common thread? The businesses here are all at key turning points for the companies, including some that are making changes to meet a challenging market.
1 – Ovative/group
The Great Recession was underway when Dale Nitschke founded Ovative/group, a digital marketing agency, in 2009. Before starting the new company, Nitschke spent eight years as the president of Target.com. Nitschke’s instincts were on the money: Today the company is growing at a strong clip.
For 2016, Ovative had revenue of $15.2 million, a 53 percent increase from 2015. The company’s growth arc has been strong; in 2012, revenue stood at $3.4 million. Greg Engen, Ovative’s senior vice president for business development, says the company is expecting to double its revenue over the next three years. Ovative earned a spot on the 2016 Inc. 5000 list, a national index of the fastest-growing private companies in the U.S.
Ovative uses data and analytics to help clients track and improve their digital marketing efforts. Clients include local companies such as General Mills and Select Comfort. Engen says that referrals from existing clients have been a major component of the company’s growth.
“What we do well is help companies understand their digital marketing impact on the enterprise,” Engen says. For example, a customer might have clicked on promotional emails and studied product details online, but ultimately walked into a store to make a purchase. Engen says that Ovative has the tools to take a big-picture look at the effect of digital marketing, including offline results.
Ovative is focused on working with larger companies. While about 50 percent of its revenue is drawn from the retail industry, Engen says that the company works with a mix of clients, including San Antonio-based Rackspace, which manages cloud computing for businesses.
Ovative is based in the North Loop district of downtown Minneapolis, which has been a draw for many tech and creative companies. The company plans to move to larger space in a proposed North Loop building to accommodate its expansion. The state’s Department of Employment and Economic Development will provide a $605,000 grant from its Job Creation Fund if Ovative meets investment and job-creation criteria. The deal was announced in December; Ovative had about 80 employees at the time and has pledged to add 100 high-paying jobs over the next three years.
The company’s North Loop address has proven to be a strong recruitment tool. “It’s an attractive place for people to come to work down here,” Engen says. “We are trying to attract a lot of younger talent.”
2 – Hydra-Flex Inc.
Eagan-based Hydra-Flex Inc. was founded in 2002, and it has been on a growth tear. In 2016 it landed on the Inc. 5000 list of fast-growing companies for the third year in a row. Hydra-Flex makes injectors, nozzles and equipment to dispense water or chemicals. The company’s products were first used for washing vehicles. Growth is being driven through serving new industries (hydro-excavation, industrial cleaning) and expanding its existing business. For 2016 the company saw revenue of $12.1 million, a 27 percent increase from the previous year.
3 – CPM Cos.
In recent years, Minneapolis-based CPM Cos. has been one of the busiest developers in the Twin Cities, having built more than 2,000 apartments primarily in Uptown in Minneapolis and near the University of Minnesota campus. Now it is expanding to new markets (apartments in Rochester) and new product types (hotels, including a boutique project in Stillwater). CPM also is a minority partner in a proposed office project in Minneapolis’ North Loop.
4 – Prime Therapeutics
While UnitedHealth Group and Medtronic are Minnesota’s largest health care industry players, Eagan-based Prime Therapeutics has quietly emerged as a prominent industry force. Already one of the largest pharmacy benefit managers in the U.S., Prime Therapeutics completed its transaction with pharmacy giant Walgreens in April to create a new company, AllianceRx Walgreens Prime. It will handle specialty and mail-order medications. Despite its scale, Prime still landed a position on the 2016 Inc. 5000 list, ranking at number 3,023 based on a three-year growth rate of 113 percent. The company’s revenue for 2016 was $4.7 billion.
5 – Bright Health
The founders of Minneapolis-based Bright Health were flying under the radar with their new company. But in April 2016, the news hit that the startup had raised $80 million in Series A financing, which ranks among the largest funding rounds for any Minnesota company in recent years. People began to ask: “Who are these guys?”
The trio of co-founders has deep experience in the health care industry. CEO Bob Sheehy once held the same title with UnitedHealthcare. President Kyle Rolfing was co-founder and CEO of Definity Health and RedBrick Health. Chief medical officer Tom Valdivia was the former chief health consumer officer for Definity Health.
Bright Health is providing a new health plan for the individual market. It launched this year in Colorado, where it partnered with provider Centura Health to offer its health plan.
“Our model is really to partner with one health care system in the market,” says Rolfing. More than 11,000 people signed up for the new offering in Colorado.
The current health insurance system caters to employers, Rolfing says. Instead, Bright Health is focused on the consumer. Rolfing says Bright Health is now gearing up to launch health plans in other states. As the health care market shifts, more health providers are getting into the health insurance business.
“Our discussions around the country with health systems have been very positive,” he says. “Now it’s really a matter of being able to scale this model.”
6 – MedNet Solutions Inc.
At the end of 2016, Minnetonka-based MedNet Solutions Inc. announced $16.5 million in new financing. The company’s iMedNet, a software technology platform, helps clients manage clinical research data. While the business does not disclose its annual revenue, iMedNet sales were up more than 40 percent in 2016. The company will deploy its new financing for product enhancements and increasing sales, particularly in international markets.
7 – Inspire Medical Systems Inc.
Inspire Medical Systems Inc. started in July 2007 when the business was spun off from med-tech giant Medtronic. The Maple Grove-based company makes an implantable medical device to treat obstructive sleep apnea. Inspire had big news in November: It landed $37.5 million in Series F financing and announced the addition of Minnesota business leader Marilyn Carlson Nelson to its board. The company posted sales of $16 million in 2016, double its 2015 total. Patients currently need prior authorization to pay for the alternative treatment. The company’s focus is now turning to reimbursement coverage with insurance companies. Inspire Medical was ranked 33rd nationally on the 2016 Inc. 5000 list, the highest ranking for any Minnesota company.
8 – Tactile Systems Technology Inc.
In late July 2016, Minneapolis-based Tactile Systems Technology Inc. pulled off a rare feat for modern Minnesota companies: an initial public offering. Tactile makes at-home therapy devices to treat conditions such as lymphedema and venous ulcers. The newly public company posted $84.5 million of revenue for 2016—marking a 34 percent increase—and net income of $2.9 million. The company is forecasting revenue in the range of $101 million to $103 million for 2017. Investors appear bullish: Tactile went public at $10 per share. At the end of the first quarter of 2017, it closed at $18.95 per share.
Recent Merger or Acquisition
9 – Tennant Co.
Golden Valley-based Tennant Co. is one of the oldest businesses in the state. Its humble beginnings can be traced to 1870, when George Tennant opened a woodworking shop in northeast Minneapolis. What began as a one-man enterprise is now a global business focused on making a range of floor-cleaning equipment. The company reported revenue of $808.6 million for 2016.
The company has seen revenue declines for both 2015 and 2016, but it’s not standing still. In the last year, the business has made three key acquisitions. In September, Tennant acquired longtime Mexico distributor Dofesa Barrido Mecanizado. That transaction was in line with the company’s strategic goal to expand in select global markets. In late July, Tennant acquired the floor coatings business of Chicago-based Crawford Laboratories Inc., owner of the Florock Polymer Flooring brand.
In early April it completed its $353 million deal to buy IPC Group, a commercial cleaning machine company based in Italy. The deal marks the largest acquisition in the company’s 147-year history.
In the wake of the IPC acquisition, Tennant is now forecasting 2017 annual revenue of $960 million to $990 million, putting the company on track to top $1 billion in sales.
The company’s first-quarter 2017 results, which did not include IPC, were encouraging. Tennant reported record revenue of $191.1 million for the quarter, an increase of 6.2 percent.
10 – Bio-Techne Corp.
When Minneapolis-based Bio-Techne Corp. bought California-based Advanced Cell Diagnostics for $250 million in August, it marked the company’s ninth acquisition in three years. But it’s also the company’s first venture into genomics. The life science company produces proteins for research and clinical diagnostics. Acquisitions are helping to drive steady growth: Revenue hit $499 million in fiscal 2016, up 59 percent since 2012.
11 – Bailiwick
Founded in 1995, Chaska-based IT services company Bailiwick has grown steadily over the years. In early March the company announced a partnership agreement with Minneapolis-based Norwest Equity Partners. NEP characterized it as a “significant investment.” The private company reported record revenue and earnings for 2016 and has averaged growth of 20.5 percent over the past three years. NEP’s backing bolsters Bailiwick’s long-term growth plans.
12 – UnitedHealth Group Inc.
Minnesota companies don’t get much bigger than Minnetonka-based UnitedHealth Group Inc., which ranked sixth on last year’s Fortune 500 list. But the company is still finding areas to grow. In March it closed a $2.5 billion deal to buy Illinois-based Surgical Care Affiliates Inc., an outpatient surgery chain. The move deepens UHG’s business as a health care provider and signals one avenue for future growth.
New Product Launch
13 – OneOme LLC
“Personalized medicine” is an emerging health care trend. The concept is that patients with the same symptoms should not all necessarily get the same treatment; each patient’s treatment would be specifically tailored. Minneapolis-based OneOme LLC sees itself as part of the personalized medicine movement.
“There’s nothing more personal than being able to understand your genotype,” says Paul Owen, CEO of OneOme.
OneOme’s RightMed product is software that, combined with DNA analysis, produces a report to help avoid or minimize adverse drug reactions for patients. The test, which costs $249, covers more than 340 prescription medications. The test’s results classify drugs into three categories for the specific patient: red (use with great caution), yellow (use with caution) and green (use as directed).
OneOme’s technology is licensed from Rochester-based Mayo Clinic. The company raised $5.25 million in new financing in the fall of 2016.
Owen says that RightMed was ready for commercial use last year when some providers began beta-testing the product. RightMed was officially commercially launched in January.
“The feedback has been really, really good,” Owen says, adding that RightMed could help “poly-pharmacy” patients, who take a long list of medications. OneOme’s test also analyzes drug-to-drug reactions and could help patients stop taking drugs that they don’t actually need. “It’s pretty daunting as to how many people are on multiple medications,” Owen says.
While OneOme is ramping up its sales effort, both in the U.S. and internationally, Owen says that the company would ultimately like to see RightMed test results become part of patients’ electronic medical records.
“We’re still continuing to do internal development,” he says. “We’re constantly looking at the science to see what’s new, what’s changing.”
14 – Envirolastech
Turning trash into durable building products? That’s the business model for Rochester-based Envirolastech. The company’s process converts glass, plastics and ash into a proprietary thermoplastic, a green alternative to traditional building materials. The company expects business to start ramping up with the completion of its new $3 million factory in St. Charles in southern Minnesota.
15 – Calyxt Inc.
Will a New Brighton company help create the next generation of healthy food? Calyxt Inc. is developing reduced trans fat soybean oil, lower saturated fat canola oil, gluten-reduced wheat and a better potato. The agriculture industry is taking notice. As the company prepares its first commercial launch, former Cargill executive Manoj Sahoo has joined Calyxt as its chief commercial officer.
16 – StemoniX
After taking the grand prize in the 2016 Minnesota Cup business competition, Minneapolis-based StemoniX now has a higher profile. CEO and co-founder Ping Yeh started the company after his own battle with cancer. StemoniX makes stem cells with the goal of finding cures for some of the most challenging diseases. The company already has several customers in the pharmaceutical industry.
Business Strategy Reset
17 – Polaris Industries Inc.
A series of recent product recalls has been an ongoing challenge for Medina-based Polaris Industries Inc., maker of snowmobiles, ATVs and motorcycles. For 2016, revenue was down 4.3 percent to $4.5 billion, and net income plummeted 53 percent to $213 million.
As it faces a tough market, the company is taking a series of steps to recalibrate its business. In response to recall issues, Polaris is making vehicle design changes, but also boosting its investment in research and development. “We’re increasing our R&D,” says Richard Edwards, Polaris spokesman, with a goal “to accelerate new product introductions and to beef up our quality.”
At the same time, the company is expanding into new markets, signaled by its November deal to buy California-based Transamerican Auto Parts for $665 million. The company says such deals bring them into “adjacent markets,” related businesses that put Polaris into new industry categories. The Transamerican acquisition was the largest ever for Polaris.
“We’re trying to diversify the portfolio both geographically and by product,” Edwards says.
Polaris also is pulling the plug on its Victory motorcycle brand; the company’s losses on Victory top $100 million since launching the product. The company has had more luck with the Indian motorcycle brand, which it acquired in 2011 and relaunched in 2013.
“We’ve had a lot of success with the Indian motorcycle brand,” Edwards says. “It was obvious that Indian was where we needed to spend our money.”
In late April, Polaris topped expectations with its first-quarter 2017 results. Revenue was up 17 percent to $1.15 billion, bolstered by the addition of Transamerican sales. A quarterly net loss of $2.9 million was due to charges related to winding down the Victory brand and integrating Transamerican. But the company’s adjusted net income of $48.3 million topped its results from the first quarter of 2016, an encouraging sign for company watchers.
18 – Cardiovascular Systems Inc.
Change came unexpectedly for New Brighton-based Cardiovascular Systems Inc.
Longtime CEO David Martin took a medical leave in late 2015 and later died of cancer. In August 2016, the company named Scott Ward, a Medtronic veteran, as its new CEO. (Ward had been interim CEO since November 2015.) For fiscal 2016 the publicly traded company, which makes devices to treat vascular and coronary disease, posted revenue of $178.2 million, but a net loss of $56 million. Under Ward the company has been taking steps to shore up its financial position—cutting some jobs, completing a sale-leaseback deal for its headquarters—but also looking to international markets for the first time. The company has approval to start sales in Japan. Ward’s work is netting benefits: In January the company announced results for its second quarter of fiscal 2017, which included its first-ever quarterly profit.
19 – General Mills Inc.
Golden Valley-based General Mills Inc. reported its seventh consecutive quarter of declining sales in March. The company’s challenge? Finding a path to growth in a challenging market for “Big Food.” The company is banking heavily on organic and “natural” brands such as Annie’s, which it acquired in 2014, and healthier versions of existing brands. But it’s still waiting to see healthy growth.
20 – Best Buy Co. Inc.
Brick-and-mortar retailers everywhere are battling the “Amazonization” of people’s shopping habits. While overall sales have been flat, Richfield-based Best Buy Co. Inc. is seeing solid growth with its online sales. For its fiscal 2017 ending in January, Best Buy reported domestic online revenue of $4.8 billion, an increase of 20.8 percent over the prior fiscal year. Online sales accounted for 13.4 percent of the company’s domestic revenue for the fiscal year.
Burl Gilyard is TCB’s senior writer.