Ohio Venture - OVA Review Newsletter
News from the Ohio Venture Association meeting on June 25, 2010

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OVA's Venture of the Year:

PartsSource
Ray Dalton
Founder & CEO

It's long since become a staple of business school case studies: some of the strongest companies emerge from the cauldron of a recession stronger than ever, after doubling down on their bets even in the face of difficult circumstances. For Ray Dalton's PartsSource, it meant simply ignoring the recession.

"We decided in 2006 we were going to ignore the recession," he told OVA members at the June luncheon. "We did what Sam Walton (the late founder of Wal-Mart) did—when the economy gets bad, go see more customers. So we doubled down, and continued to hire more people and continued to grow. So when other companies said, 'I don't know if I want to take that trip,' we took that trip, and sold five customers instead of three... We decided it was an opportunity rather than a barrier."

That brave strategy has positioned PartsSource for yet another round of fast growth now that the economy is beginning to recover. It also helped the company, founded in 2001, emerge from three finalists to be recognized as the OVA's Venture of the Year for 2010. It succeeds last year's venture of the year, Brulant.

In 2006, the company rolled out its electronic parts system, which Dalton called "a reverse e-bay." It helps clients in the hospital industry efficiently sort through the inventory of about 8,000 parts suppliers, electronically. The company's mantra: We're lowering the cost of health care, one part at a time. Dalton proudly noted that since its inception, PartsSource has returned $50 million to its clients in costs savings.

PartsSource has landed on the Inc 500 list of fastest-growing companies in America for the last four years, and has also been among the top 15 companies on the regional Weatherhead 100 list for the last four years. The company now has more than 200 employees, and is on track to do $100 million in business this year. Dalton said $300 million in revenues "is where we're going next."

Of the fundamental changes in health care recently adopted by Congress, he said, "Politically, I disagree. But it's a windfall to organizations like ours, because it's causing a sea change in the way business is being done in the United States." Anything that "shakes the pillars of big established companies" gives upstarts such as his company a chance to take market share away from incumbents, he added. "We're gonna see over the next five to ten years in health care things we've never seen before. And it's going to be exciting, it's going to be exhilarating. It might be a little scary. But it's going to be good."

He thanked Morganthaler Ventures, which brought him to the region in 1991, to run one of its portfolio companies. "I thank you for allowing us to take big ideas and commercialize, because without that community, we can't grow and thrive."

This year, OVA chose three Venture of the Year finalists. They included Playaway, established in 2004, and which last year made the Inc 500 list; and Arteriocyte, a stem cell therapy company spun off from Case Western Reserve University in 2004, with technology later purchased from Medtronic.

Playaway co-founder Blake Squires proudly recalled how "we started as three guys above a liquor store in Chagrin Falls," ignoring everyone who thought their idea was crazy. To date, the company has shipped about two million digital music-playing units to buyers in the U.S. and eight other countries, and "is the de facto entertainment for our troops" overseas. Arteriocyte CEO Don Brown, meanwhile, noted that "in six years, we went from a core strategy of taking marrow from your hip, cleaning it up, and shooting it down a coronary artery to repair heart tissue, to a company today with 67 employees and operations in 15 states, Europe and Latin America."

More information:

Webcast from the Meeting:

Click on the image below to view the entire presentation as video.

Ray Dalton, Founder & CEO, PartsSource
Webcast produced by Mike Sutyak, The Entrepreneurial Learning Initiative.

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