After a year like 2018, it's easy to see why Catherine Mott has been investing for 15 years. You’re always hunting for the next big thing.
“You’re riding the wave of some significant trends that are driving the economy,” says the founder of BlueTree Capital. “It never gets old. It is so exciting to be on the cutting edge of things.”
It’s been an exciting and unprecedented year for BlueTree, the holding company for the BlueTree Venture Fund and BlueTree Allied Angels group.
“We have a company that’s valued at $1.6 billion,” Mott says. "It’s the first time ever we’ve had a unicorn in our portfolio."
Beyond a home run
The story of Blue Tree's big 2018 starts with the unicorn, HealthTell. The California startup was bought by the Chinese company iCarbonX in 2017, which pushed its value up above $1 billion.
iCarbonX created Digital Life Alliance, an ecosystem of seven leading bio, health networking, sequencing and artificial intelligence technology companies. In addition to HealthTell, participating companies include PatientsLikeMe, SomaLogic, AOBiome, GALT, Imagu and Robustnique. The total price of the rollups was nearly $400 million, and former HealthTell CEO Bill W. Colston is leading all operational and technology development functions at iCarbonX.
Mott says it took almost a year to get the iCarbonX sale approved because it had to go through CFIUS — the increasingly important Committee on Foreign Investment in the United States.
The combined company will likely go public over the next 18 months with a dual listing on the stock exchanges of Hong Kong and either NASDAQ or New York.
“To have a company that’s valued at over $1 billion in your portfolio just makes you want to jump up and down and cross your fingers and say your prayers every night because if this comes to fruition, it’ll be beyond a home run,” she says.
While the exit for HealthTell is still on the horizon, two other exits in 2018 were very profitable.
BlueTree invested in Wombat Security Technologies over five years ago. It was sold March 1, 2018, to Proofpoint Inc., giving BlueTree a 12x return.
“The beauty for Pittsburgh is not only did we all make some money, but they are going to keep the company in Pittsburgh and continue to add on in Pittsburgh,” Mott says.
Because the cost of talent and office space is so much less than in California, it made sense to keep the company in place.
“It was almost like a no brainer for them, so it was a real win for the region as well,” she says.
The other exit came from a co-investment in ApartmentJet, a Chicago-based real estate platform.
Mott says the venture fund made an investment in November 2017, and by the beginning of 2018, sales were ramping up quickly. So, BlueTree brought in the angel group.
Three Fortune 500 companies were considering buying the startup, which settled on a sale to Expedia. The deal went through at the end of October for a more than a 4x return.
“We invested in February and it sold by October the same year. So, we’re going to be faced with short-term capital gains for the first time in our life,” Mott says of the BlueTree Allied Angels.
The BlueTree Venture Fund typically closes investments in four to six new companies each year, Mott says. In 2018, it closed five new companies, but also had four follow-on investments that hit at the end of the year.
“I don’t think we’ve ever written this many checks in one year,” she says.
Additionally, the BlueTree Allied Angels picked up 12 new investors without even trying, going from 76 to 88, and Mott and her team are starting to look at raising another fund.
She compares the road to success to playing golf.
“When you see it grow from something that’s 10 employees to 150 employees, and you get a positive exit, there’s nothing like that,” Mott says.
“You have a decent hole and then maybe a not-so-decent hole the next time. The third time, a decent hole. The fourth time, a decent hole. Then, the fifth hole, you have a ringer, and you go, ‘Oh my God, I love this game.’ It feels like that.”
That’s not to say it never gets challenging. Mott deals with dysfunctional teams and boards, and repair work when things are going sideways. She often must deliver tough messages to entrepreneurs and hope they’ll listen.
“It’s like any business. You’ve going to have issues and obstacles that you’re going to have to deal with,” she says. “I don’t think there’s any one business that doesn’t have issues. It comes with the territory. You’ve got to take the good with the bad.”