Past Investment Successes

The following are two examples of the typical extent and nature of a Rand Capital Corporation (Rand) investment:



Pathlight Technology, Inc. (Pathlight) began in 1994 as a “skunkworks” of a company named Ironics. Originally incorporated in New York State in 1977, Ironics provided serial storage solutions for video editing studios, where the efficient storage and transfer of data-heavy files had long been required. Pathlight was assigned the task of developing the hardware and software interfaces that could be used in Storage Area Networks (SAN), which many companies, including IBM, predicted would usurp traditional client/server technology. SAN’s offer greater speed, easier management and greater flexibility of use, by seamlessly interconnecting a variety of devices, such as servers, storage devices, storage management tools and high-speed communications media, so that they may all “share” any storage device within their network.


In October of 1997, Rand participated in a $500,000 round of investment, providing a $100,000 cash amount, while acquiring less than 5% of ownership. A year later, Rand provided another $100,000 investment, which, following the company’s increased valuation, resulted in Rand’s stake of ownership remaining at less than 5%. In both cases, Pathlight used these funds to finance development of core technology and products.

Following these two rounds of investments, Pathlight found itself in need of additional capital for further product development, marketing and to assure customer confidence. Pathlight raised another $1,000,000, with Rand providing $225,000 of that amount. On the strength of the SAN market, the strong support for IPO’s for other companies in the industry and Pathlight’s products and OEM relationships, Rand participated in a fourth round of financing in January of 2000, providing $750,000 of a $5,000,000 funding.


Throughout the four rounds of investments in which Rand participated, Pathlight was able to demonstrate the viability of its future through the strength of its management, its ability to execute on a business plan and produce a useful product, and perhaps most importantly, to market itself and establish OEM relationships for the distribution of its products.

Due to the success of Pathlight’s business plan execution, it was announced on January 30, 2001, that Advanced Digital Information Corporation (ADIC), provider of hardware and software-based data storage solutions to the open systems marketplace, signed a definitive agreement to acquire Pathlight in exchange for ADIC stock. At the time of the announcement, Rand’s $1.2 million investment and 5% ownership in Pathlight was expected to result in Rand receiving approximately 525,000 shares of ADIC, then worth $13 million.

The merger of Pathlight with ADIC concluded on May 11, 2001, and on May 31, 2001, Rand received its shares of ADIC stock pursuant to the agreement between Pathlight and ADIC. Following subsequent weakness in the public market, Rand liquidated its holdings resulting in a realized gain of $6.3 million.



In 2001, Don Sackett founded Innov-X Systems, Inc., located in Woburn, Massachusetts, with several of his former co-workers by raising $800,000 in start-up capital from family, friends and angel investors. Mr. Sackett had a vision for manufacturing a specialty line of handheld XRF (X-Ray Fluorescent) alloy metals analyzers, around a Compaq, pocket-PC platform. The founding management team believed they had a winning strategy which utilized off the shelf components and a safer technology (their competitor's units were primarily based on radioactive isotopes), while utilizing proprietary software algorithms, which allowed the units to be more easily calibrated, used and upgradeable in the future.

Though the founding management team originally planned to sell online x-ray equipment for manufacturing applications, they soon learned that the consumer “marketplace” demands for the product were for handheld-type units. Innov-X began selling its first hand-held units in 2002. However, the early demand for the product caused a need for growth capital for the business.

In 2003, the company began to seek out this capital to fund the growth. A Buffalo, New York based consultant was working with the entrepreneur for some time and an introduction to Rand was made. Rand visited the company and attended an industry trade show to learn more about this emerging market sector.

Over the next six to nine months, Rand SBIC helped to identify another institutional investor to partner with Rand SBIC for the investment opportunity, and was able to negotiate an investment term sheet that was acceptable to both Innov-X and the investors group.


In 2004 and 2005, Rand SBIC funded a total of $600,000 of investment capital into Innov-X, in the form of a five year term subordinated debenture, with warrants for an equity position in the company. Rand SBIC’s co-investor provided the same amount of funding. Rand was also appointed to the Innov-X Board of Directors.

The company continued to experience growth in demand for its products, and in doing so, experienced issues faced by many high growth companies, including: production capacity, staffing, marketing, quality, identifying new markets for products, expanding internationally and the need for additional senior management. The Board of Directors, including the investors, helped the management team with many of these issues, though it was the entrepreneurial drive of the CEO/Founder that was the driving force for the success of the company through these many challenges. Mr. Sackett continued to lead the company to record sales and profitability levels. In addition, during this time, Innov-X kept close communication and a working relationship with Key Bank, who provided constant financial support to the growing business.

In 2006, new international regulations regarding testing of noxious metals in electronics resulted in unprecedented sales and demand for Innov-X’s novel handheld instruments. This growth attracted the interest of a large Boston-based investment fund, Summit Partners.


In December 2006, a minority position of the company was sold to Summit in the form of Preferred Equity, for a total investment of $27 million. Rand SBIC’s debentures were repaid and thus realized a gain of $2.2 million from a partial sale of its equity holdings. As part of the Summit Financing, Rand re-invested $1,055,148 back into the company, as a participant in the new financing.

Innov-X continues to experience record revenues and has over an 8X growth in its employees since the time of Rand SBIC’s first investment. We are excited and pleased to be part of Innov-X’s growth.

Over the course of the investment to date, Rand SBIC has invested a total of $1,690,148 through three investments, and Rand SBIC’s equity ownership held by Rand SBIC at 12/31/2009 is approximately 9%.

Innov-X has grown from 17 employees to an estimated employee count at 12/31/2008 of 150, an 8X growth in employees since original investment.