RainDance, Angling For an IPO, Adds $16.5M From GE Ventures, Others

Xconomy Boston — 

RainDance Technologies has been steadily raising cash from private investors for a few years now. But with the addition of GE Ventures to its group of backers, the Billerica, MA-based company is signaling that its next raise just might come from Wall Street.

“We’re not able to confirm or deny that,” says RainDance CEO Roopom Banerjee. “However, GE Ventures does have a track record of investing in companies that certainly have created a lot of shareholder value in the public markets.”

RainDance is announcing today that it’s raised another $16.5 million by expanding a $20 million Series E round it put together in 2013 with new cash from its existing investor group, and new entrants GE Ventures and Northgate Capital. The cash is all upfront, meaning RainDance doesn’t have to hit any milestones to tap into all of it. With that cash in its pocket, RainDance, which provides tools used by research institutions and diagnostic companies, has now raised about $160 million in combined equity and debt financing since its inception in 2004.

Today marks the third separate funding announcement RainDance has made over the past 10 months. Myriad Genetics (NASDAQ: MYGN) joined the company’s $20 million Series E last April, and RainDance followed that up five months later by securing $35 million in debt financing from Houston, TX-based Capital Royalty. Banerjee said at the time that the company had “completely shored up the financing and balance sheet” through the debt financing, and was able to do so without diluting its equity shareholder base.

So why the new raise, and the equity dilution that comes with it? First, Banerjee reiterated what he said when we spoke in September: RainDance keeps growing faster than it thought it would. Though the company isn’t disclosing just where its revenue is expected to climb to this year—Banerjee says the company eclipsed a $20 million run rate in 2013—it’s now got two systems on the market, around 100 employees (up from 70 early last year), and its workforce is growing at a rate of 30 to 40 percent per year, a trend that is expected to continue in 2014.

Roopom Banerjee, CEO of RainDance Technologies

Roopom Banerjee, CEO of RainDance Technologies

“It’s a function of growing fast,” he says of the recent financings. “As you can imagine with new product launches, we’re building inventory, we’re building systems, we’re increasing working capital, and all the other financial machinery that’s required within the company, so we wanted to be better capitalized to be able to sustain that kind of growth trajectory and not leave any opportunities on the table.”

Still, that growth hasn’t led to profitability just yet. RainDance isn’t cash flow positive as of yet, and doesn’t expect to be for “the next couple of years,” according to Banerjee.

Banerjee says that the funding enables RainDance to bring on a strategic investor, GE Ventures, that has a number of industry relationships that might benefit the company. GE Ventures is interested in a cancer assay RainDance recently developed called ThunderBolts, and sees it as a “commercial partnership opportunity” with players in the imaging community, Banerjee says.

GE Ventures also happens to be an investor in a number of companies in the diagnostics field that have either recently gone public, like Seattle-based Nanostring Technologies (NASDAQ: NTSG) and South San Francisco-based VeraCyte (NASDAQ: VCYT)—or which plan to, like San Francisco-based CardioDx. All of which suggests RainDance might soon join the busy queue.

RainDance provides tools used by research labs and diagnostics companies that are supposed to make their tests easier and cheaper to run. Its core digital PCR technology, dubbed RainDrop, separates patients’ bloods or urine samples and breaks them down into millions of individual micro-droplets that each contain a DNA sample. Each droplet is then merged with another one equipped with a reagent, forming millions of tiny test tubes that researchers can use to perform diagnostic tests. This system can potentially be used to obtain “liquid biopsies,” using samples of blood or other fluids to detect certain cancers rather than surgically extracting tissue samples from a patient.

In addition to its core technology, RainDance also sells a second product, the ThunderStorm high-throughput sequencing system. Most recently, it developed ThunderBolts, a cancer assay that runs on its digital PCR system that researchers could use to screen for 49 known cancer genes and tumor suppressors, certain cancer drug resistance markers, and “hotspots” of the genome that are often mutated in cancer. The assay costs as little as $100 per sample, according to Banerjee.

RainDance will use the cash for a few different things. One would be to expand its pool of customers from commercial laboratories and major cancer and sequencing centers, to entities in the molecular pathology community, cancer bio-banks, and pharma/biotech companies. RainDance will also continue building out its manufacturing operations and develop new assays and systems with the help of the funding as well.

In addition to Myriad, GE and Northgate, RainDance, which started up in 2004, is also backed by Mohr Davidow Ventures, Quaker BioVentures, Alloy Ventures, Acadia Woods Partners, and Sectoral Asset Management.