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Blackstone Steps Up Life Science Efforts With New Funding, Management Team

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Backed by $12.6 million in new funding and a revamped management team, Blackstone Technology Group said it plans to refocus its efforts on the life sciences market and offer several new software products in 2001.

Last week, the Worcester, Mass.-based company best known for its compute cluster consulting services closed a $12.6 million Series B round of venture financing led by Ampersand Ventures. Co-investors in the funding included Softbank Investment, Garfly Invest AG, Itochu International, and Synopsys.

Blackstone also appointed Brian Ritchie as president and CEO and Theodore Bardasz as vice president of research and development. Ritchie most recently served as president and CEO of infrastructure automation software provider Auspice. Bardasz was vice president of development at e-business consultant NewRiver.

Ron Ranauro, founder and former CEO of Blackstone, will remain at the company as vice president of business development. Ranauro ran the company’s initial $3.5 million round of funding in May 2000, which was almost exclusively through private and angel investors.

Ritchie said his first challenge as CEO upon arriving at Blackstone in February was to assess the various markets the company was targeting. “In evaluating the company and its successes, it became very apparent to me that the company had tremendous strength in terms of skillset and knowledge and success in the life sciences arena,” Ritchie said.

Determining to go exclusively after the life sciences was a logical direction for Blackstone, which recently won contracts with Biogen, Pfizer, and AstraZeneca. Approximately 90 percent of the company’s current business is through life science clients, Ritchie said, “but our new focus will bring it higher than that over the next 18 to 24 months.”

Ritchie set out to rework Blackstone to “exclusively drive after that market based on what we perceived to be not only a strong fit with our skillset but a huge market need.” The company reorganized its staff and hired more people with a life science background, bringing the current employee count to 40. In addition, Ritchie restructured Blackstone’s sales efforts to create a direct sales component for life sciences and a business development component that will nurture potential life science partnerships as well as “dabble and explore in other markets that we would like to expand into as we move forward as a company.”

This strategy will help the company forge ahead with its plans to shift from its primary role as a consultant to that of a software provider. Blackstone expects to introduce new software lines that will focus on infrastructure management and optimization. While the initial focus in this area will be life sciences, Ritchie sees the company moving back out into other markets as this software is introduced.

“We found that in more mature markets, what they were looking for from us was our new software technology coming out more than our consulting expertise; whereas in the life sciences area, they tended to be at an earlier stage in regard to their IT infrastructure and their IT resources. So they were very interested in our consulting in addition to an interest in our software.”

By focusing on the immediate needs of the life science market over the next 12 to 18 months, Ritchie said the company would move from a model in which approximately 90 percent of its revenue is generated from consulting services to more of a 50-50 mix. “We’ve learned a lot in the consulting side that we can translate into software to increase the efficiency of the customer, but the consulting doesn’t go away,” Ritchie said.

Blackstone expects to launch its first new product — middleware that sits on top of a compute cluster’s load management software — by September. While Blackstone’s current software offerings, SmartBlast, SmartCache, and SmartWatch, work by distributing jobs among available computers, Ritchie said the new product would “add intelligence to the decision” by determining what hardware is the most appropriate hardware to run it on.

This promised offering, along with Blackstone’s intent to narrow its focus on the life science market, were key selling points for its new investors, according to David Parker, general partner of Ampersand Ventures. “The upside in the opportunity from our standpoint is where the company is trying to go. Now they are a consulting company but going forward the opportunity is in the software side.”

Parker said Ampersand “got a very strong endorsement of the company’s domain expertise” from its current life science customers.

An additional plus, according to Parker, was that Blackstone is “hardware and software agnostic,” in contrast to other companies such as IBM and bioinformatics vendors who are also gearing up to consult biopharmaceutical companies on their computing needs. “I think it’s attractive to customers to have an unbiased source of advice,” Parker said.

Ritchie said the new funding “adds significant credibility to our company to show that professional investors are now invested in the company.” The fact that Blackstone was able to raise cash even as the VC market has slowed to a trickle is “a double positive,” he added.

Blackstone intends to support R&D, marketing, and sales efforts with the new funding.

Ritchie said it was too early to tell what the company’s long-term plans are in terms of going public or being acquired. “Our objective right now is to build a strong successful company and weigh our options as they become available.”

— BT

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