2010 Portfolio Company of the Year

Initiate Systems, Inc. (an IBM company)

Venture Capital Partners: Blue Cross Blue Shield Venture Partners L.P., Boston's Sigma Partners, William Harris Investors, Apex Venture Partners and First Analysis/MK Capital of Chicago, and In-Q-Tel

Imagine just a two-month courtship. That's all it took before IBM Corp. snagged Chicago-based Initiate Systems, Inc., for an undisclosed price. Until March 2010, Initiate Systems was a fast-growing privately held company. It held an estimated 80 percent share of the software market that links individual patient records across various health-care databases. Now it and its 350 employees are part of IBM's Information Management business.

Initially named Madison Information Technologies by father-son founders Ron and Jeff Galowich, 15-year-old Initiate Systems became profitable in 2008 on sales of $74.4 million. It saw its profits and profile climb in 2009, when the Obama administration pushed for more widespread use of electronic medical records to reduce treatment errors, among other reasons. The federal stimulus bill included $19 billion for the effort. The company also drew the attention of IBM, which has a $4 billion health-care technology business.

Since July 2002, Bill Conroy, himself a former IBMer, has been CEO and responsible for Initiate's expansion from its niche in medicine to other industries, including financial services, retail, hospitality and the public sector. And it was this growth that sparked the marriage with IBM. "Our customers wanted more complete solutions," explained Conroy. "There were products we knew we wanted to build and needed to build, but we just didn't have the bodies."

Initiate owes much to a wide array of venture capital firms and other investors. They included Blue Cross Blue Shield Venture Partners L.P., Boston's Sigma Partners, William Harris Investors, Apex Venture Partners and First Analysis/MK Capital of Chicago, and In-Q-Tel, a private venture group established by the Central Intelligence Agency. In June 2008, Initiate completed a $26 million financing led by Paladin Capital Group and including new investors Dunrath Capital, EMC Corp. and Informatica Corp. as well as existing investors.