Is this South Florida startup headed for an IPO?

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Venture capital database CB Insights released Tuesday its 2017 IPO Pipeline list. Among the hundreds of companies predicted to be headed for an initial public offering next year is South Florida e-commerce platform Chewy.

Since being founded in 2011 with an investment of just $50,000, the Dania Beach company has passed the $1 billion revenue mark — a sizable bite out of the online pet product market, which projected to grow by about 9 percent annually, according to IbisWorld, a market research group. (Overall, the pet products market is worth about $40 billion — just $10 billion fewer than the U.S. auto industry.)

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Chewy, now nearly 6 years old, has captured about 50 percent of the online pet market, according to some estimates, despite competing directly with established companies such as PetSmart. Just last month, it signed a lease for 663,000 square feet of industrial space in Dallas for a new distribution facility.

Now people familiar with the company say Goldman Sachs is helping it prepare for an initial public offering in 2017, Bloomberg reported. CB Insights’ IPO Pipeline bolsters the rumor.

Chewy declined to comment.

This year was a slow one for IPOs. Miami-based investment banking firm Cassel Salpeter & Co. released in October a quarterly review of technology investment activity, which showed a cluster of public offerings amid a mostly stagnant 2016. The slowdown can be attributed to a strong private equity market, the presidential election and even Brexit.

But momentum is expected to follow, said Jim Cassel of Cassel Salpeter & Co. CB Insights echoed the assessment in its IPO Pipeline report.

“2016 did not turn out to see a flurry of tech IPOs as companies continue to access funding privately. But as companies in the pipeline continue to mature, increasing calls by investors for companies to go public, and a slowing down of deep pocketed investors like mutual funds and hedge funds financing late-stage startups, the drumbeat for a busier 2017 is getting louder.”

Debora Lima covers technology, startups, biotech and transportation. Get the latest tech news with our free daily newsletter. Click here to subscribe.

Six tips for growing middle-market businesses in 2017

By James S. Cassel

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James Cassel is co-founder and chairman of Cassel Salpeter & Co. Carl Juste MIAMI HERALD STAFF

With 2017 fast approaching and a new “sheriff” coming to town who has brought optimism for a better economy, it is beneficial for business owners to evaluate key factors that may affect their businesses and take the necessary steps to position themselves for maximum success.

First, consider our current economy. The national unemployment rate is 4.6 percent. Interest rates, currently at historic lows, have started to climb. Inflation is up slightly, and wage growth has started to come back.

Many businesses have been growing slowly. Even technology companies that might be finding faster growth than general service businesses are still finding their growth slower than anticipated. What does all this mean?

Employers are likely to find it increasingly difficult to find qualified talent and are much more likely to have to pay more to attract, hire and retain employees. Healthcare costs are going up next year, both for corporations and for employees. At the same time, other business costs are expected to rise as well. Depending on U.S. trade agreements, the cost to import parts and components for manufacturing might rise.

The spike in interest rates will slightly increase business costs, and business owners will be tasked with having to address a myriad of questions, including: How do they retain or improve profit margins, and can their industries institute price increases? How much, if anything, should they spend on capital equipment or improvements, and are there any ways they can reduce their costs by investing in robotics or other innovative technologies? Can they trim or eliminate other costs or expenses? How can they increase productivity? Most importantly, if there is increased economic growth, do they have the capacity to expand and, if not, what will expansion require?

So, what steps can be taken to prepare for growth in 2017? Following is a list of some general considerations and guidance based on our experience assisting middle-market business owners through all types of business and economic cycles:

1. Evaluate your current health insurance policies and consider sharing a larger portion of the costs with your employees. Otherwise, you can continue to carry the burdens and hope things will get better next year.

2. In light of inflation and wage growth, if your business is growing and can afford it, you should consider giving raises or risk losing employees to employers offering higher compensation packages. With a better economy, more employees will expect raises and be more likely to make a move in pursuit of the best offers.

3. Test your pricing power. Raise your pricing to compensate for the higher expenses you are likely to incur. Airlines have been successful at achieving this by creatively breaking up their services and offering things à la carte.

4. Cut waste. For example, a manufacturing company producing scrap would be wise to find ways to reduce the amount of scrap created or reuse the scrap and benefit from those savings.

5. Get higher utilization out of your people. A great book to read is Gallup’s newly released, expanded edition of the international bestselling management book “First, Break All the Rules.” Among other things, it explains how the best managers know how to assess people’s strengths and weaknesses and put them in positions where they will find greatest engagement and success.

6. Prepare your company for growth. Review your existing capacity to determine how much room you have for growth. Also, start determining what you need to expand and begin taking the necessary steps to get there. Evaluate both the lead time needed as well as the capital required.

Most important, keep in mind that if you can grow faster than inflation and increase your organic growth, then you will be in a good position to absorb any increased costs that you can expect to hit your business in 2017. If you can increase your revenues by 10 percent and your expenses by only 5 percent, then your profits will increase. Indeed, by giving some thought to these issues and taking the right steps now, you can help ensure your business grows in the coming year.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middlemarket companies. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel. His website is: www.casselsalpeter.com

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Constellation Healthcare Technologies has been acquired by CC Capital Management

  • Background: Headquartered in Houston, TX, Constellation Healthcare Technologies, Inc., a publicly traded company on the AIM Exchange, provides a holistic, integrated suite of practice management support services to hospitals and medical practices across the United States. The Company’s services include outsourced revenue cycle management for hospital-based and office-based physicians, practice management for primary care and subspecialty pediatric practices, and group purchasing services for vaccine and flu shots between eligible physicians and selected pharmaceutical companies.
  • Cassel Salpeter:
    • Served as the financial advisor to the Company’s Special Committee of the Board of Directors
    • Ran a 30-day “go-shop” period, identifying and contacting approximately 200 potential parties
  • Challenges:
    • Expedited timeline with only 30 days to identify and contact a large number of parties
  • Outcome: The “go-shop” period resulted in the successful sale of the Company in January 2017 to CC Capital Management and management.