Local software company Blue Medora flies under the radar, even as sales blast off

With an admittedly 'unsexy' focus on a small niche in the software field, Grand Rapids' Blue Medora may never become a household name, even in their home city. But they’ve quickly established an elite profile within their field, and have grown into one of Grand Rapids' largest and most promising software startups.
Grand Rapids’ Blue Medora may not have the kind of business model that would turn heads if you described it over conversation at a party. In fact, you might get a lot of blank stares. But within their somewhat unglamorous niche, they’re starting to establish a profile as one of West Michigan's premier technology companies.

“I’ve often said, ‘We’re not sexy, but we make money,’” says Blue Medora chief operating officer Kirk Senkowski, “and I’d rather make money than be sexy and out of business.”

Making money is the one thing Blue Medora does that almost anyone can relate to. The company announced at the beginning of this year that their sales had quadrupled in 2014, and they recently announced a $4.6 million dollar round of funding. They’ve grown from a staff of 10 in 2011 to over 45 today, and plan to be close to 60 full-time employees by the end of 2015.

“It’s been sort of iterative,” says Blue Medora co-founder and CEO Nathan Owen regarding the company’s growth. “We found a winning recipe and started sort of doubling down on the things where we were really resonating in the marketplace. The second half of last year, we had products where all of a sudden we had our first $10k deal, then $20k, $30k, our first $100k deal. Now we’re working on our first half-million-dollar a week single transaction — one customer buying that much from us in a single deal.”

Understanding what Blue Medora actually does requires a bit of background in cloud computing. The basis of the cloud lies in virtualization technology, which uses software to simulate a bunch of small virtual servers inside one actual, physical server.

In the past, where a data center might have racks and racks of physical servers, each dedicated to a different task or aspect of the business — e-mail, invoicing, sales orders, so on —, virtualization lets a company buy one big physical server and divide it into smaller ones with software.

Not only does this method of managing servers require less energy in terms of power and cooling, but it also lets a company optimize their usage of the different servers: if you’re only using 25 percent of your email server’s capacity at a given time, you can re-allocate the remainder to help out one of the other virtual servers. And besides optimizing usage, virtualization also allows companies to only pay for the capacity they actually use, and to quickly scale usage up or down in response to demand.

After all of that explanation, you’re probably thinking that Blue Medora makes virtualization software. But they don’t. What they do is make software that provides a “power-up” to existing software, extending the features and compatibility of virtualization platforms made by IBM, Oracle and VMWare, three of the industry leaders in cloud management systems.

Basically, says Nathan Owen, Blue Medora is sort of the Switzerland of technology companies: a strong neutral party who can link together competing technologies that don’t work together otherwise. It’s a rather arcane specialization for a company, but one that leaves them with few competitors and enormous potential for growth.

As stated earlier, Blue Medora is well aware that this sort of stuff won’t capture everyone’s attention. Even the name for the type of software they make is almost aggressively boring: it’s called middleware.

“[Middleware is] sort of the classic kind of boring space, that, it’s maybe a $50 billion a year space, and it’s all of this other stuff in a data center you never see,” Owen says. “It’s typically kind of the plumbing of the data center, connecting different systems together, and although you don’t see it, it’s highly valuable.”

Owen left employment with IBM to start Blue Medora in 2007. He had an idea for a software solution that would take IBM’s software for application performance management — a type of software that detects and diagnoses problems in software systems — and extend it to monitor performance from Oracle Enterprise Manager, a leading database management software.

After contracting with Atomic Object to develop the initial software, Owen successfully licensed it to IBM and formed Blue Medora around that product. In the ensuing years, Blue Medora also developed and licensed a similar solution for Oracle, and then another one for the company VMWare and its “vRealize” cloud management suite.

Today, Blue Medora’s management pack for VMWare is the company’s flagship product — and in the cloud management software industry, VMWare, the market leader to this point, is a very good partner to have.

Blue Medora’s recent $4.6m funding round, which came primarily from Michigan eLab with some additional funding from Start Garden, Grand Angels and a few private investors, will allow the company to double down on its VMWare business, says COO Senkowski, and will also help with Blue Medora’s most recent venture: Creating Blue Medora-branded software products instead of just operating as a behind-the-scenes player.

The change in focus, which the company began to put in motion in 2013, will require Blue Medora to hire sales and marketing personnel, and represents a big change in philosophy, according to Blue Medora chief technology officer Mike Kelly.

“In the past, we haven’t really had to sell our product,” Kelly says. “Now that we’re going out there, it means using this investment to build our sales force, our sales team. We can’t be under the radar anymore and be successful. We don’t need everyone in Grand Rapids to know our name, but we do need everyone in Silicon Valley to know our name.”

Most of the leading companies in cloud technology are based in Silicon Valley or on the West Coast, which makes Blue Medora something of an anomaly. In fact, a number of venture capitalists and potential investors along the way have suggested to Owen that he should pack up the company and move it to California or Boston — an idea that he says he continues to reject. Being a Silicon Valley-style startup based in West Michigan actually allows Blue Medora to create their own custom blend of Michigan and West Coast startup cultures, Owen says.

“We have a really nice talent pool of universities here, where you have a fair number of people in technology who want to scratch that itch, had that dream of going out to Silicon Valley, because that’s sort of the big leagues,” he says. “But they love Michigan and they want to stay here. So Blue Medora becomes a best of both worlds for those people. They get to work for a high-tech startup-type company and they don’t have to leave.”

“it never fails to surprise customers, though, when they find out where we’re based,” Senkowski adds.

Blue Medora has made a few moves to meet the expectations of workers in Michigan; for instance, they began to offer 401k plans — not typically a feature of West Coast-style startups — after realizing that job seekers here valued them more than stock options.

But they also bring in ideas that have a distinctly Silicon Valley flair. Once a quarter, for instance, the company has what they call a “Blue Medora-thon,” where employees come in on Thursday morning and work until late at night. The company buys dinner and employees can work on almost any project they want, even if it’s only weakly linked to Blue Medora business. Once, for example, employees created a program to track their performance in foosball — a favorite hobby around the office. After the Blue Medora-thon, employees take Friday off and enjoy a long weekend.

Sitting around and programming for fourteen hours may not sound like a treat to most people, but Mike Kelly says it’s the kind of thing Blue Medora employees look forward to for months.

“One of the core things about people here is we’re all really passionate about technology,” Kelly says. “We care a lot about the stuff that other people maybe think is boring. You know, middleware — maybe that’s a boring component to some people, but we love it.”

Steven Thomas Kent is the editor at Roadbelly magazine and a high-tech, high-growth features writer at Rapid Growth Media. You can reach him on Twitter @steventkent or e-mail him at [email protected] for story tips and feedback. His stories are made possible by support from GR Current.

Photography by Adam Bird

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