UPDATE Thursday Nov. 9 — Dash Solutions, a Philadelphia health care data company, is waiving initial fees and offering its Dash Compliance Automation Platform as "a migration path for current CloudMine customers" looking to replace that company's federal HIPAA-compliant secure data storage system since CloudMine filed for bankruptcy protection and shut down earlier this week, after sales fell, investor Safeguard Scientifics wrote down its investment, and lender Comerica Bank seized CloudMine's cash.
"We will be waiving our typical installation fee for CloudMine customers that are dealing with the company's uncertainty," Dash chief executive Jacob Nemetz told me. He said hospitals and other health care providers have fast become "wholly dependent" on specialized data-storage systems, leaving them "in a predicament" when services from a vendor like CloudMine are interrupted. Dash is compatible with storage leader Amazon Web Services (AWS). CloudMine had used AWS as well as Google and other rivals.
TUESDAY Nov. 6 — CloudMine Inc., a Philadelphia medical-data storage provider, has filed for Chapter 7 bankruptcy liquidation. The Monday move came 11 days after CloudMine told its lead lender, Comerica Bank, that it had been unable to find new investors or a buyer after an "intensive" search, and three weeks after CloudMine's lead investor, Safeguard Scientifics, wrote down the last of its $10.5 million equity investment.
CloudMine is one of several Center City start-ups that had raised millions in recent years from the city's undersized tech investment community. But CloudMine has suffered "decreasing success" selling its services to hospitals, insurers, and other medical clients in a fast-changing market, the company said in its bankruptcy filing.
So Comerica on Oct. 31 took the company's $207,000 in remaining cash, leaving CloudMine still $1.8 million in debt to the bank, said Jeffrey Kurtzman of Kurtzman Steady LLC, the company's bankruptcy lawyer. And that left CloudMine "without any free cash" to stay in business, according to a bankruptcy court statement signed by Safeguard president Brian Sisko, CloudMine chief executive Stephen Wray, and other investors and directors.
The bankruptcy filing listed less than $50,000 in CloudMine assets and more than $1 million in liabilities to more than 200 creditors. Those creditors include Comerica; Amazon Web Services (AWS) and other tech companies; Children's Hospital of Philadelphia and other medical and insurance clients; law firm Morgan, Lewis & Bockius; and investors including Philadelphia-based MentorTech and Robin Hood Ventures as well as Safeguard and former CEO Brendan McCorkle. Terry P. Dershaw, named trustee for the liquidation, plans to meet with creditors Dec. 12.
Safeguard, based in Radnor, owned 47 percent of CloudMine. CloudMine had attracted more than $15 million in equity and debt investment since 2012, when it was picked by state-backed Ben Franklin Technology Partners of Southeastern Pennsylvania to locate at an Inquirer start-up incubator. It later moved to offices in the 1200 block of Sansom Street. Wray joined CloudMine last year and had cut its staff of 20 in half before the bankruptcy.
Founded in 1953, Safeguard is now in the process of selling or shutting the companies it backs, after a group of investors including real estate and buyout mogul Ira Lubert and former aides to buyout investors Carl Icahn and George Soros took over the board earlier this year. The dissidents, led by Joseph M. Manko Jr. of the Horton Fund and Darren C. Wallis of Maplewood Capital LLC, called for Safeguard to unwind what they called an outdated minority-shareholder approach, which they said served Safeguard managers better than its outside shareholders.
Other local investors in CloudMine included MissionOG, MACV, DeSimone Group, and DreamIt Health, which has sought to capitalize on information technology firms targeting Philadelphia's concentration of hospitals and drugmakers.