Good Money After Bad

In: Business and Management

Submitted By gunjanagarwal
Words 1192
Pages 5
Christian Harbinson is an associate at Scharfstein Weekes (SW), a venture capital firm based in Palo Alto and specialised in Medical instrument industry. Harbinson joined the company 6 months ago and is responsible for covering the $600,000 investment (out of a $100m fund) in Seven Peaks Technologies (SP), a company that has developed an innovative cauterizer used for electro surgery.
Jack Brandon, the founder of SP, has developed a new cauterizer that is faster and more reliable than currently available technologies. Its main feature is that it does not stick to tissues during the cauterizing process, contrary to other similar products available in the market.
Brandon has invested $65k of his own money in the development of the product before he approached SW to raise capital. The product received good feedback from surgeons and got the FDA (Food & Drug Administration) approval for launch in the market.
Nevertheless, the product’s sales have been disappointing. The life duration of the product is too long; consequently there is no opportunity for reordering the product and distributors are not willing to market it as the sales are not recurring.
As a result, Brandon wants to develop a new product. He thinks there is a demand for new electrosurgical forceps that would use the same technology used in the cauterizer. The advantage of the forceps market is that surgeons use between 6 and 8 of them in every surgery. Thus the addressable market is much bigger. The product development would take less than a year including FDA approval. Plastic surgeons would be the first clients to be addressed. Brandon has set up a business plan. He expects low sales in year 1 that would double in year 2. The breakeven would be reached in year 3. He asks Scharfstein Weekes for a $400,000 capital increase to develop the product.
Entrepreneur, Jack Brandon
Key elements: *…...

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