BUSINESS FORUM: What to do when funds are low but determination is high

Q: Three of us started a company about a year ago with a $500K investment from a wealthy individual to develop a new photonics-based medical diagnostics platform. We have made significant progress but are close to running out of money. What should we do?

A: All three of you have excellent academic credentials but no business experience, and that may explain why you are now in a pickle. It takes much more than a good technology to start a business; for sure you’ll need a good business model and finesse in execution.

My understanding is raising money for an early-stage medical diagnostics startup is really difficult. The reason why you got your initial funding is probably based on the fact that companies in this field are acquired for large sums of money and that your investor is new to this space. We all know gestation for medical products is very long. You have to validate the technology, implement the product, get FDA approval, and gain market acceptance not only by medical professionals but also their administrators. Seasoned investors in this field also know that for every success, there are typically hundreds of failed attempts along the way to make the odds unfavorable to investors—even though the payout is large. And VCs generally are not willing to invest until the entire business model makes sense and has gained validation in the marketplace, and the business is well on its way to an exit.

Let me sidetrack a bit for the benefit of my readers before addressing how to proceed in your case. A rational approach is to prove out the technology—either as an aspect of your academic research or get government R&D grant support. Getting a grant is not easy and would take time, but it also provides a sanity check that there is someone knowledgeable who believes in your idea. You are more likely to get investor attention if you have a successful outcome from your grants, especially if you can also attain some positive customer feedback along the way. Getting investors involved early and subsequently disappointing them could poison the well, making it difficult to convince other investors to support you down the road.

The million-dollar question is what you should do now. At this point, you have no alternative but to hunker down and focus on keeping the doors open if you really have faith in the technology. If not, then it is time to give up. If you decide to proceed at this point, your best bet is actually to get support from your current investor. He is probably willing to come up with a small sum to protect his investment. And if you can verbalize a rational strategy and engage the individual to explore options, he may very well wind up being a part of your solution.

In parallel, use your technical credentials and what you have accomplished to date to get government contracts. “Better late than never” truly applies here! Put together a good proposal and give some thought to identifying agencies that may be interested. For example, DOD is no NIH but may find this device useful to provide instant diagnostics on the battlefield. Consider teaming with institutes that have a strong reputation and a presence in getting contracts to submit your proposal as part of a larger program to enhance the likelihood of success.

Another source of grants could be charitable foundations because your device may be useful in underdeveloped parts of the world. For that you would need to focus on the specific diseases to which each foundation is dedicated instead of presenting your technology as a general platform. Of course, you can contact new investors and companies that may want to acquire you. If I were you, my allocation of effort would consist of an 80-5-15 split between grants, established companies, and investors. Whatever you do, be humble. This is not likely to be an easy sell and you are not in a position to drive a hard bargain.

Click to EnlargeMILTON CHANG is founder and managing director of Incubic Management LLC. He is also director of Precision Photonics and mBio. Chang is a Fellow of IEEE, OSA, and LIA. He has received Distinguished Alumni awards from the University of Illinois and Caltech, is a trustee of Caltech, and is member of the Committee of 100. Contact Chang at miltonchang@incubic.com with questions, and visit www.incubic.com for other articles he has written regarding entrepreneurship.

 

More Laser Focus World Current Issue Articles
More Laser Focus World Archives Issue Articles

Get All the Laser Focus World News Delivered to Your Inbox

Subscribe to Laser Focus World Magazine or email newsletter today at no cost and receive the latest news and information.

 Subscribe Now

Most Popular Articles

Webcasts

Understanding Polarization and Optical Coatings

Light is an electromagnetic wave, but, at optical frequencies, it is its electric field that interacts with materials, with the direction of the electric fie...

In-Situ Infrared Sensing using Calibration-Free Scanned-WMS Laser Absorption Spectroscopy

This presentation, sponsored by Wavelength Electronics and ILX Lightwave, will discuss the range of sensing capabilities offered by scanned-WMS in the near- ...

Mid-infrared lasers in remote chemical sensing – from stand-off detection to atmospheric sounding

In this webcast, Gerard Wysocki of MIRTHE will discuss the unique remote-sensing capabilities enabled by modern mid-infrared (mid-IR) lasers and novel spectr...

Femtosecond Lasers – Getting the Photons to the Work Area

Ultrashort-pulse lasers, both picosecond and femtosecond, are now available from a large number of manufacturers, with new players entering the field at a ra...

Ray Optics Simulations with COMSOL Multiphysics

The Ray Optics Module can be used to simulate electromagnetic wave propagation when the wavelength is much smaller than the smallest geometric entity in the ...

Multichannel Spectroscopy: Technology and Applications

This webcast, sponsored by Hamamatsu, highlights some of the photonic technology used in spectroscopy, and the resulting applications.

White Papers

Tamarisk® Custom Lens Calibration

Though the Tamarisk product line is optimally designed to suit a variety of end-uses, DRS has dev...

NIST Traceable Spectral Responsivity Calibration of Photodiode Detectors

All Newport optical detectors are recommended for a 12 month recalibration interval. Newport main...

Accurate LED Source Modeling Using TracePro

Modern optical modeling programs allow product design engineers to create, analyze, and optimize ...
Technical Digests

Fiber for Fiber Lasers

The development of higher-power and higher-energy fiber lasers has benefited from many advances i...

Click here to have your products listed in the Laser Focus World Buyers Guide.

PRESS RELEASES

SCHOTT North America and Space Photonics, Inc. Sign Exclusive Licensing Agreement for Covert Communications Technology

01/22/2013 WASHINGTON, D.C.—October 18, 2012—Space Photonics Inc. and SCHOTT North America, Inc. today annou...

SCHOTT and Applied Microarrays Establish Distribution Partnership for NEXTERION® Products

01/22/2013 SCHOTT and Applied Microarrays, Inc. have established a partnership for the distribution of SCHOT...
Social Activity
  •  
  •  
  •  
  •  
Copyright © 2007-2014. PennWell Corporation, Tulsa, OK. All Rights Reserved. PRIVACY POLICY | TERMS AND CONDITIONS