Good Money After Bad

Written Analysis of Cases #10

May 20, 2016

GOOD MONEY AFTER BAD

In the Medical devices industry, I have experience both as a scientist and in Business Development and am confident that Jack’s idea is promising. I feel that my colleagues at SW are skeptical about Jack’s proposal because they were let down by the cauterization device. We have to understand that the two are independent products and cater to different markets; we should not let our bias affect our decision. I recommend that we invest in the second proposal and work with Jack to make it realize its true potential.

I was in two minds after the meeting with the Investment Committee and decided to weight the arguments for and against the new proposal. Since I felt that I might just be too close to the deal, I decided to think about the arguments against the proposal first. An important one is that we do not have a proof of concept yet. Also, industry is categorized by intense competition and established players. I did not include the failure of the first product in my analysis as that would be unfair to the new product under consideration.

I then moved on to the arguments for the product. The first and the most important consideration was that the product really does address an important and a common pain point market. I am quite familiar with the industry and am confident about Jack’s competence and commitment. I do agree that the first device also seemed equally promising but the issues that the previous device faced were all addressed in the new proposal. It promises a huge target market and repeat customers, hence large volumes. Additionally, the fact that big players have not thought about it can be seen as a positive sign that our technology is unique. Not all startups breakeven before three years, Medical Technology companies typically take longer as the R&D approval and the Patent filing process is time-consuming. Talking about competition, the industry is characterized by intense competition but we still invest in medical technology start-ups and the presence of big players should not discourage us given that no one is currently making what Jack is proposing. Most industries have big players dominating the market but this does not mean that small new players cannot succeed and flourish.

While I agree with Joe that the decision making process at Hospitals is slow, we have to consider that the Surgeons will find value in the product and it will be their job to convince the hospital authorities. We do not even have to worry about changing their behaviors. Besides, we are not just looking at Hospitals but also independent plastic surgeons. Also, since the first product did not give us any return as we did not see huge volume. Thus, we can direct efforts from that to the new product.