The Funding Is Out There! by Wright Tiffany C.;

Author:Wright, Tiffany C.;
Language: eng
Format: epub
Publisher: Morgan James Publishing
Published: 2014-08-15T00:00:00+00:00

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Example Eighteen: Strategic investor financing. A medical imaging company, Medical Imaging, Inc., that provides imaging technology over the Internet via a secure network needed financing so that it could grow. A medical imaging technician would upload the photos to the website, then a certified technician would log on from the company’s headquarters or from a remote site, assess the images and document his or her comments regarding what he or she observed in the images. The technician would then e-mail a link to these assessed images to the patient’s physician to review and discuss with the patient.

Medical Imaging, Inc. needed funds primarily for marketing and business development but also for continued product development. The founder and majority owner, Derek, had procured seed financing when he started the company and had later obtained a round of angel financing. However, to grow the company Derek sought $3 million in capital, larger than the amount that typical angel investors and angel investment groups provide. Derek initiated contacted with venture capital firms but was soon disgusted with the reception he received and the perceived run around to which he was subjected.

Derek was told his company had a good concept and decent revenues (~$2.5 million) but as of yet did not have the stellar growth potential venture capitalists seek for their investments. He received this message repeatedly, in various forms. Admittedly, his arrogant demeanor may have also turned off some of the venture capitalists. Venture capitalists like companies with management that it perceives as coachable. Arrogance and coachability reside on opposite sides of the receptivity spectrum.

During his pursuit, Derek let his large customers and technician providers know of his dilemma – insufficient financing to properly grow the company. One of the customers, a medical group of over 50 heart surgeons, expressed interest in investing in the company. This customer had a highly strategic relationship to the business, more of a strategic partner than a pure customer. Because there was a shortage of imaging specialists, the surgeons’ group used the services of the company to drastically reduce the time needed to obtain reviewed images.

The surgeons’ group saw this as an excellent way to make the existing technicians more accessible and more efficient. The group therefore entered into discussions to invest in Medical Imaging, Inc. and ultimately invested over $500,000 in the company. Another customer group with strategic ties invested a similar amount in the company. As a result, Derek turned his efforts completely away from venture capitalists to focusing on procuring another large investment from an entity that stood to benefit significantly from the company’s services and anticipated growth.

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