Originally Published MX May/June 2003
EDITOR'S PAGE
The Mantra of Money
Early-stage medical technology companies often find their earliest investors among an intimate group that includes the founders, family members, friends, and those with a commitment to the firms' reasons for existence. Such investors may support a company for a variety of reasons, not all of which have to do with its bottom line.
As companies grow and incur the need for additional funding, however, company leaders inevitably find themselves turning to venture capitalists and institutional investors whose demands can be much more severe. Such investors not only extract a high percentage of equity from a growing company, they may also impose significant performance demands and milestones on the firm. The single-minded goal of such investors is expressed in a simple mantra: return on investment (ROI).
In order to maintain the level of investment necessary to support continued growth, company leaders must be continuously searching for ways to keep their investors happy. In this regard, assurances of strong market potential and future company performance can only go so far. At some point, the company has to sell something.
Medical technology companies are fortunate in having a wide range of opportunities through which to generate revenues. Some deals involve the transfer of licenses or the creation of partnership arrangements that can bring in money without actually divesting any assets or selling products. But for the most part, medtech companies generate revenues by selling their intellectual properties (IP), technologies, products, or, indeed, their entire business.
Maximizing the value of such assets doesn't come easily. Prospective buyers and licensees find little value in ill-defended IP, technologies without demonstrably commercial potential, or products without markets. To address these issues, company leaders must be prepared to develop appropriate business strategies and to execute them consistently.
This issue of MX offers several views of strategies that can be useful to growing companies, including IP acquisition, outsourcing company functions, and product launch planning. Giving thought to these and other issues will help company executives devise strategies that are truly mantra-fulfilling.
Copyright ©2003 MX
