Medical Device Link.

Originally Published MX November/December 2005

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

Company F was founded by Mark Startwrong, a talented corporate engineer who during the previous 10 years had developed medical devices to address an emerging market. On his own, he conceived a promising product to serve an unmet need in that market, and so formed Company F.

Mark decided that he was not qualified to be CEO of his company, so he recruited lawyer Dave to fill that executive role. The partners agreed to split the founders' shares 50/50. Mark made no mention of vesting to Dave. Together, they wrote a 30-page business plan and identified Mark as company founder and Dave as CEO.

Mark and Dave met with three venture capital firms, all of which told them that Dave did not have the qualifications to be CEO. On the basis of this feedback, Mark informed Dave that he could not be CEO and would not be part of the company after all.

Dave hired an attorney. He asserted that he was listed in Company F's business plan as CEO, and therefore deserved his 50% share in the company. Later, several months too late and under pressure, Mark hired legal counsel to represent his company. That attorney's first task was to help resolve this issue of contested ownership.

For two years the partners battled. They ultimately settled, and Dave parted with 35% of the company. During the period of the dispute, product development was on hold and fund-raising stopped.

Freed of Dave, Mark discovered that his product infringed patents held by a large company. He did not want to expend resources fighting another (probably futile) legal battle, so he agreed to develop the product and have the large company sell it.

Mark Startwrong's Company F failed. But the would-be entrepreneur was able to earn a modest amount on royalties over the next 10 years.

Copyright ©2005 MX