Relationships Reward Entrepreneurs in Post-Recession Financial Services Arena
24 Apr, 2012, 03:07 ET
SAN FRANCISCO, April 24, 2012 /PRNewswire/ -- HourGlass Technologies CEO and Co-Founder Darin Buxbaum, a biomedical entrepreneur, is asked regularly to speak to business groups—not about his game-changing, paradigm-shifting innovation that has the potential to save or extend the lives of millions of obese people—but about how he got the capital to expand and grow his pre-revenue company in such challenging economic times. Equity capital and a $300,000 equipment lease will enable Buxbaum's company to enter clinical trials and launch the TRIM™ System, a non-surgical obesity treatment.
"We raised our largest round of venture capital in 2010 (including blue chip investors) when very few clinical-stage medical device companies were being funded," he said. Then, at the end of last year, he was surprised by the flexibility of an independent funding source that offered him a 10-year venture lease so he could preserve his working capital while still acquiring manufacturing equipment and expanding research and development.
The TRIM™ System may achieve better results for patients than gastric banding surgery, and is incision free and more cost effective, said Buxbaum. Even with such a strong business concept, he did not expect the flexible terms offered by Fountain Partners, of San Francisco, CA. http://fountainpartners.com/category/news/
Fountain Partners President and Founder Tom Carter said HourGlass fit into his company's sweet spot. "Our proposal was not what our client anticipated we would offer, but we realized that what they really needed was time—more time to test and install equipment at their facility, time for trials and commercialization."
The target market for the TRIM™ System is composed of 40 million patients who are morbidly obese (100 pounds or more overweight). Only 2 percent of them will seek the surgical band or gastric-bypass surgery because they are afraid of the surgery itself or its prohibitive cost ($15,000-$20,000 estimated).
HourGlass Technologies needed production equipment for parts to create the TRIM™ System and perform more testing; if it had not had been for Fountain Partners' creative solution, Buxbaum said he would have had to outsource the manufacturing, which would have taken longer and afforded him less quality control over the production. All of the manufacturing, as well as continuing research and development, is being conducted in HourGlass Technologies' own 12,000-square-foot facility in Redwood City, California, where 20 people are employed.
"It's rare for anyone to offer more than three-year terms to small, unknown pre-revenue-stage companies," said Buxbaum, who had approached other funding sources before meeting Carter through a financial services intermediary.
Buxbaum said the new TRIM™ System, inserted orally, will restrict the size of the stomach, creating a sensation of being full, and it can be kept in place for a long time.
But it wasn't just the unique idea that got him the funding needed to acquire manufacturing equipment. Both Buxbaum and Carter spoke to the importance of the relationship they created.
"I just wanted to minimize my cost of capital with a low interest rate and maximize my time to pay it off," said Buxbaum, "but I'm glad and grateful Tom and I took the time to get to know each other."
"If we make decisions based only on the obvious, such as 'this company is pre-revenue' then we deprive ourselves and our clients of our capability and positioning in the market," said Carter.
SOURCE Fountain Partners
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