Q: I’ve developed an innovative product for the healthcare industry, specifically for the hospital environment that improves patient health and safety while lowering the healthcare provider’s time and cost. We are looking for $250k to $500k to fund the manufacture of the first few prototypes and to perform the early sales and marketing effort to get our product to market. What suggestions do you have for me?
A: Given the fact that your capital need is $250k – $500k puts you in the realm of angel investors and seed capital investors. While there are many angel investors in the U.S., it can be a long and difficult process, especially if you do not know any personally. There are far fewer seed capital investors (organized as funds) and it is far harder to qualify for an investment from them.
One of my favorite ways to tackle the capital issue at your stage is to encourage you to structure a strategic alliance with a larger, well-capitalized company in the market space that would have a lot to gain by adding your new product.
In your case, for example, it might be a manufacturer that is looking to add new products to its lineup. Ideally, the target partners have manufacturing, distribution, and sales capability already in place and would be interested in partnering with you to take your product to market. That alliance may be a capital investment or even a licensing deal. I would think that spending some time exploring that notion with the larger manufacturing or distribution companies in the medical products space would garner you much more traction than spending the same amount of effort trying to raise capital from potential investors that don’t know you.
The other benefit of this approach is that it is excellent due diligence on your product idea and its market viability. If the large successful market participants don’t see any value in your innovation, there’s a good chance that it may not get any traction in the marketplace.
- Strategic Alliance and Licensing Documents (includes various document and agreement templates for negotiating and structuring alliances and licensing agreements, along with other business planning and capital raising agreements)
- Startup Financial Model (to help you plan and operate the financial aspect of your business or acquisition)
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- Venture Academy (includes nearly 200 videos of entrepreneurship training)