Money Trap II

This month's subject is a follow-up to my August 2001 column and the events that took place in the early summer at the start-up biomedical company for which I work.

At that time, our first outside investors signed on the dotted line with enough belief in what we were doing to provide us with money in the form of loans and equity investment. The commitments for the money came in a rush during the first couple of weeks, but this was not enough to keep us going until production. Fortunately, we maintained financial controls, because after we received this money, there was a drought.

As a result, we were required to work toward our ultimate goal, bringing a successful product to the marketplace, on short rations. Even during these lean times, engineering continued to make progress to develop the products that we are going to sell eventually. The small U.S. team that I am part of has continued to work with our Russian counterparts. But progress was slower than we wanted, and we still have a lot of unanswered questions.

We took shortcuts in our design effort. Instead of building two versions for each of our new systems, we built only one. And we minimized the testing necessary to confirm that our understanding of the devices is correct.

The company will have to pay for taking these shortcuts in the long run, and we may have to redesign components that we could not fully analyze and bench-test before building. There will be ergonomic issues that will have to be addressed again. Our early production units may have to be quickly replaced by a new generation of devices because the first generation did not fully meet the customer's needs.

It is important to remember that it takes a certain minimum amount of time, money and effort to design a product. Cutting this time only means you will have to do it again if you get
the opportunity.

Fortunately, the worst of the drought appears to be over. After six months without additional money, the team members who are responsible for getting funding were able to make contact and convince a second group of investors that what our company has to offer will make money for them. I will explain how next month.

In addition to the infusion of money, December brought two other important milestones: We demonstrated code compliance in the form of clearance from the Federal Drug Administration to sell our human device, and we got our first firm orders on our veterinary devices.

With code compliance issues resolved and first orders in hand, we know we have a product that customers can and will believe in. This will heighten the need for us to do the job correctly. As a company, we have to demonstrate that the customers' beliefs are well founded and our products will meet their needs and expectations.

I will continue to give reports on the saga of my company as I am able and when interesting milestones affecting all entrepreneurial companies arise. I would also like to hear about the entrepreneurial efforts of my readers, and am looking forward to featuring your story in this column.

— Niel Leon
Committee on Engineering
Entrepreneurship
leonn@asme.org

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