Case 2 – New Land Medical Technologies
Question 1 :
In order to assess if the Newland Medical Technology’s business opportunity is viable, we will check for attractiveness, durability and timeliness. We shall additionally also perform the Venture Opportunity Profile Screening
Newland Medical technology’s idea of the SRS was definitely one that added significant value to the customer or the end user(the patient). Before SRS patients would have to wait with pain for a couple of days before the Kidney stones moved out of the Ureters, by themselves. Now SRS would help them do that. It was definitely a product that if successful, would let patients relieve of their pain. This is definitely a product that many such patients wished would be available in the market some day. Hence this product add value and also provides a solution for which people would pay a premium. The market share so far seems attainable(if the product can be successfully launched).
On terms of value to stakeholders, there definitely exists a big market. When there are a lot of people ready to buy this product, that obviously opens the door for a big market. But unless Newland Medical Technology figures how much it will cost them to make a product, and figure out how much they can sell the product for(which was not figured completely until the end) the margin and money factors cannot be determined and to any potential stake holders that will be a big concern
With regards to the final anchor I think the inclusion of Dr.Grainer in the management team is good move. After all without her there would have been no idea in the first place. Dr.Grainer may hold the key to this Idea’s success because she is the only person who is directly related to the use of the product and has enough knowledge on its uses and problems. Dr.Grainer also may be the key to the success of the product’s launch in the market as she can start to use this product herself and slowly recommend to her close circle and slowly the product may gain popularity. But since Dr.Grainers actual commitments were not described in full, it is hard to conclude if she after can be considered for this anchor. With the FDA approvals that went quite fast and well and with the probability of this product being acquired by other market leaders because the product has a patent I suppose it can be safely concluded that the opportunity is a good fit to the Engineer-Doctor combo Founder team and if carried out properly can result in an attractive risk-reward balance.
As per the Financial Projections included in the case , the company starts generating revenue right from the 3rd year and also predicts a $12,009,223 in Net Earnings by the end of the 5th year.
With regards to the attractiveness, the industry is a definitely Niche(as described earlier customers would pay a premium). There are no direct competitors and customers are reachable if the product is prescribed and marketed well. The product will survive the time needed to recover the investment plus a profit. But the company doesn’t have a growth strategy, they only have one product so far. The market otherwise is fragmented or emerging, and poses a $200 Million opportunity.(but Timmons says optimal medical industry market must be around $500 Million). Taxes are imposed at 18% (as calculated from the case) but the profits after tax seem high too.The company expects to break even in years and has a ROI potential. But the initial investement seems to be a bit high (apart from the $600,000, foster was seeking $1.7M) but knowing todays ventures capitalists are ready to fund upto $2M , this seems attainable. The business also has an exit mechanism, it wants to become a potential buy out by one of the big market players.But with complicated stakeholders involved and Dr.Grainer who’s role and share in this business is also not clear, it is difficult to predict what problems may arise then. With regards to Entry Bariers, there...
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