M3786 NEW VENTURE PLANNING SAMPLE CASE ANALYSIS REPORT
STARION ENTREPRENEURSHIP SAMPLE CASE ANALYSIS REPORT
Starion Instruments, headquartered in Sunnyvale, CA is a private company with core IP assets based on the exclusive license of groundbreaking medical research in the field of laser tissue welding. Starion hopes to revolutionize the electrosurgical field with the introduction of products like its cautery forceps used for cutting and sealing (cauterizing) tissue. The overall annual market for these types of medical devices is in excess of $1 billion. Furthermore, Starion’s promising IP and continued research goals will enable it to gain a significant foothold in the worldwide medical technology industry with sales reaching $150 billion annually. The foundation of Starion’s IP lies in the hands of Dr. Michael Treat’s research. In the 1980s Dr. Treat and Dr. Larry Bass, a plastic surgeon resident at Columbia Presbyterian, started experimenting with lasers in surgery. With a humble beginning the two surgeons worked from Columbia Presbyterian’s 17th floor lab on their innovative research. Together, these two pioneers invented the field of laser tissue welding – using thermal energy to rejoin tissue severed in surgery. However, this technology remained uncommercialized for several years after its initial discovery. Shelly Monfort, a Stanford-trained engineer, began her entrepreneurial career in 1986. With a background in R&D on medical devices as well as start-up experience, commercializing those devices, Ms. Monfort and two engineers, Ken Mollenaur and George Hermann, were involved in the creation, funding, and exit of at least 6 surgical device companies from 1990-1996. Ken Mollenaur maintains experience designing and building medical prototypes. George Hermann possesses extensive experience navigating the medical device approval process; working with the major regulatory bodies in the industries. By June 1988, Ms. Monfort had signed a license with Columbia; Starion Instruments could now begin building a staff and a product to bring to market. With their exclusive licensing deal in place, Dr. Treat left Columbia for Starion’s California headquarters and began developing the product. In October 1999 Starion instruments, represented by Dr. Treat, made its debut at the American College of Surgeons Conference, the single most important industry event for people who would buy and use the product. At the time, the company’s goal was to raise $750,000 in capital. Ms. Monfort assembled $2 million from private investors along with a pair of venture capital firms. At the time Starion’s valuation was $7 million. This was a crucial point for the company. Success or failure is often based on an initial market foray. The direction chosen by management in this situation had an irrevocable effect on the company’s overall performance. A capital infusion of only $750,000 severely limited the company’s marketing and development capabilities and was a gross underestimation of the company’s capital needs; a clear representation of Ms. Monfort’s inexperience. Furthermore, the company’s additional capital requirements were highlighted by the investors’ willingness to infuse a $2,000,000 round when only solicited for $750,000. To Ms. Monfort’s credit it was her colleague and mentor, Dr. Thomas Fogarty, a legend in the surgical world, who insisted on the additional capital. The company planned to go to market with a package consisting of single use disposable forceps and a disposable battery pack. The forceps would carry a price tag of $410 and the battery pack would list for $39. The effort was directed toward an open surgery application. Open surgeries accounted for approximately 80% of procedures performed at the time. Starion planned to eventually expand to laparoscopic devices once it gained additional market share. An important aspect of Starion’s strategy was to market its product as not only a superior tool as far...
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