Venture Capital and Low Cost Production

Topics: Venture capital, Marketing, Startup company Pages: 2 (624 words) Published: March 11, 2012
DermaCare has the potential of a successful business. They have taken several steps in the right direction so far by obtaining patents that protect their intellectual property both for sale through DRTV and the retail market and sourcing for low cost production costs. In addition, there are no obvious loopholes in their business model. They have a proven product that provides a solution to a large market of dissatisfied customers. Also, they are maintaining 400% margins by selling through infomercials and websites direct to customers, therefore avoiding marketing and packaging costs associated with retail distribution. However, like every start-up company, there are certain challenges that may prevent them from being successful. - There is already a similar product on the market that has equal efficacy as DermaCare’s product. The competition may gain significant market share through the retail space before DermaCare can finally place their product on the TV. Also, there are already existing solutions in the market and their estimates for revenues may be overly optimistic. In spite of their patent, there are no barriers to new entrants in the market by large pharmaceutical and cosmetic companies who can create similar products and rely on existing brand to build traction in the market. - Access to capital may pose a challenge depending on what investor they decide to go with. They may require more capital to drive sales of their products or in the event they achieve high revenue numbers, they may have to invest more to manage logistics to deliver to their product to their customers. - They is some risk associated with the industry they are in, Products in the medical field quickly face criticism; the company may face liability if there are any questions raised about the use of their products or side effects identified down the line that they had not earlier anticipated. DermaCare’s Capital Requirement

DermaCare needs to raise at least $2,500,000 to get over the...
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