Friday, April 13, 2012

TSB Case Study

TSB thought it would be interesting to present our readers with an actual case study of a start-up spine company.  TSB will call the company in question, MicroManagement, LLC. MicroManagement is four years old, and has an IP portfolio that includes three 510(K) products and a device that Micro will likely have to be developed vis-a-vis an IDE. The company was capitalized by surgeon and Angel investors.  The majority of MicroManagements sales revenues are generated by their surgeon investors.  It is estimated that the surgeon investors account for 80% of the company's revenue. During the interim, the company  launched it's flagship product in August of 2008. In January of 2011, MicroManagement received a 510(K) clearance to launch Micro's second product. The second product was due for a limited launch, yet fifteen months later MicroManagement has not commercially launched the product due to a product failure, lack of capital, marketing expertise, and a lack of inventory. From 2008 thru 2010 the company's revenue stream grew exponentially. The company generated $3.7 million in 2011, resulting in a half of million dollar loss in revenue from 2010. The composition of the executive management team is made of a CEO that has failed at two other ventures in addition to hiring a retread of a VP of Sales in hopes of increasing sales.  The flagship product's declining revenue is attributed to the product's life cycle and a change in the surgical approaches since its launch in 2008.  

MicroManagement has a technology platform that is a commodity based product that has some novelty to the design. Yet, MicroManagement is having a difficult time in raising capital which hinders them from bringing their other technologies to the marketplace.  As a side bar, the other technology would only have to go through a 510(K) submission.  MicroManagement is one quarter into fiscal 2012, once again revenue is flat and the VP of Sales has forecasted 4X growth for fiscal 2012, you can do the math. As stated, the real objective at MicroManagement is to eventually bring a device to the market that will require an Investigational Device Exemption (IDE) which will cost MicroManagement a minimum of $48-50 million dollars, which they do not have. MicroManagement's exec team does not place a premium on addressing the market trends, nor do they address their distributors needs.  In essence, there is a lack of inventory, instruments are poorly designed, even the trays are a maniacal disaster.  The greatest challenge MicroManagement has with their current system is that there is a lack of reproducibility attributed to inherent design flaws. So here's the scenario, you as the reader get the opportunity to make wholesale changes at MicroManagement, as a Board Member what do you do?  In your estimations;

Is this company making good progress after nearly four years?

Does MicroManagement have realistic revenue expectations?

If MicroManagement cannot raise the necessary capital, what alternative means does MicroManagement have with a product that in all likelihood will have to go through an IDE?

Does MicroManagement's inability to generate revenue from their existing products, hurt their future valuation?

Does a $3.7 million dollar company warrant a VP of Sales and what value does a VP of Sales bring if he himself has no contacts that generate immediate revenue?

What would you do with a CEO that is taking the company backward rather than driving growth?


TSB wants to know what's your best 30-60-90 day plan for MicroManagement and what would you do?


51 comments:

  1. Hey TSB why not open up a forum of questions about the Sunshine Act and how its going to change the way we ALL do business?? Being in this biz for over 15 years, all in Spine, this is something that we all need to pay close attention to. We all thought that AVAMED was a joke, well I can tell you that here in CALI, they are taking this seriously. There goes trying to create true, honest business relationshipa with our customers.

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  2. Option 1: MicroManagement CEO should higher Earl Fender for his vision & leadership skills in order to sustain a wealthy paycheck.

    Option 2: Resign

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    1. Thanks Earl. Get rid of the blue eye glasses ok. The boys on 8th Street don't go for that anymore...teehee

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  3. Who is this TSB, who ever it is, I would ask the following questions, why does a $3.7 million dollar company need a VP of Sales and how incompetent is the CEO? Sell this while you can in a fire sale. PS that Earl Fender comment is beautiful, another visionary.

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  4. Fire the exec management team, sounds like some losers

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  5. Is that Earl Fender with his new surgical repair?...some call it plastic surgery....you should hear the docs after he leaves the room. Did the repair remove his visionary status?

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    1. Earl's a girl....guys...how long has it taken to figure that out?!

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  6. 3.7 after four years you have to be kidding who's running this company the Captain of the Costa Concordia?

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  7. New look...very savvy

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  8. Boring. Hell, even Globus going public is more interesting than this post,,

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  9. A. Hire the entire Phygen (formerly Allez Spine) executive team. They have done such an excellent job fooling their board that they could sell ice to eskimos (Boom!)
    -or-
    B. Hire DJ and the boys at 360. Anyone that can convince Chase Bank they are running a legit company can do miracles for your new company!

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  10. Sounds like a company out of Minnetonka MN

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  11. Sounds like they need Joe Bag of Donuts and Herman Munster.

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  12. Spineology is doing way more than 3 million annually in sales.

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  13. What have you done with Musculoskeletal Man... you pretender!!

    Give us him back.

    p.s. anybody know when MicroManagment is going public

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  14. It's definitely not Spineology what other company is in Minnetonka? C'mon TSB the suspense is killing us.

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  15. Based on recent acquisition transactions, commodity implant companies are going for 1.5x revenue....so top end company valuation is around $8M and that is generous since 80% of the revenue comes from MDs....it also doesn't sound like their IP isn't worth squat.....all VCs are weary of any IDE study company and will only invest in teams that have done it before and have been successful, doesn't sound like this company has that either....so if I am on the Board, i say pay my fees in cash and start seeing where you can sell the furniture online....this company is toast

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  16. Looks like MicroManagment LLC hired Northcutt.

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  17. I don't know anything about Globus or 360 but I do know that it is a good thing when capital is flowing into this space. I'm sure institutional investors do their diligence and know a lot more than all these talking heads. I've never seen a Industry more against itself. Not wanting to see your own segment succeeding is just jealousy.

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  18. Sounds like a classic case of more desire than capital available to make it happen. They probably didn't raise enough cash at the start. That can be fixed. Here's how:

    30 day plan: find potential equity investors.

    60 day plan: convince existing investors that dilution is in their best interest.

    90 day plan: convince investors that whatever the tech is, is worth $30-50m in traunches over 3-5 years of enrollment and follow-up.

    CEO and VP are somewhat irrelevant here. The numbers needed to make it happen dwarf what you're likely paying them in salaries. Somebody needs to do those jobs. Fire them if they suck at their job, or fail to raise the capital, but not because the company is under-capitalized relative to what it would like to do.

    Without knowing how much was invested, can't say if $3.7m sales is good or bad.

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  19. The problem with a company like in this case study is that they do not know how to get out of their own way.. It is likely that the CEO in this case study lacks skills to raise capital or run a company operationally, if the company is four years old. The are reasons why a company cannot raise capital. Either the BOD does not want to dilute its equity, or the CEO's reputation at failing at two other ventures as stated in the case study, will affect or scare away potential investors. So what does the BOD do? You replace the CEO with someone that has a successful track record. If the CEO has a vested interest in the venture, therein lies your first problem. EGO's come into play. Based on the information, I would be interested in knowing how long this company has been attempting to raise capital? Who have they talk to? Are the surgeons and investors willing to dilute? What is the IP that needs an IDE? Is it really an emerging technology? If you have unrealistic expectations, or are not focused on what greases the wheels in a new venture, you fail. JMHO

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  20. None of this matters if Obamacare is enacted. We all will be working for min wage no matter how cool our IP is, so No We Can't compete against a plundering out-of-control govt. Pray for some wisdom from the SCOTUS.

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    1. What total crock. Plenty of medical distributors and sales people in 'socialist' systems in Europe make an excellent living. If you think that your skills are worth 300k plus, you're in for a rude awakening, just like the spine specialists who think they're blatant overuse of surgery as treatment of choice deserves to make them at least 1.5 million. O yeah, and most novel ideas and products over the past two decades come from where???? Just look at the origins of pedicle screws and artificial discs. And the spinous process block was studied and discarded as worthless over there even before St. Francis made nobody better, except themselves financially.

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    2. yes, great point, and look also at the post office and the dept of energy and the dept of education! They are just stellar performers that are so efficient. You keep on believing that socialist bullshit and if you are lucky and get your way the federal government will allow you to live as long as you think you should!

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    3. Now that is a really good point!! Wow, wish I thought of that!! Difference is that "obamacare" is not run by the federales, as is for example the DoD, another shining star of efficiency. Instead, it will be run by the insurance companies who's only incentive is to keep shareholders happy and pay themselves fat salaries and bonuses. In anticipation of 'obamacare' they upped the premiums by the max allowed, i.e. 10%. To their surprise they have seen that office visits and surgeries are down, not up. Are they going to give the surplus money back? Of course not, they will use it to become even fatter and happier. You keep feeding the capitalist bullshit while your existence is inexorably being hollowed out.

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    4. Very interesting that you really believe it won't be run by the gov't.....which part of "....or as to be determined by the HHS secretary" do you not understand??? The bill is consumed with this statement hundreds of times, and in my book this little phrase gives our beloved federales the right to make up the rules as they go along. Did you actually read all umpteen pages of the bill?

      I believe that person is Kathleen Sebelius, who in fact is the federales, so if you are fine with her or her successors having complete authority over your health and well being then you keep drinking that socialist kool-aid.

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  21. A very simple leadership question for those working at Micromanagement; Do you have the necessary tools to get the job done? If not, then your leadership team is inept at best.

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  22. With a two time failure as CEO and a retread Sales VP the BOD must not understand Einstein's definition of insanity. This has failure written all over it.

    Two questions; why does a $3.7 million company require and sales VP? Secondly, why is the CEO taking the long path of developing a product that requires an IDE and massive capitol vs. the product that requires a 510K? With no capitol to develop the IDE product why not develop the 510K product. This makes no sense at all. No wait, this does make sense if your a two time failure CEO.

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  23. What is the Sales VP smoking predicting 4x sales in this environment? With failed product, bad instruments and no inventory he really is hitting the hooka pipe. Maybe the Board is smoking too. Is the CEO related to Earl Fender, Ben Shapley or Doug Daniels?

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  24. Are you guys talking about VTI? To my knowledge they are the only other company that I can think of in Minnetonka.

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  25. The BOD should can the VP of Sales and put on the surgeons girlfriend to cover sales at least then he should see some return on his investment

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  26. Who is the VP of Sales at a $3 million dollar company? There's a quality decision. LOL

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  27. if this is VTI, Tom Boyd is the VP of Sales and Jeff Felt is the CEO.

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  28. Never heard of VTI. Looked at their website. Somewhat interesting cage.

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  29. Could TSB be talking about Textbook Tommy? Always by the book. A shining star in the world of spine. If he is at VTI he will take the company to new heights like he did at SpineMedica.

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    1. Boyd has bounced all over the spine community. Six months here two years there. It's only after a few months when the Pres or CEO understands this guy is an empty suit that he's terminated. Then it's of to the next sucker; company.

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  30. Somewhat? It's a cage, next please.

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    1. It's OK according to their website the company is ISO 1345 Certified..!

      Quality!

      After all whats an 8 between friends?

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  31. Textbook Tommy, LOL has he asked for your 30-60-90 day plan?

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    1. No but he has asked to come to each of my reps home office to "check up" on how they work

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    2. You mean he still can't distinguish between an independent or direct rep? Some things never change?

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  32. Doesn't our man-behind-the-mask John Nieradka work for/with VTI?

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    1. No, he works for us.

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  33. sounds like Zimmer Spine model to me! What a bunch of hot air all their folfs are now!!

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  34. How many of you hotshots took a risk to develop an idea for a spinal fusion devise or a disc nucleus replacement devise? Better to have tried and failed than not try at all. Earl Bakken of Medtronic fame tried and failed many times, but he didn't give up. He learned from mistakes and kept working on it til he got it right.

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  35. 12:15 there's a difference between being an inventor and being a businessman. How many people like have burned through millions of investors dollars and failed at every venture they have been involved with because they are obstinate, have no flexibility, have no people or customer service skills, don't listen to the surgeon customers nor the people that work for you, and then micromanage every situation that occurs. How noble that you can develop an idea only to fail because of your personal inadequacies. You know what they say sometimes you have to throw out the baby with the bath water. Karma is a bitch.

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  36. Hey 12:15 it's easy making mistakes with other peoples money

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  37. 12:15 is comparing himself to Earl Bakken LMAO! More like Ken Lay of Enron.

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