If you were rich and wanted to get richer, what would you invest in?
A plastic device to straighten newborns' ears, a system to sell American "wellness" snacks to foreign grocers, or a powder that helps ill people gain weight?
Those three Big Ideas, and their hopeful developers, were culled from 36 start-up firms that presented Wednesday to the Philadelphia Alliance for Capital and Technologies (PACT) conference at XfinityLive! in South Philly. They were thrown into the Lions' Den — "a real life Shark Tank," like the TV venture-capital show, but live and unedited, said host Marc R. Lederman, whose day job is managing partner at NewSpring Capital in Radnor.
The Lions were three Philadelphia men who prospered by selling their own companies — Jonathan Brassington (LiquidHub), Michael Hagan (LifeShield, VerticalNet,), Richard Vague (EnergyPlus, Juniper Bank, First USA); plus fellow investors Arlan Hamilton, music producer turned founder of Backstage Capital, Los Angeles; and Michael C. Forman, corporate lawyer turned CEO of South Philly's own FS Investments.
The finalists gave their best pitches for the Lions. One came away with cash. Some highlights:
First up was Kimberly Haze Coffey, president of TalexMedical LLC and a Villanova-trained nurse who rose to regional sales manager at Johnson & Johnson's Synthes before turning entrepreneur. Coffey sought cash for Talex's product, InfantEar, a device that "non-surgically corrects ear deformities" on babies as they grow.
It's a big market, she stressed. It's lucrative: InfantEar lists at $550 an ear, with "gross margins of 72 percent," and fits insurance guidelines, which suggest robust doctor profits.
It's competitive. Rival EarWell costs more. And it apparently works: "Over 300 ears [have been] treated successfully" in the past year. Founder and chairman Scott Bartlett is a plastic surgeon at Children's Hospital of Philadelphia.
"Why not be a little more aggressive — sell direct to consumers?" asked Hagan. (They're considering it.)
"Will you be able to get a patent in China?" asked Vague. (Nope.)
"Any intention to expand the product line?" asked Hamilton. (Better adhesive.)
"Make an offer?" asked Lederman.
It got real quiet.
"I don't know enough about the person who invented this," said Hamilton. She said she'd "talk offline about doing something, $50 to $100," meaning thousands.
"It's a wonderful product," said Vague. "I'm thrilled so many parents will have good outcomes." But the valuation was too high for him.
And Coffey had to walk, smiling, no cash.
"I hate this part of my job," said Lederman.
Next up was Peter Groverman, CEO of Grovara, which markets American snacks to foreign stores using a snazzy tracking app from its offices at 3401 Market St. He tossed the judges goodie bags: organic energy drinks, cane sugar candies, and other U.S.-made vegan foods.
Grovara's veteran advisers include Sree Kotay, former chief technology officer of Comcast Corp. Brands including Pennsauken-based J&J Snack Foods, Purity Organic, True Citrus, and Mindfully Delicious have signed up, though none have paid Grovara's new $25,000 fee. Groverman's revenue projections soar from a few hundred thousand a month this year to $39 million in 2020.
"What's your EBITDA?" Vague asked, referring to profits before financial costs.
"Our net is averaging 165 percent," said Groverman.
"I'm trying to get a sense of actual dollars," said Vague.
Groverman said the company expects to become profitable next year.
"Then what is the need for $3 million next year?" asked Vague.
"Basically, it's a land grab," said Groverman: If Grovara can raise the money, why not use it to build extra market share?
"Any interest?" asked Lederman.
"I'd like to see the revenues develop," said Foreman.
"It's pretty exciting, it's a large market," said Brassington. "But I agree with the guys, some details need to be fleshed out."
"Thanks for your time!" shouted Groverman.
Last came MNI boss Jim O'Connell, a former Safeguard Scientifics officer and Wharton grad, the front man for another CHOP doc, Virginia Stallings, a nutrition expert who is on Danone's board and has advised Nestle.
"A billion people have a digestive disease," O'Connell began. People with digestive diseases, inherited disorders, old people unable to retain nutrients, and others with the "the inability to absorb calories" need efficient fatty food or they'll die.
MNI has developed a "nutritional pod base," a tasteless powder with fatty acids and key vitamins. It's been tested in a National Institutes of Health-funded study on patients with cystic fibrosis. "This improved absorption of fats, essential fatty acids, choline, and vitamins A and K," O'Connell said.
MNI was looking for $1 million-plus for research, testing, business development, O'Connell said. No sales yet.
"I had a partner who had a kid with cystic fibrosis," said Brassington. "Parents are intensely focused on self-education. So, what education programs are you focused on?" MNI is working closely with cystic fibrosis groups.
"How much does the founder own?" asked Foreman. Over 50 percent.
Lederman popped the question: "Will you fill out the round?"
Hagan scratched his ear.
"Subject to due diligence, I'd be interested in doing $100,000," said Brassington.
"I see you guys supporting food research that could be extremely attractive for a long time," said Vague. His partners at Gabriel Investments "are prepared to invest $300,000."
"$300,000 as well," said Foreman.
"$50,000," said Hamilton.
Hagan brought the total to $850,000.