Case Study
HBR CASE STUDY
Good Money After Bad?
Jack Brandon’s initial idea has not panned out, and the cash is nearly gone. But he’s got a new plan. Will you back him a second time?
by John W. Mullins
F
Daniel Vasconcellos
overlooking the sparkling lights of San Francisco, Christian Harbinson gazed across the bay to the hills above Sausalito. “There’s nothing like a vigorous hike,” he thought,“to clear the mind before a crucial meeting.” It was a mild March evening, and the 35-year-old venture capitalist was reflecting on the recommendation he would have to make to his firm’s investment committee the next morning about Jack Brandon’s young company, Seven Peaks Technologies. Seven Peaks had developed an innovative device for cauterizing blood vessels during electrosurgery, and although the feedback from surgeons had been excellent, sales had been slow. The Palo Alto–based venture capital firm where Harbinson worked, Scharfstein Weekes, had invested $600,000 in Seven Peaks from its newly raised second fund of $100 million. SW’s current investment strategy focused on early-stage medical technology companies, and Seven Peaks was a typical investment for the firm, which liked to get in on promising ideas modestly and
ROM A ROCKY PERCH
HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.
hbr.org
|
March 2007
|
Harvard Business Review
37
HBR CASE STUDY
|
Good Money After Bad?
then follow with additional rounds of capital after technological and market milestones had been met. The $600,000 was nearly gone; Harbinson and his colleagues had to decide whether to put more into the struggling company. Seven Peaks was looking for another $400,000 to develop a second product based on its proprietary technology, which enabled surgical instruments to do their work without sticking to
don had decided to take the leap and try to commercialize it on his own. He had used nearly $65,000 of
Good Money After Bad?
Jack Brandon’s initial idea has not panned out, and the cash is nearly gone. But he’s got a new plan. Will you back him a second time?
by John W. Mullins
F
Daniel Vasconcellos
overlooking the sparkling lights of San Francisco, Christian Harbinson gazed across the bay to the hills above Sausalito. “There’s nothing like a vigorous hike,” he thought,“to clear the mind before a crucial meeting.” It was a mild March evening, and the 35-year-old venture capitalist was reflecting on the recommendation he would have to make to his firm’s investment committee the next morning about Jack Brandon’s young company, Seven Peaks Technologies. Seven Peaks had developed an innovative device for cauterizing blood vessels during electrosurgery, and although the feedback from surgeons had been excellent, sales had been slow. The Palo Alto–based venture capital firm where Harbinson worked, Scharfstein Weekes, had invested $600,000 in Seven Peaks from its newly raised second fund of $100 million. SW’s current investment strategy focused on early-stage medical technology companies, and Seven Peaks was a typical investment for the firm, which liked to get in on promising ideas modestly and
ROM A ROCKY PERCH
HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.
hbr.org
|
March 2007
|
Harvard Business Review
37
HBR CASE STUDY
|
Good Money After Bad?
then follow with additional rounds of capital after technological and market milestones had been met. The $600,000 was nearly gone; Harbinson and his colleagues had to decide whether to put more into the struggling company. Seven Peaks was looking for another $400,000 to develop a second product based on its proprietary technology, which enabled surgical instruments to do their work without sticking to
don had decided to take the leap and try to commercialize it on his own. He had used nearly $65,000 of