I stepped into a minefield yesterday. Equity f-ing battle in my group for our business that has turned into a legit business model possibly going to market. We present to VCs in a couple of weeks. Ok I’ll give some background.
I’m involved in a class which takes a medical device from inception to prototype to market with an emphasis on filing a patent first and then proceeding with the business model.
My group is composed of three people. PhD student, MD/PhD student, and myself (MD/PhD applicant). I’m the only business dude in the class. There are 12 people total (4 business groups) with 4 post doc students and 3 professors (15 people in room minus the presenters for the day). Each class is designed to help us with each step in creating this patentable medical device and to bring it to market and make it profitable. We sit at a big oval table each class and have people in the business come in and talk about their products, successes, failures, and lessons learned. When the people come in (a couple are even VC related people in medical field) and talk numbers everyone is quiet except me. I start asking questions and literally the blonde chick that sits over from me says “I’m business stupid” and everyone laughs because it is funny how detached these medical students/PhDs/Post Docs are from business (they spend all their day in academia). So the three of us created our group early January. We had two potential ideas. One was from the PhD candidate that was so complicated it didn’t really even make sense (maybe to him but not to me at all). He had a bunch of fancy chemical compounds involved on an idea that was already patented. So that was out. The PhD/MD candidate proposed another idea for a medical device that was relatively easy to comprehend, but he had so many holes in the idea that the Carolina Panthers football team could have come in and singlehandledly had each player fack each hole in this swiss cheese of an idea. The idea was somewhat sound but lacked a lot before it went to market. We decided on the idea and setup the group/potential business partners as being science/science/business with my role as the business/financial analysis to establish the business plan, business model, and a few other things. We had class one day and then decided to go to happy hour to iron out some responsibilities, progress, and brainstorm. We get to the student/doctor bar place which is basically on campus and they both get beers but I was straight up business and got water and a philly cheesesteak. When i’m serious I get water or coffee and need food. MD/PhD dude says his wife is coming to meet us too. I was like ok (but thinking ok thats weird this is a business/group meeting) … but was fine with a meet and greet with his wife. So she comes after about 10 min of business/group talk and shes very weird and introverted. I was like hey whats up nice to meet you. She says literally jack the whole time and just sits there. I learned early on by asking that she just got her JD and is some BS wannabe lawyer that hasn’t passed the bar. I respond cordially, but still am thinking wtf is this chick doing here (but give him credit — its his wife so ok whatever). So we assign roles in this meeting of what people have to do. I had to do like 6 bullet points on our plan that dealt with ALL of the business aspects, business model, market research, feasibility, resourses needed to create device (physical and human assets/consultants/equity partners), etc. Not only do I create a business plan and business model, I talk about completely changing the device to a much better design during this meeting. He had some retarded idea and we changed the design and the actual name of the device which is catchy, functional, and the name implies the meaning of the device. We all just want to pass the class (its pass or fail), but also discuss that we want to take it to market. So I get home that night and start doing some work. When I do work I kill it and I aligned not only the business facets of the device, but made a handful of calls and started to line up legit business meetings and also started to promise equity for time for people who could bring this device to market because we currently do not have funding for payroll and a small slice of equity is fine in my mind for a product designer or mechanical engineer to CAD up our designs so we can 3D print at least the prototype. I don’t want some BS product designer or mechanical engineer so I go to my rolodex and start calling up my Stanford D-School designers and mechancial engineers. I get some traction and found someone who could CAD things up and get the ball rolling. I called some people in medicine and also lined up meetings with doctors in the field who could examine the feasibility of this device. We could also get feedback from them on practicality. I literally lined up the doctor needed in this field (they had no connections) with a follow up with his buddy who is the CHAIR of the department at our school in this field (impossible to get on their schedule). I’m feeling pretty good about this device at this point and work up a few documents on: a) business plan b) legal equity contract By the grace of God I did not send these documents and still have them in my posession. I felt I needed to polish them a little bit before we signed on the dotted line for the equity split and so just gave a brief three paragraph update on the business progress, connections, team required, and path to success. I gave encouragement in the email about the device to pump up our team and get this done. My closing paragraph detailed the equity split. I felt it fair to give more equity to the idea generator and did a (40%/30%/30%) split with the idea generator (MD/PhD dude) getting an extra 10%. This equity is somewhat diluted to the extent that the hospital takes 60% and we get 40% leaving a 16%/12%/12% split which mainly goes to pay our salary/labor when we get VC funding per hospital regulations as the hospital takes control of the 60% to ensure the funds are spent in a proper way (we can spend the 60%, but they have control). I thought I was generous and really don’t like only having a 12% stake in general but it is pretty normal in this field. So I walk into prototyping class yesterday and sat down next to the MD/PhD dude and we were the first two there and 10 min earlier than everyone else. He was like “hey man I got your email.” I was like “oh yeah cool” - oh by the way is that 40/30/30 equity split cool with you? He was like ummmmmmm (literally said um for 2.2 seconds) no. I said oh ok you think you should have more? Throw me some numbers. Silence. I’m like dude just give me an idea. Silence. I said ok I thought I was being generous so what is fair? You want 60/20/20 or something? Silence. I was like dude I don’t think I can go much lower than that. He was like well … the thing is is that my wife already developed a business plan and model and this is kind of my baby. We deserve a very high equity stake. I was like higher than 60% ? You already have a lion’s share and full control of our piece — what more do you want??? I’m started to get really pissed right now because this dude has been living in academia and I felt like the 60/20/20 was already too far. Our other team member hadn’t even showed up yet and I was negotiating a crappy stake on his part. Also, for the happy hour that night we met to talk business … his wife … JD wife … somehow forgot to DISCLOSE DISCLOSE DISCLOSE … the three essentials of legalese … I was doing cartwheels in my mind. I passive aggressively said in a very nice and open way … oh what law school did your wife go to again? He said it and I was like “ok great” … “thats cool” … thinking she went to like a top 100 hacksaw school that somehow forgot to engrain in her mind to DISCLOSE DISCLOSE DISCLOSE and she already f’ed herself legally in a sense I feel like he is sitting on a lift in a mechanic shop in a car accelerating his car on the lift saying “i’m going 40mph … i’m going 50mph” in the mind of his business model whereby the rubber is not meeting the road. I’m sure her business model and research are crap because she has no business experience, never has made any money in any discipline and is a freshly minted starry eyed JD with plans to take over the world and a hacksaw top 100 JD … wtf is going on … I will destroy this chick in her own legal world. So Tuesday we are meeting again at the same bar to discuss equity. His wife is coming again. I know whats at stake now but I have already spent valuable time and made connections to pave a way for this product in the best way. I don’t want to face a wifey/husband combo but if its business I might just have to. Our other PhD business partner experienced us heating up in equity negotations after class yesterday and straight up said “i’m out”. 0% equity for me, just give me a pass in the class and I will do my part in the presentation. I have already spent valuable time and connections aren’t free. Not only that but I prefer not to have a 90min convo with a Stanford D-School grad with 10 years product design experience and get them interested in a product to flip it on them and say we aren’t working with him anymore. Did wifey disclose any of this? Nope. I will destroy this chick. I’m pissed. I don’t get f’ed on business often but when I do I look back and at least admit that it was fair. I look back and say well I could have done x and y better to achieve z and because I didn’t think about y as much as I should have I didn’t get z. This isn’t the case. I can’t believe a f’ing lawyer didn’t disclose all of this crap during a deliberate business meeting. I don’t care it was at a bar. This is driving me up the wall and I in a sense want to take an LLC that I have and be his competitor and just crush all of his ideas and expectations on the market, but I am trying with all my will not to burn bridges and somehow elighten this person with him and his wifey in the clouds about how they are in the clouds and it is a lot of work to bring a product to market. You don’t just have an idea and make money. From having an idea to making money is a long and hard process that requires much. Very much. These people living in academia for 6 years and thinking they can just think of something and have it meet the market are going to meet their creator sometime soon as well. The market judges and it judges harshly. They can’t even get VC funding without me, I know it. We have some VCs coming to our final presentation to potentially invest, but I have a few aces up my sleeve in the VC healthcare sector (all of which are in NYC). This dude can’t even get a meeting with these people and here I am getting zilch equity but have the connections? It doesn’t work that way. Ok i’m done. STL … know you like it when I get worked up hahah was so TLDR but yeah … any comments or feedback is appreciated. peace ACE
christ i actually just read all that. next time communicate with your team. you’re on a team. that means everyone knows what everyone else is working on so efforts aren’t duplicated. Sounds like if you just said at the end of the meeting “good meeting, i’ll work on a, b, c you guys work on x,y,z”, this all would have been avoided.
Just got off the phone with my very hot and intelligent Cornell JD lawyer (corporate governance lawyer) friend … I have holes in my legal parts at this point but she gave me some important things to consider about being a director, voting rights, and some other things when we put this on paper …
this is why I am so pissed we had about 12 bullet points and I was assigned all the business points a week later I hear that not only did the MD/PhD guy say that not only does he want all the equity but that his wife already did all of my business points — she isn’t even in the class — I didn’t even know she was involved at that point … he wants her to have equity for doing a crappy job at some business points? I surely hope not. wtf
The class is called Neuroscience Entrepreneurism. The goal of the class is to develop a good product. The stretch goal is to take the product to market and at least apply for a patent.
The 3 professors are all successful doctors (Neurosurgeon, 2 Neuroscientists) who have done this in the past and have an array of patents.
Our product is a Neuropsychological Urology device that is taking a device developed in 1985 that is bulky and expensive and integrating current technology in a small inexpensive device. Medicare covers this $3k per user product device that is prescribed by urologists to diagnose a physiological vs psychological issue. We are looking to undercut this product for a cost of ~$200 at high production levels and I proposed a price of $1000 per user to completely undercut the 1985 device and gain quick Medicare approval.
My point is that this is the one guy’s baby. Find something that ownership can be taken by the whole group. He just wants some legs. Needs to cut you in or a new product or group needs to be found,
I lined up a meeting with this doctor in the field who has experience in these devices for Tuesday at 12pm. He is an expert practitoner in the field who would be a potential doctor prescribing the device to patients. They had no connections in this field and couldn’t get past secretaries to ask if we could meet with doctors. Doctors spend time with patients and don’t have time to bounce ideas off each other for fun. I have this doctors personal cell number and he is a family friend. His buddy is the head of the department of another hospital (the one where we take classes) who I lined up a potential meeting with as well. Anyway, I invited the two other people in the class to come and they both confirmed. We are meeting in the front lounge at 11:30am to prep. I think it will speak volumes if his wife shows up or not. If she is not showing up for valuable business meetings with doctors in the field, how is she entitled to a slice of the equity? How can someone just sit on the sidelines and then jump in and say they are part of a company in which they had no part developing? If she is so important, I want to see this schlep of a business plan she created so I can annihilate it. I have been hesitant so far to be confrontational. I want to gather as much information as possible before I possibly switch to being a competitor or switch to compiling a list of costs to bill to his company if I am cut out of the equity. I think I’m going to confront the MD/PhD dude for the first time prior to the meeting if his wife doesn’t show. We are supposed to talk about the equity split after the 4:00-5:30pm class ends on Tuesday night — this is an important aspect in my mind. I could be wrong, but you don’t just take a big slice of equity in a business without going to the meetings. If she doesn’t show, I’ll have ammunition for the equity split conversation on Tuesday because this is getting a bit ridiculous. She isn’t even on our email chains.