Even when you are desperate to raise money, don't forget to do due diligence before meeting with potential investors.

April 30, 2013

2 Min Read
In the Hunt for Capital, Don't Lose Your Head if A VC Shows Interest

Joe Bjorklund, CEO of Insituvue

Imagine that you have been trying to raise money for a long time, but have been disappointed.

You believe you have an innovative product and money is the only thing that is preventing you from finalizing design and getting your 510(k). You are not drawing a salary because you want to save every penny and send a message to investors about how you believe in the product.Then a trusted source introduces you to a VC firm that appears to be really interested.

Get excited, but don't lose your head. And most importantly, don't forget to do your due diligence. That's the advice that Joe Bjorklund, CEO of Insituvue in Pittsburgh, gives following an experience that left a bad taste in his mouth. Bjorklund was speaking to an audience at the 10x Medical Device Conference in Minneapolis, Monday.

Bjorklund is living the situation described above as he tries to bring to market a vein illuminator that he believes can help physicians guide a needle into the arm of a patient without having to use traditional imaging techniques that aren't user friendly.

Last year, he was introduced to a northeast VC firm. He won't name the company or the venture partner involved.

"The venture firm was all hot to talk to us," Bjorklund told the audience.

He was told that a relative of the VC would be attending the meeting as well. At the meeting to which Bjorklund and Insituvue co-founders flew, the VC partner spent 30 minutes talking before leaving them with his relative for an hour and a half.

It turned out that the relative was actually the VC's brother who had a distribution business and wanted access to Insituvue's products when they would be ready to be sold.

"We were open to a distribution agreement, but only with investment," Bjorklund said, in an interview later.

But the VC wasn't interested in investing. He was only looking to help his brother out.

"We didn't do our due diligence, we didn't put two and two together," he said. "Shame on us. Your really need to ask, 'What is their business? Do we fit in their paradigm at all?"

-- By Arundhati Parmar, Senior Editor, MD+DI

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