Biomedical Entrepreneur Finds Time is On His Side After Building One-on-One Relationship With Equipment Financing Provider

Background

The TRIM™ System is a non-surgical obesity treatment developed by HourGlass Technologies that is administered orally to restrict the size of the stomach, creating a sensation of being full. The TRIM™ System has a target market comprised of 40 million patients who are morbidly obese (100 pounds or more overweight). HourGlass is a development stage company located in Redwood City, CA.

Business Challenge

HourGlass needed a Miyachi Unitek laser and related production equipment for parts to create the TRIM™ System and perform more testing. Without it, the company would have to outsource the manufacturing, which would take longer and afford less quality control over the production. Other approaches to non-invasive weight loss have failed to reach commercial success so raising additional capital for applications in this market could be difficult. Furthermore, HourGlass had a strong preference to not give up stock purchase rights in the process of obtaining venture leasing and would lease only if the total cost of ownership was within an acceptable range.

Financing Solution

HourGlass CEO and Co-Founder Darin Buxbaum was introduced to Fountain Partners as a recommended venture leasing partner in late 2011. Fountain Partners provides financing to venture and growth companies that have a significant capital equipment component to their business model. "The opportunity for us to assist HourGlass came ahead of them going into large scale production but there were enough good things in place for us to open up a relationship with Darin and finance his first large piece of equipment." said Fountain founder Tom Carter.

"We had a face-to-face meeting," said Buxbaum of his first encounter with Carter. That was his first surprise, he said, because most other financial service companies preferred only phone discussions.

Carter said the customer relationship has always been important in the kind of transactions Fountain Partners does and that for entrepreneurs, having a financial partner that they can count on for attention and follow through has been at a significant premium in the wake of the recent financial crisis. "We don't take a cookie-cutter approach," Carter said, "We start by understanding the client's business and overall financial needs."

"It's rare for anyone to offer more than three-year terms to small, unknown pre-revenue-stage companies," said Buxbaum, who had approached other funding sources before meeting Carter through a financial services intermediary. "Our proposal was not what our client anticipated we would offer, but we realized that what they really needed was time—more time to test and install equipment at their facility, time for trials and commercialization," said Carter.