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STRATEGY

Every Year, Thousands of People are Killed By Pathogens in Food.

William Hanson wants to help.
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The Pitch: "Food-borne diseases kill 5,000 Americans each year and send another 325,000 to the hospital. Our OmniFresh 1000 System tests produce for pathogens such as E. coli and salmonella. Existing tests take up to three days, but ours takes two hours. Competitors can test an ounce of produce at a time, whereas we can test thousands of pounds because we test the water that produce was washed in. One machine costs about $165,000, and we'll also sell disposable biochips, which must be replaced after every sixth test. We recently completed a successful pilot program with Verdelli, one of the largest farms on the East Coast, and hope to sign a deal with them soon. Other packaged salad producers are interested as well."

Company: Hanson Technologies

Owner: William Hanson, 49

Location: Carlisle, Pennsylvania

Employees: 11

2006 Revenue: $55,000

2007 Projected Revenue: $585,000

Investment Needed: $4 million to hire a COO, ramp up production, hire a sales staff, and open a service department

Clients: Food packagers and processors

Recent Buzz: Successful pilot program with Verdelli Farms


The Investors React

Switch markets

Pathogen detection is quite interesting, and existing systems tend to be cheap but slow. But the food industry is slow to adopt new technologies. It might be better for Hanson to go after a smaller market that he can penetrate quickly. If he could prove himself in pharmaceuticals, for example, where expensive drugs need to be tested quickly for pathogens before being shipped, he'd gain a foothold more quickly. The food industry would follow later. As for fundraising, pathogens are very important from a biodefense perspective right now, so I bet he could get some money from the government.

James Thomas
Partner
Thomas, McNerney & Partners
Stamford, Connecticut

Raise less

Bill Hanson wants to sell a product in the food-processing industry where margins are quite thin. If he can prove to farmers that he can save them money by preventing E. coli outbreaks, he has a good case. But he's trying to raise too much money, especially considering his sales forecast is so low. If he raises that much now, he'll dilute his stake. If his main goal is to hire a COO and start testing the market with a few systems, he shouldn't need more than $1 million in the first round. He probably doesn't need much of a sales effort now, either. He shouldn't ramp up a sales force until he hires a COO who knows how to do that.

Robin Bellas
Partner
Morgenthaler Ventures
Menlo Park, California

Find customers first

I think there's a market for this kind of product, but I wonder if customers will want to pay $165,000 for a piece of equipment. My advice would be to pitch OmniFresh as insurance. When a company could be sued for millions of dollars for selling food contaminated with E. coli, the price no longer seems so high. I think $4 million is a fair amount to raise; you go through that pretty quickly in this kind of business. Angel investors are probably his best bet, since this deal is too small for a venture firm. To invest, I would need to see more customers buying the product.

Nagesh S. Mhatre
Angel investor
The Halo Funds
Palo Alto, California

Last updated: Nov 1, 2007




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