Will Raising Money be Child's Play for a Toy Start-up?
BY April Joyner
Sproutel makes toys that help children deal with chronic illness. Will investors play along?
Co-founders: Hannah Chung and Aaron Horowitz Location: Providence, Rhode Island Employees: None Founded: February 2012 Planned Beta Launch: March 2013 2013 projected revenue: $350,000 Price of toy: $200; $10 to $30 for accessories and software packages Previous funding: $25,000 from Betaspring accelerator and grants Funding sought: $550,000
The Pitch: "We create interactive learning toys for children with chronic illnesses. When kids are diagnosed, their parents are hit with a lot of complex information. Our toys take that information and make it easy for a child to understand. Our first product, Jerry the Bear, a talking robotic teddy bear, is for kids with Type 1 diabetes between ages 3 and 7. He teaches how to recognize when blood glucose levels are too high or too low and the importance of eating a healthy diet. We've tested Jerry with more than 150 kids, and they all loved him. We're in negotiations with medical distributors and pharmaceutical companies to market our products. Next, we plan to develop toys for asthma and childhood obesity. We're raising funds for our first manufacturing run and additional product testing."
Pitch health-care companies
This is a very compelling pitch. So many companies have "me, too" products, but Sproutel's product could really change someone's life. At $200, I think the price is reasonable. This may end up being a good investment for a medical distributor or pharmaceutical company. I've seen cases, especially with medical devices, in which a pharmaceutical company will take an ownership stake and it doesn't require that it be the exclusive distributor of the product. The founders should not overlook them as they fundraise.
--Rob Delman, managing director, Golden Seeds, New York City
Quantify the benefits
Talking about kids with chronic illnesses tugs the heartstrings, so Sproutel has a sentimental angle to sell people on. I could see this as a steady business, but I'm not sure it's scalable enough to invest in. Adding toys for other diseases could be difficult, as each has its own idiosyncrasies. Fuzzy teddy bears, for example, aren't good for kids with asthma. The $200 price tag also seems too high for parents. Sproutel will need more objective metrics about how this product helps kids if it expects parents to pay for this.
--David Kim, M.D., partner, Pinnacle Ventures, Menlo Park, California
Find a partner
Proving that there is a large enough market will be Sproutel's biggest challenge. I don't think medical distributors and pharmaceuticals are the proper way to go, not until the company has proven its market. Those companies won't be interested in a product without a history of sales. But if Sproutel could partner with diabetes associations, like the American Diabetes Association, to market its products, it might not need as much capital. That route bodes best for an exit.