DermaCare: Zapping Zits Directly
It was a rainy Saturday morning in late November 2005, and Peter Scocimara pulled on his Croc shoes to take his rambunctious golden retriever Jasper for a walk. Walking the dog would give Scocimara some much-needed time to clear his head and prepare for a Monday-morning meeting with the cofounders of his company, DermaCare, Inc. Headquartered in Livermore, California, DermaCare was a start-up venture that planned to market its ThermaClear acne-treatment device directly to consumers using direct response television (DRTV).
Scocimara was DermaCare's CEO, and he and his cofounders, Luiz Da Silva and George Choi, were excited about the company's prospects. Early clinical trials showed that the ThermaClear acne device made pimples disappear twice as quickly as those left untreated. With those results in hand, Scocimara and Choi approached angel investors, including Silicon Valley-based Band of Angels, to raise a Series A round. Just before Thanksgiving, the Band of Angels sent Scocimara a term sheet that offered the company $1.5 million, assuming a $4.5 million postfinancing valuation. Shortly thereafter, the CEO unexpectedly received a competing term sheet from Foundation Capital, a venture capital (VC) firm where his good friend and former business school classmate Charles Moldow was a partner. The VC's term sheet offered the company $4.0 million in funding, assuming a $7.65 million postfinancing valuation. Moldow structured the proposed deal so that DermaCare would receive $1.0 million up front and the remainder after the Food and Drug Administration (FDA) gave DermaCare clearance to market its acne device.
1) Do you think DermaCare will be successful? Why or why not?
2) How much cash will DermaCare need to be a self sustaining business?
3) What is your asessment of the Band of Angels?
4) Which financing offer would you accept?
Attachment:- Case.pdf