Eight Great Business Plans, But Only One Is the Winner …

Ask anyone involved in the healthcare field — doctors, insurers, drug makers, and certainly patients — and they will tell you that the industry is in dire need of an overhaul. But chaos, which often precedes change, presents opportunities too. 

Five of the eight teams in the Venture Finals of the 2005 Wharton Business Plan Competition see promise in the upheavals that are roiling the healthcare sector. These teams proposed businesses that would, among other things, help in the treatment of critical wounds, prevent drug abuse and test for serious illnesses such as breast cancer. The three remaining teams focused on information technology, offering plans to prevent Internet fraud, improve college fundraising and enhance “mission-critical” computing.

The Business Plan Competition unfolds in four phases, during which students present business ideas that eventually turn into full-fledged plans. In the months leading up to the finals, participants can tap a variety of Wharton resources, ranging from mentoring to workshops on such topics as business plan writing and the legal challenges of entrepreneurship.

A panel of six judges evaluated the final plans on April 26, interrogating each team during a question-and-answer session that followed a 10-minute team presentation. The judges, all investment professionals, came from Johnson & Johnson, Perseus Group, Arboretum Ventures, First Round Capital, Sienna Ventures and Arzu Inc.

The competition typically attracts more than 200 student teams and is open to any team that includes a University of Pennsylvania student. The top three finishers win cash prices — first place gets $20,000 –plus in-kind donations of business advice from lawyers and CPAs. Missing from this year’s competition, sponsored annually by Wharton Entrepreneurial Programs, were the off-beat ideas — like pet insurance, manicure stations at airports and space tourism — that have enlivened recent finals. Nor was the group heavily weighted by technology-based ideas, as was the case in competitions that preceded the 2001 dot.com bust.

Below, in alphabetical order, are brief synopses of this year’s eight finalists. See if you can pick the winning team (announced at the end of the article; don’t look).

Alumni Affairs Worldwide: Colleges and universities are hungry for alumni donations — as anybody who has fielded their fundraising calls during dinner knows. Despite this persistence, the effectiveness of such appeals has lately tapered off, with fewer alumni stepping up to the donation plate, says John Weaver, an executive MBA student and team leader of Alumni Affairs Worldwide. Weaver’s company would change that by helping schools cement their ties with alums.

It would employ an approach built on graduates’ emotional link with their classes. The company would use major reunions (like the 10^th or 25^th ) as a chance to connect, and it would sell alums a class book filled with photos and reminiscences by classmates. It would also offer a class website selling such items as reunion tickets, clothing and memorabilia.

“A lot of schools are doing little pieces of this, but none of them has integrated it,” Weaver said. Plus, schools are desperate for fundraising help as their public financial support wanes. Alumni Affairs Worldwide — started by Weaver and two fellow Princeton alums — tested the approach at their alma mater and completed transactions worth about $2 million.

Dynamic BioSystems: Actor Christopher Reeve, who was paralyzed in a horse-riding accident, died last year of an infection that originated with a bedsore. Dynamic BioSystems has devised a better way of treating wounds like Reeve’s as well as the foot ulcers that often afflict diabetics.

The company’s first product, a gel called Diactif, would speed healing and limit scarring. “There are 60,000 amputations a year because of these kinds of wounds,” said team leader Steven Chua, an MBA student. He estimated that the market is worth $6.5 billion annually and will grow due to increasing numbers of elderly patients and diabetics. Diactif would be more cost effective than current treatments because it would cut healing time and thus hospital stays, he said.

The technology that undergirds Diactif is patented, and Chua and his partner, Shiladit Sengupta, a postdoctoral fellow in bioengineering at the Massachusetts Institute of Technology, have begun to work on an advanced formulation of the gel that wouldn’t require refrigeration. If they succeed, the potential market for their product could expand significantly. Besides eliminating the need for special storage, the new formulation would increase the product’s shelf life.

E-Ventures Holding: If e-commerce is big business, so is Internet fraud, said Raghu Bala, team leader for E-Ventures Holding and an executive MBA student. “There’s e-commerce fraud, email fraud, data fraud and click fraud. People fish for credit card information. They scrape data off websites. They steal passwords and access password protected sites.”

E-Ventures would help companies fend off these kinds of threats with a combination of hardware and software. The company’s algorithms are able to ferret out patterns of fraud and then block attacks, Bala said. Many companies hold themselves out as protectors of online innocents by, for example, selling firewalls and spam detectors, “but we stand apart in that we focus solely on fraud. Our patent-pending technology is able to detect and take action against several simultaneous threats. It can detect fraud in different types of data. And it’s self-learning. We have built in neural networks.” 

FibrinX: Here’s a funky fact and, for FibrinX, a business opportunity: Fish blood clots more readily than mammalian blood. That’s partly why FibrinX would peddle a tissue sealant derived from the blood plasma of the Atlantic salmon. Tissue sealants are adhesives used to prevent excessive bleeding during surgery or after a serious injury. They stimulate the body’s natural blood-clotting process, said Dhaval Gosalia, team leader and a doctoral student in bioengineering.

Competitors make their tissue sealants from mammalian blood. That presents problems because mammals can give each other such diseases as AIDS, Mad Cow and hepatitis C. But there is no evidence of these sorts of diseases being transmitted from fish to humans, according to Gosalia. As a result, FibrinX’s sealant would not only be safer but would spare healthcare providers the cost of screening for blood-borne diseases.

Six patents protect the technology and three more are pending, said team member Jonathan Goodspeed, an MBA student, adding that the U.S. Army and Navy are testing it in pre-clinical trials. “Fifty percent of soldiers who die on the battlefield die because of excessive blood loss,” he noted.

FibrinX already has entered into an agreement under which the largest salmon farmer in North America would supply the blood the company needs to make its sealant.

IntuiTouch: Breast cancer kills thousands of American women each year and everyone agrees that early detection is the key to survival. The trouble is, the most common early-detection method — self-examination — is notoriously unreliable. Women often miss tumors until they are quite large.

Enter IntuiTouch. The company would sell a handheld, easy-to-use and inexpensive device called iFIND, which women could use at home to check themselves for signs of cancer. The device — based on technology patented by Britton Chance, a University of Pennsylvania professor of biophysics — would use near-infrared light to find tumors. “The unique light-absorbing property of hemoglobin, and the fact that growing cancers require more blood and consume more oxygen than surrounding tissues, afford iFIND the ability to detect metabolic changes (early stage) rather than physical changes (later stage),” according to IntuiTouch’s business summary. In early trials, the device showed more than 90% accuracy. 

IntuiTouch’s surveys found that 83% of women would use iFIND if it were available and they would be willing to pay $100 for it, said Michael Herr, a team member and an entrepreneur-in-residence at Drexel University. The device wouldn’t replace the mammogram, the leading detection technology, but rather supplement it by giving women an early warning that they should see their doctors.

Lemire Imaging: Whereas IntuiTouch wants to encourage women to get mammograms sooner, Lemire Imaging aims to supplant the reigning breast-imaging technology. As far as its team members are concerned, mammograms are seriously flawed. “Existing technologies are high cost, produce inconclusive results and are painful for patients,” said Anya Schiess, an MBA student. “Ours is easier to use, safer and cheaper.”

Mammograms employ radiation — X-rays — to create their images. In other words, they expose women to a potential carcinogen while trying to detect cancer. Lemire’s device, the LaserScan, would use light. “Light is scattered or absorbed differently depending on the type of tissue it encounters,” Schiess explained, adding that mammograms also are uncomfortable because a woman’s breast has to be pressed against the scanner. With the LaserScan, the breast would rest in a box.

Mammography is so well established that it would be tough to unseat. But the Lemire team members said they could sell their machine for $175,000, half of what leading scanners cost. They believe that doctors, hospitals and women’s health centers would adopt their machine not just for its cost savings, but also for its greater accuracy. “Mammograms have to be screened by two radiologists, which adds cost,” Schiess noted. “And 80% of the lesions detected are benign.” LaserScan, she added, can distinguish between benign and malignant tumors.

Mujisan Pharmaceuticals: Oxycontin, the slow-release version of the opiate Oxycodone, has been called “hillbilly heroin.” Users grind up the painkiller, destroying its slow-release properties, and snort or inject it. Mujisan Pharmaceuticals aims to sell a tamper-proof version of the drug called PolyOxy. The company’s technology would bind the drug to a novel polymer that can’t be destroyed by crushing, dissolving or heating.

“Fifty million Americans face some sort of acute, chronic pain, either end-of-life pain from cancer, osteoarthritis pain or back pain,” said Karoon Monfared, a team member and an undergraduate at the University of California at Los Angeles. But many of them aren’t getting the pain relief they need because some doctors are reluctant to prescribe Oxycontin out of concern about addiction and abuse. “In 2004, only 17% of people suffering from chronic pain received Oxycontin,” Monfared noted. Despite a growing need, the amount of the drug prescribed actually dropped from 2003 to 2004. “PolyOxy’s safety will drive market growth,” Monfared said. Team members created their company’s unusual name by combining two Japanese words. It means “son of the generic.”

Valverde Computing: People who operate a stock market say you can’t afford a second of downtime; the consequence is that you risk losing hundreds of transactions and millions of dollars. As a result, stock exchanges as well as operators of other “mission-critical” applications tend to rely on mainframe computers. While mainframes are expensive to lease and maintain, they are also very reliable.

Valverde Computing has devised a combination of servers and software that provides mainframe reliability without its cost or complexity, said Yan Pei Chao, team leader and an executive MBA student at the Wharton West Campus in San Francisco. His team’s product is, in information-technology terms, open system and open source. In other words, users — or rather their IT staffers — can see and, if necessary, tinker with its guts. In the past, users in this niche have had to rely on proprietary solutions from companies such as IBM and Hewlett Packard, Chao explained. That meant they often had to look to IBM and HP for updates and maintenance. Chao’s partner, Charlie Johnson, designed the Valverde system and continues to work as a programmer in California. “Charlie’s my rocket scientist,” Chao quipped in reference to Johnson’s stint as a NASA computer specialist.  

Envelope, Please …

The winner of the 2005 Venture Finals is FibrinX.  Team members collected the $20,000 first prize as well as in-kind donations of accounting, legal and consulting services, and say they hope to turn their plan into a startup company after they graduate. “We have several different options we are looking at, but this is definitely top of mind,” Gosalia said. They are already fishing for investors.

Gosalia met Goodspeed during the 2003-2004 school year through Penn’s Center for Technology Transfer. Gosalia, who had a business idea that sprang from his thesis research, was looking for someone to help him write a business plan. Goodspeed and another Wharton friend were seeking technologies to commercialize. That meeting produced a business plan for a drug-discovery company called BioSpectrum, which took third place in last year’s Venture Finals.