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Fork in the Road: Firm finds life is what happens while it's making other plans
Thursday, December 14, 2000 By Bob Starzynski, Post-Gazette Staff Writer
A favorite aphorism: Fools seek happiness in the distance, while the wise grow it under their feet.
Change the word "happiness" to "revenue," and you have a lesson that has been learned the hard way by many entrepreneurs this year.
Anymore, investors are skittish about investing in technology companies that are two years away from generating consistent revenue and five years away from profitability. This fear explains why many young companies have seen their sources of funding disappear or have cut costs in a hunt for quicker profitability.
The aphorism also explains, in part, the lesson learned by Peter Johnson and his South Side company, TissueInformatics, in recent months.
No, TissueInformatics has not had to scale back and lay off employees.
But the company is growing revenue under its feet, so to speak, while continuing to seek the larger pot of gold in the distance.
Three-year-old TissueInformatics catalogs and analyzes tissue for pharmaceutical companies, hospitals and research institutions and provides those organizations with the tools to do it themselves.
In the distance, Johnson wants to create massive databases of tissue information so that, for instance, a large pharmaceutical company developing a new drug could pay TissueInformatics for the use of thousands of electronically filed samples of liver tissue to analyze how the human liver would be affected by the drug.
But that goal requires three things. TissueInformatics first had to create a software platform that can electronically quantify the traits and functions of a tissue sample.
Then, the company had to build databases with millions of tissue samples of everything from human brains to tomato pulp to fish gills -- a process that is under way. Then, the company will have to find organizations to buy, rent and tap into the databases -- an ongoing process.
In the meantime, Johnson is going after revenue with new specialized software applications that run on the company's existing software platform.
The first of these newly crafted applications, which characterizes and quantifies skin features, was launched yesterday. This application, called Dermf(x), and future applications will be marketed and sold to those companies that want to do their own tissue analysis and cataloging using TissueInformatics' platform, called Quantf(x).
The idea to launch these new applications while continuing its long-term pursuits was conceived and carried out in the last six months.
"We realized [our big-picture plans] were far too big a bite to chew as a young company with limited financing," said Johnson, a plastic surgeon by training and the founder of the Pittsburgh Tissue Engineering Initiative.
"Investors like to see a modicum of revenue along the way. They don't want to get burned by dot.coms anymore."
In other words, TissueInformatics needed a much larger infusion of capital than the $6 million it has received through three rounds of funding to date -- the latest of which came earlier this year from Motorola -- and it needed to take some "baby steps" along the way to its ultimate goal. "We needed to shift from a company with a big dream to a tightly focused company working toward that big dream," Johnson said.
The 36-employee company is seeking that larger infusion of capital and hopes to obtain $6 million from corporate partners and private investors in January and another $20 million from venture capitalists later in next year's first quarter.
But the tightly focused baby-step approach has taken several months to work out.
First, Johnson tapped his marketing team to identify potential niches for the company and its products.
Then, he hired Mark Braughler as his senior vice president of business development.
Braughler was charged with bringing these new ideas to reality.
Just two weeks after he was hired in September, Braughler told Johnson and the rest of the company's senior managers that he needed to put together a product development team that recognizes the company's limited resources and could prioritize what products and projects to pursue and when to pursue them.
"When you grow quickly, your capacity to intellectualize what you can do outstrips the resources that you have to get things done," Braughler said. "In a small company, you always have more ideas than you can manage. We needed to start with some very measurable activities, where we could tee these things up and knock them down."
Or, as Johnson said, "You need to celebrate the small successes along the way to stay [ambitious]."
In addition to the software application for skin that was released yesterday, Braughler also believes TissueInformatics could launch other niche applications for blood vessels, corneas, livers and muscles.
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