From some idle chatter at a cocktail party to a $55 million business — and he didn’t even have a prototype. Part of it, of course, was the invention: a faster way to detect a disease that hospitalizes 350,000 Americans annually. But most of it was the entrepreneur, Dave Dingott, age 45, who possessed both the business and technical expertise to found Sword Diagnostics from his home in Chester.
The secrets of Dingott and other successful entrepreneurs are revealed at the New Jersey Technology Council’s Bootcamp on Wednesday, May 24, at 7:30 a.m. at the Conference Center of the New Jersey Hospital Association. Cost: $130. Register at www.njtc.org. This day-long event includes discussion groups and success stories. Dingott speaks at a workshop, “You Only have One Chance to Make a First Impression.”
Other panelists include moderator Steve Cohen, an attorney with Morgan Lewis in Princeton; Philip Politziner, partner with the accounting firm of Amper, Politziner & Mattia; Shayne Vernallay, associate with the New Jersey Venture Fund; and Katherine O’Neill of the Jumpstart New Jersey angel network.
A Brooklyn native, Dingott earned his engineering degree from Brooklyn Polytechnic Institute. This was followed by a master’s from Columbia University in electronics engineering and computer science. He then went to work for Bell Labs, where he spent 18 years. His career shifted as the result of a chance meeting.
“I met this fellow at a party who was doing work at the Naval Research Laboratory on finding a quicker way to find the pathogens that cause food poisoning,” Dingott says. “I became increasingly interested in this scientist’s work.” So interested, in fact, that Dingott gathered a crew of his own and in partnership with the Navy Lab began working on the problem.
Food poisoning is often viewed as a distressing 24 hours followed by a quick recovery, like a short flu. But 5,000 Americans die each year as a result of food poisoning. Many cases are caused by the E. coli and salmonella bacteria. But the blood-based bacterium listeria, with a 25 percent fatality rate, is more deadly, making it imperative that it be detected at the earliest possible moment.
Traditionally these poisonous bacteria are identified by injecting antibodies in a sample and seeing if they partner up with anything suspicious. This process takes some 48 hours. Dingott and his crew, along with their Navy partners, have recently begun enhancing this method with a technique called Raman spectroscopy, which deals on the tiny photon level, rather than the much larger microscopic level. This method, coupled with various chemicals, allows for swift detection — within five minutes — of even the most miniscule particles. In order to turn this break-through into a company, Dingott had to raise a substantial amount of money.
Some of these funds have come from the NJTC Venture Fund and the Jumpstart Angel Network.
“We started out raising funds by licensing a very good mousetrap,” says Dingott. “It was only later that we developed a really better mousetrap.” Dingott insists that he has no golden rules for entrepreneurial capital raising, but he can spot the popular blunders and compare them with what has worked for him.
Alone and omniscient. The one sure way to make potential investors nervous is to show up alone, blueprints in pocket, and proclaim yourself inventor, business manager, and sales force all in one.
“When you are starting up, you’ve got no revenue stream, no track record — nothing angels can pin their hopes on,” says Dingott. “Your entire credibility comes from your team.”
For Sword Diagnostics, Dingott partnered with the top engineer and chief scientist in the field. His sales manager had just sold a record 100 units for his main competitor. Finding these partners and convincing them to join him meant haunting trade shows and plugging away for personal interviews. Once on board, all of the crew members joined together in making the pitch to the investors.
Be candid. Be it bank or individual angel, every investor is going to burrow deeply into every entrepreneurial venture before investing one thin dime. Letting them discover secret chinks in the firm’s armor only raises suspicions.
Total candor, on the other hand, makes a marvelous selling tool. By sharing the business’s current problems, an entrepreneur can put them in perspective and end further investigation. Dingott has found that potential angels are often eager to help with solutions. Additionally, candor places the firm’s most important asset — the owner’s integrity — in an excellent light.
Get out there. “Just who is the buyer for your product?” asks the interested angel. The entrepreneur ticks off the potential customers. “And with how many of them have you spoken?” the angel continues. A stunned, uneasy silence descends on the room.
With so many written business aids, it has become very popular to compile major marketing plans from one’s office chair. But for Dingott, hustling around and personally contacting everyone remotely interested in his type of product proved an immense value. It took Sword Diagnostics’ market beyond the obvious — the food processing industry — into hospitals and research institutes. “I not only learned who my buyers were, but they helped me define my product,” he says.
Protect the store. As investor and inventor sidle ever closer, the great fear looms that the entrepreneur might be giving away his control. He might one day find himself voted out of the company he founded. Dingott admits that it can happen — it has happened.
The advice that seems to have worked for Sword Diagnostics’ owner is to keep yourself invaluable. “No matter how greedy they are, they aren’t going to fire you if you are making them money,” Dingott says.
Still, it is generally unrealistic to expect to retain a majority ownership. It is better to concentrate on developing staff loyalty and individual value than on gaining a fiscal stranglehold. Dingott says that it is unrealistic for any owner to think he can maintain control of 50 percent of the stock as his product goes fully national.
Very shortly Dingott will be obliged to move Sword Diagnostics out of his home in Chester. He has been considering central New Jersey for the new company’s headquarters, or perhaps Chicago, near the National Center for Food Safety. Wherever he lands, he is optimistic that his business will do well.
“If there is any lesson to be learned from my company,” says Dingott, “it is that it pays to listen to people at cocktail parties.”