REGIONAL REPORT : Nothing Ventured : Medical Products Inventors Face Unhealthy Times as an Ailing Economy Cuts Into Capital

Visiting his sick mother at a hospital four years ago, Robert Markus watched in disbelief as nurses wrestled the aching patient onto a cold, hard bedpan.

“It was a god-awful thing to see,” Markus said. “Bedpans are the only things left in a hospital that haven’t changed since the 19th Century. I thought, ‘There’s got to be something better.’ ”

So the 70-year-old retired restaurateur and a partner went to work in a garage and developed an electric-powered, inflatable bedpan. Years later and $100,000 poorer, Markus is still waiting for an investor to provide the money he needs to market the product.

He isn’t alone. Small inventors across Southern California and across the country find themselves facing an acute problem: how to move a product from the drawing board to the marketplace. Poor economic times, small inventors complain, have all but driven them out of the running.

Venture capitalists and bankers, burned in the easy-money days of the ‘80s, have become skittish about financing new products. And friends and family--often a source of financing for small inventors--are often cash-strapped themselves because of the recession.

The problem is a troublesome one for inventors in the medical products industry in Southern California, especially in Orange and San Diego counties, which are home to scores of medical products companies.

The medical device industry is one that community leaders in both counties have been counting on to spur development of new, fast-growth companies that would help create jobs.

Some designers of medical devices find the lack of financing particularly frustrating because they believe that the products they have perfected could be used to help sick people, as well as make their own financial dreams come true.

“It is incredible,” Markus said of the financing drought. “The medical industry has almost consistently yawned in my face. There just is no money anywhere.”

Indeed, the days in which venture capitalists and other investors garnered 30% returns on even small, one-product start-up companies is long past, said Russell R. Diehl, managing partner of Diehl & Co., a venture capital firm in Newport Beach.

With few exceptions, venture capitalists now prefer to sink their money into middle-sized companies that have success records and only temporary cash-flow problems, he said.

Roscoe E. Schmerse Jr. has heard that before. He invented what he calls the safest cotton swab in the industry.

Schmerse’s inspiration for the invention resulted from a day of people-watching at John Wayne Airport. He and a friend noticed a passerby with a flat-top haircut resembling that of rap singer Hammer.

A few months later, Schmerse developed a swab with a similar flat top. Because the swab does not taper at the end, it cannot enter the ear canal and damage the eardrum.

Despite its practical design, Schmerse has been unable to find financing for his invention. “I have talked to zillions of people,” Schmerse said, including cotton-swab manufacturers. He is now considering talking to family members and friends to raise cash.

“I don’t know what else to do,” he said. “I’ll even go to the swap meet.”

Don Milder, a partner at Crosspoint Venture Partners in Newport Beach, said Schmerse is typical of small inventors. They have the creativity and gumption to develop a product, but they lack the business and marketing skills to be successful entrepreneurs.

A former medical-device company executive, Milder has seen his share of product blueprints and business proposals from small, independent inventors.

The vast majority are rejected, he said, not necessarily because the products have no medical benefit but because their applications are not broad enough to anchor a growing company.

Single-product companies founded by inventors with little or no business savvy are risky because, lacking diversification, they typically reach plateaus after a few years. Such a company, to be viable, should be based on a highly technical product and have “an ability to grow rapidly,” Milder said.

“They may come up with some very clever ideas that are worthwhile,” Milder said of inventors. “But they usually target a niche in a relatively small market size.”

Inventors who do have an inroad with venture capitalists, Milder said, are usually experienced engineers who once worked for medical-device companies, know the business and have contacts.

“Those are the people we like to back,” Milder said. “They know how to take a product idea to the market.”

But venture capital is not the only way to go, said Stephen Paul Gnass, founder of the Hollywood-based Invention Convention, which held its yearly symposium this past weekend at the Pasadena Center.

While emphasizing that there are no short cuts to success, he said that small inventors can bypass “cold calling” by showing off their wares at trade shows. Such shows, he said, can improve an inventor’s chances of getting noticed.

The first step, Gnass said, is to define a goal. Should the product be sold by mail order? Would a joint venture be feasible? Should the inventor start his or her own company?

All of those tactics have proved successful for some, disastrous for others.

Leonard Holtz, 72, of Sunland, who had a booth at the Invention Convention, said he defined his goal out of necessity.

Holtz, a diabetic, was frustrated by the difficulty of inserting a needle into an insulin bottle. So he invented a small plastic cap that fits over the bottle and secures the syringe firmly to the top, preventing the needle from bending or breaking as the insulin is drawn out. He makes the caps in his garage.

The device, which he invented two years ago, could be a great help for elderly diabetics who have shaky hands and often break needles in bottles or scratch them against the metallic insulin caps, dulling the points, Holtz said.

Holtz and his son have turned out 350,000 pairs of caps (diabetics usually need two bottles for a single injection) and have been trying to sell them independently at $9.95 apiece. So far, though, he has not made a penny on his $118,000 investment.

William New, president of the Novent Group, a medical device consulting company in Palo Alto, suggests that small inventors interested in licensing or distribution agreements or joint ventures should steer clear of large companies such as Johnson & Johnson and Baxter International.

Instead, he said, inventors should do their homework and find compatible one-product companies that are solvent, aggressive and ready to branch out with new product lines.

Look for companies that have not gone public yet but are strongly considering doing so, he suggested. “They need that second fire to get them going.”