Lateral Capital Management, LLC

Acme Blood Services

Acme Blood Services (ABS) was set up to buy human blood in low-cost Midwest markets and resell it on the East and West Coasts – at much higher prices – using a very high tech, HIPAA-compliant software system. Basically, Acme would compete with the Red Cross (ARC) as a National Blood Broker under existing FDA regulations. We did not invest.

  • Assessment: The Acme product was terrific. And there were huge “system” benefits, since Acme’s system provided fresher, cleaner blood – without the waste inherent in the ARC system. As much as a third of blood donated to the Red Cross is disposed of before it can be used – at great expense – because it “ages out.” That said, however, we concluded that the selling cycle for converting Red Cross-supplied hospitals to the much better, lower cost Acme system would be very, very long. The key reason: Whole blood is a key revenue source to ARC (with a cost of goods sold of practically zero). We were concerned that ARC might use political/emotional pressure to keep Acme from doing their work much more successfully.
  • Outcome: Our assessment about converting hospitals was right. Everyone agreed Acme offered a superior value proposition – quality, delivery and price. But somehow, at the last minute, would-be hospital customers refused to connect. The company failed, having raised perhaps $40MM.
  • Learning: We liked the entrepreneurs here and we thought the business model was highly compelling. But converting hospitals from one “system” to another is a daunting task and we were correct in passing. Moreover, we learned that when a much-loved public institution is under threat, it doesn’t matter how much better your product or service is.