Northstar's Second Chance

For Northstar Neuroscience, which is exploring new approaches for neurostimulation devices, the decision to take the money and run when the device IPO window was open in 2006 has meant the difference between survival or closing up shop. The FDA's recent approval of the company's second study of its Renova cortical stimulation device for the treatment of major depressive disorder is one sign that reports of Northstar's demise may, have been premature. The company's second chance can largely be attributed to the fact that it flew in the face of conventional wisdom that held that it was too early for the company to go public in 2006.

There are two schools of thought when it comes to financing a start-up company. One viewpoint is, when it comes time to raise money and you get the opportunity to raise even more than you think the company needs, take the money and run because you don’t know whether you’ll be that fortunate the next time around. The other line of thinking is to raise only what you think you’ll need to hit your next milestone, thereby minimizing dilution.

For Northstar Neuroscience Inc., which is exploring new approaches for neurostimulation devices, the decision to take the money and...

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