1Mby1M Incubation Radar 2010: OnTrack Imaging

OnTrack Imaging, Inc is bringing a unique ultrasound technology from the industrial to the veterinary market, specifically to treat horses. The company’s through-transmission c-scan ultrasound camera takes clearer images of horses’ legs and allows for early stage soft-tissue evaluation. The aim is to protect horses by treating them earlier and preventing avoidable damage and to give veterinarians and trainers greater confidence in ultrasound imaging.

Siobhan O’Brien is the CEO of OnTrack Imaging, Inc, which is based in north Texas and was founded in May 2006. She invested in the company that patented the technology over 10 years ago. As the technology progressed, she recognized that it could be applied to the animal imaging market and, in particular, the performance horse market to detect early stage soft-tissue damage and potentially prevent catastrophic injuries. O’Brien competes in the equestrian sport of eventing, which comprises dressage, cross-country, and show jumping, and recognized the value of a technology that would prevent career-ending damage to valuable horses. Cofounders Diane Pitt, Jamie Galis, and O’Brien purchased an exclusive worldwide license to adapt the patented technology for animal imaging. O’Brien also has 20 years’ business experience, including starting a small equine marketing company.

Veterinarians can buy OnTrack’s camera system as an additional diagnostic tool and pay the camera off in 13 months of preventative and pre-purchase screening. Ultrasound is not used in this manner today as it’s not clear enough to validate early-stage abnormalities. The camera is also lightweight and field portable, making it user friendly for equine veterinarians. The company also anticipates a new market of trainers with large stables of horses. Because the camera is portable, OnTrack envisions trainers adopting a regular scanning routine and uploading images to veterinarians for interpretation. The camera will cost $45,000 plus an annual software license of $1,000.

O’Brien says that current ultrasound imaging in not clear enough to allow a veterinarian to accurately diagnose early-stage lesions in soft tissue. Because of this, these early lesions go undetected and result in catastrophic injury that requires costly rehabilitation or even be career-ending for a horse. Twenty percent of all performance horses suffer soft tissue damage annually. The NTRA (National Thoroughbred Racing Association) created the Thoroughbred Safety Commission in an effort to determine why so many racehorses are having catastrophic injuries in high-profile races and to seek solutions to this problem. O’Brien believes the market is ripe for more comprehensive, earlier stage diagnostic technology like OnTrack’s camera. The only other technology used for detection of soft tissue injuries in horses is magnetic resonance imaging (MRI). The cost of the equipment is prohibitive for all but the large imaging clinics, and the cost of scanning the horses is usually prohibitively high for horse owners. MRI machines are not portable and require anesthesia for the horse. Horses in general do not wake up from anesthesia well, and additional injuries may occur during that process.

OnTrack Imaging says that performance horses represent $35 billion in assets in the U.S. economy. The company believes the market for its cameras is $289 million in the United States and $1 billion worldwide, and that it will increase as high performance trainers acquire machines to work in conjunction with their veterinarians’ review. The potential overall market in the United States are the 6,432 equine veterinarians practicing. Within that number, there are 1,200 high performance clinics, some with multiple vets. OnTrack Imaging anticipates that these clinics will want one camera per vet. The top targets are equine performance horse veterinarians: racing, Olympic disciplines (dressage, show jumping, eventing, reining), and Western disciplines – cutting and endurance. This represents 3.5 million horses in the U.S. alone.

Sound/Eklin and Biosound are the market leaders in the veterinary imaging market with b-scan pulse-echo technology designed for human imaging. O’Brien believes that as early adopters validate the early-stage detection capability of OnTrack’s technology, market adoption will be rapid and widespread.

OnTrack has raised $600,000 in two rounds of seed funding: a $300,000 family and friends round for the license agreement and establishing business in January 2007, and $300,000 for prototype production from the Emerging Technology Fund of Texas and a private investor in October 2009. It needs another $450,000 for image processing software and camera modifications. The company has raised $100,000 of this from the founders and is still trying to get an additional $350,000 from angels and individuals. It will need $1.5 million more to get to market (for sales and marketing, Inventory, and some engineering) by Q4 2011. For this, OnTrack would like an angel group or accredited individual who would fund in stages as milestones are achieved. The company does not yet have sales, but potential customers are Texas A&M, OSU, Rood and Riddle, Hagyard, Animal Imaging Center, ECMS, Virginia Imaging, Brendon Furlong, CSU, Cornell, UPenn New Bolton School, Tufts, Purdue, and Palm Beach Equine.

At a minimum, the company anticipates selling to the 1,200 clinics mentioned above and moderate adoption by other equine veterinarians for total U.S. sales of 1,323 clinics in the first five years. It wants to expand into the worldwide market in the third year of sales, and leverage distributors. At present, OnTrack aims to establish a strong revenue base in the equine industry and then talk to current market leaders about acquisition in the fourth year of sales. The revenue gained from that purchase would allow the team to develop new verticals for the technology. They have had preliminary discussions with two market players, and both have expressed interest as OnTrack creates revenue. The company has also begun research on a logical second vertical and have that license negotiated to ensure can commercialize as quickly as possible.

O’Brien says, “I think as women starting this company as a second career, our maturity and perspective has made it a less turbulent ride than some entrepreneurs’ experience” and that the three work well together. She had a baby seven weeks premature at the height of the company’s investment pitches – they were presenting in San Francisco for an investment round and were involved in the Texas funding process at the same time. “With my partners running interference, I was able to manage pumping and storing milk in between funding meetings and discussions,” says O’Brien. “[The] good news was I have a thriving 2-year-old son, and we got $300,000 during that process with a promise of $750,000 more as we meet milestones.”

O’Brien presented at the roundtable on October 7, 2010; the recording is here. Our discussion was about financing strategy, and I advised her that the best range for her, considering what she needs to get validated customers, is not $350,000 but $900,000–$1 million.

Recommended Readings
Deal Radar 2009: RadarFind
Flower Mound’s OnTrack Could Revolutionize Horse Racin (from D Magazine, a Dallas-based publication)

This segment is a part in the series : 1Mby1M Incubation Radar 2010