A venture capitalist’s investment in an emergent industry: which bets to place?

June 2001, the Belgian Investment Company (BIC) wants to invest in the booming Customer Relations Management (CRM) market. Dave Hudson, investment manager at BIC, has been asked to recommend a venture in which to invest a capital sum of 1 million euro. On his desk, Hudson has the business plans of two very promising ventures active in the CRM market. The first venture, Neurorithm NV, is still in the development stage of its revolutionary neural network-based software platform, which has the potential to become the next SAS or SPSS. Given the new and revolutionary character of their software, credibility will have to be established, however, before income streams will be generated. The second venture, DataMining NV, provides highly customized, unique data mining software for three market segments: the CRM market, bioinformatics and the sports analysis market. The company is expecting a steady growth in the years to come. The business plans of both companies display very diverse business models and ambitions. It is now up to Hudson to decide which one of these two companies to recommend to his superiors for future investment.

Written by Petra Andries and Yvonne Kirkels from the University of Leuven and Fontys University of Applied Science. Download case and teaching note at www.thecasecentre.org or request them from Petra.Andries@econ.kuleuven.be.

What next for fromAtoB?

Between 2005 and 2010, the internet became the preferred medium for people searching for passenger transport options. However, the search for connectivity from point A to point B was cumbersome and to obtain optimum results, necessitated calls to the web sites of many different transportation providers. The comparison between potential train connections, different airlines, using your own car, ride-sharing and sometimes the need for additional public transport links made this a time-intensive process.

However, in Germany in 2007, these inefficient and time-consuming search-and-compare processes were replaced by the internet platform www.fromAtoB.com. This enabled people to perform a comprehensive search that included every relevant transport mode (rail, air, own car, ride sharing, bus, rental car, taxi).

fromAtoB.com was founded as a spin-off from RWTH Aachen University, Germany. In 2009, the internet platform was successfully launched in the German market under the domain www.Verkehrsmittelvergleich.de. However, by August 2010, faced by the threat of competition from new market entries backed by big internet players such as Microsoft’s search engine, bing.com, fromAtoB.com’s founders were forced to consider expansion outside Germany. The question was, how best to finance an internationalisation strategy?

Written by Malte Brettel, René Mauer and Tobias Karmann from RWTH Aachen University. Download case and teaching note at www.thecasecentre.org or request them from karmann@win.rwth-aachen.de.

ThreeFive Photonics: Searching for the Holy Grail?

In 2001, the Dutch company ThreeFive Photonics was founded by telecom professional Wouter Deelman and PhD student Chretien Herben attached to Delft University of Technology. The founders set out to develop revolutionary opto-electronic chips with the potential to change the telecom industry. That year, venture capital firms invested € 7 million in the promising start-up, but additional capital was needed to develop ThreeFive’s radical “Holy Grail” technology. However, during the product development phase disaster struck: the ‘telecom bubble’ burst and the industry crashed. Desperately trying to keep the company alive, the founding team and investors turned to investigate less radical products, while trying to secure the extra funding needed. As the company’s final hour began to strike they faced an important decision: should ThreeFive try to enter new markets with new products, or look to merge with a competitor?

Written by Elco van Burg, Hans Berends and Sharon Dolmans from Eindhoven University of Technology. Download the full case and teaching note at www.thecasecentre.org or request them from j.c.van.burg@vu.nl.

When intellectual property rights go beyond patents

In 1999, three technical engineers invented a membrane system to clean sewage water. They filed for patent for their inventions, founded their company Watertreat GmbH, and in 2000 received financial support from different start-up support programs. The founders successfully acquired venture capital from an investor and for the next three years, the product worked well.

In December 2003, the company received its first major order; for Watertreat, the future looked bright. And then in January 2004, a lawsuit alleging multiple infringements of intellectual property rights threatened the company’s very existence. How would the founders react to this danger, and what options did they have to counter it?

Written by Malte Brettel, René Mauer and Tobias Karmann from RWTH Aachen University. Download the case and teaching note at www.thecasecentre.org or request them from karmann@win.rwth-aachen.de.