In cer­tain cir­cum­stances, expand­ing a busi­ness in the tra­di­tional sense can actu­ally limit value for a com­pany whose technology’s great­est poten­tial is as an enabler. An enabling tech­nol­ogy is a tech­nol­ogy that may have dif­fi­culty suc­ceed­ing in the mar­ket­place on a stand­alone basis, but can sig­nif­i­cantly increase the per­for­mance of another tech­nol­ogy or com­pany when combined.

Com­pa­nies pos­sess­ing enabling tech­nolo­gies must, of course, prove their tech­nol­ogy is effec­tive, per­haps through clin­i­cal tri­als, beta cus­tomers, or tech­nol­ogy part­ner­ships. For these com­pa­nies, invest­ing heav­ily in sales efforts or grow­ing their geo­graphic foot­print may even be coun­ter­pro­duc­tive. Often these com­pa­nies are well advised to focus the major­ity of their efforts on fur­ther devel­op­ing their core tech­nol­ogy and increas­ing its attrac­tive­ness for inte­gra­tion into exist­ing prod­ucts as opposed to build­ing out a stand­alone business.

We believe that there is an inher­ent founder and investor bias toward “com­pany build­ing”, largely because that kind of progress is more eas­ily mea­sured (sales, cus­tomers, employ­ees), and both founders and investors can find it dif­fi­cult to rec­og­nize and prop­erly assess progress that is less eas­ily mea­sured (patents, new dis­cov­er­ies, advanced know-how, learn­ings from a test). At bm|t, we rec­og­nize this bias and work closely with founders to prop­erly eval­u­ate their unique oppor­tu­nity set to col­lab­o­ra­tively reach an opti­mal out­come. This requires that the founders and investors share a vision and estab­lish a trust that allows for pur­su­ing paths that might be less mea­sur­able but more value cre­at­ing.

Our appre­ci­a­tion for com­pa­nies with less mea­sur­able paths was recently rein­forced, because two of our most suc­cess­ful investee-part­ners did not gen­er­ate sub­stan­tial rev­enues but pos­sessed tech­nol­ogy that was so unique and highly pro­tectable that the com­pa­nies dra­mat­i­cally increased their value with­out sig­nif­i­cantly expand­ing their busi­ness in the tra­di­tional sense.

With our under­ly­ing goal of cat­alyz­ing Thüringen’s econ­omy, bm|t invests across the full spec­trum of inno­va­tions – those that should indeed be the basis for large, stand­alone enter­prises as well as enabling tech­nolo­gies. What­ever each company’s opti­mal path may be, we look for­ward to the shared journey.

Your bm|t Team

* Our use of the term value in this newslet­ter is intended to be inter­preted more broadly than sim­ply share­holder value, as we appre­ci­ate that there are many aspects to value creation.