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bm|t newsletter Q2 2020

To be suc­cess­ful, a com­pany must cre­ate sig­nif­i­cant value for its cus­tomers and must cap­ture a sub­stan­tial por­tion of that value. Many of the high-fly­ing star­tups of recent years have taken the approach of first cre­at­ing a tremen­dous amount of cus­tomer value by pric­ing low (in some cases even at zero) and scal­ing glob­ally very rapidly with the aim of sub­se­quently cap­tur­ing much of that cre­ated value at some point in the future, pre­sum­ably after they have attained a level of mar­ket dom­i­nance that allows for excess profits.

In this Newsletter 

Value Creation and Value Capture

While this model, which is the focus of Reid Hoffmann´s excel­lent book Blitzs­cal­ing, can pro­duce excep­tional win­ners, such as Ama­zon or Face­book, it can also destroy large amounts of invest­ment cap­tial when it does not work, such as in the cases of WeWork or per­haps Uber. Although we real­ize the jury is still out on the lat­ter exam­ple, we believe that this land-grab­bing and heavy-loss-mak­ing-in-the-early-years approach is being employed to cre­ate value in more mar­kets than actu­ally lend them­selves to suc­cess­ful value cap­ture. At least the mag­ni­tude of value cap­ture is fre­quently not ade­quate to appro­pri­ately com­pen­sate investors for the cap­i­tal deployed and the large risks taken. Actu­ally, this that are char­ac­ter­ized by extremely high net­work effects (Face­book) or mas­sive invest­ment (Ama­zon) which cre­ate sus­tain­able bar­ri­ers to entry.

In Thürin­gen, we do not have suf­fi­cient cap­i­tal to fund such large-spend busi­ness mod­els, nor do we have many com­pa­nies which are focused on large-scale B2C oppor­tu­ni­ties, nor do we have the type and quan­tity of avail­able labor that could pur­sue such mod­els. Instead, due to the highly inno­v­a­tive and dis­ci­plined engi­neer­ing and tech prowess with which Thürin­gen is blessed, we take a dif­fer­ent approach that focuses first on the ele­ment of value cap­ture. We do this by devel­op­ing truly ground­break­ing tech­nolo­gies and pro­tect­ing those tech­nolo­gies from direct com­pe­ti­tion and sub­se­quently, once the tech­nol­ogy is ready to scale, pur­su­ing value cre­ation on top of a strong foun­da­tion of highly dif­fer­en­ti­ated prod­ucts and solutions.

His­tor­i­cally, the value cre­ation part of the equa­tion was an area of weak­ness for our region; how­ever, over the last decade com­pa­nies here have become more adept at pack­ag­ing their tech­no­log­i­cal break­throughs into attrac­tive and eas­ily con­sum­able prod­ucts and solu­tions and com­mer­cial­iz­ing on increas­ingly larger scales. In fact, we strongly believe com­pa­nies in Thürin­gen are gen­er­ally well posi­tioned to pro­duce excel­lent cor­po­rate results and invest­ment returns in the years ahead as our world-class, break­through tech­nol­ogy increas­ingly seam­lessly acesses the global economy.

At bm|t, we believe that investors can gen­er­ate attrac­tive returns pur­su­ing either model (focus­ing first on value cre­ation or focus­ing first on value cap­ture), but they must not com­mit the car­di­nal sin of employ­ing the wrong approach for the spe­cific com­pany and mar­ket oppor­tu­nity being pur­sued. We know which approach gen­er­ally works well for com­pa­nies in Thürin­gen and feel extremely for­tu­nate to have nearly 60 Investee-Part­ners which are work­ing on or already pos­sess rev­o­lu­tion­ary tech­nolo­gies and are bring­ing those tech­nolo­gies ever more suc­cess­fully to mar­ket, cre­at­ing great value and returns.

Your bm|t Team

Follow-on Investments

JeNa­Cell has won many awards for its inno­va­tions in bio­log­i­cally derived wound healing/management prod­ucts. The company’s base tech­nol­ogy involves the use of microor­gan­isms to cre­ate strong, flex­i­ble, and mois­ture-retain­ing sub­stances ideal for wound and cos­metic appli­ca­tions. The com­pany is also devel­op­ing a translu­cent ver­sion of its flag­ship prod­uct, Epicite, which will allow for wound mon­i­tor­ing with­out the removal of the cov­er­ing – a major improve­ment for patients and med­ical staff. bm|t acted as a co-investor to a strate­gic and another insti­tu­tional investor in this seven-fig­ure financ­ing round, which will be used to deepen the company´s capa­bil­i­ties in its core der­ma­tol­ogy mar­ket as well as to pur­sue sev­eral new high-poten­tial prod­uct categories.

neu­ro­Care Group has an ambi­tious and achiev­able plan to become for men­tal health what Fre­se­nius is for renal care: a global, ver­ti­cally-inte­grated patient care and tech­nol­ogy leader. The company’s ther­apy offer­ing is per­son­alised and evi­dence-based with the key sci­ence advanced inhouse. neuroCare’s core tech­nol­ogy brand, neu­ro­Conn, comes from Ilme­nau (a spin off from the TU Ilme­nau and its largest loca­tion in terms of employ­ees) and is a world-leader in neu­ro­mod­u­la­tion. Founder, Thomas Mechter­sheimer, a 15+ year Fre­se­nius vet­eran, has assem­bled a tremen­dously tal­ented and moti­vated man­age­ment team that is work­ing hard on achiev­ing his bold vision. We are thrilled to have joined Kyowa Phar­ma­ceu­ti­cals from Japan in this growth-focused invest­ment and are expect­ing great things from neuroCare.

Review: Investor Days Thüringen — Digital Edition

Although we greatly missed hav­ing beer and bratwurst with our guests at Investor Days Thürin­gen, this year´s dig­i­tal edi­tion did have some astound­ing advan­tages and fea­tures. We had a sig­nif­i­cantly broader reach in terms of the num­ber and loca­tion of investors than we have ever had before. The vir­tual arena soft­ware from rooom AG pre­miered at IDT and – in com­bi­na­tion with the Plazz AG con­fer­ence app – greatly enhanced the event with a futur­is­tic 3D plat­form which made meet­ing the com­pa­nies inter­est­ing and effi­cient. Most impres­sively, the pitch­ers and pre­sen­ters sim­ply stole the show with extremely strong per­for­mances from all across the globe. In case you missed this year´s event, you can view a brief high­light video here.

We are look­ing for­ward to see­ing you next year at IDT 2021!

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