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.
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 blitzscaling model only potentially works well in true winner-take-all markets 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
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.
Investor Days Thüringen – Digital Edition – Review
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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See also our previous newsletters
- bm|t‑Newsletter Q1 2020 (17. April 2020)
- bm|t‑Newsletter Q4 2019 (15. Januar 2020)
- bm|t‑Newsletter Q3 2019 (17. Okober 2019)
- bm|t‑Newsletter Q2 2019 (14. August 2019)
- bm|t‑Newsletter Q1 2019 (3. Mai 2019)
- bm|t‑Newsletter Q4 2018 (4. February 2019)
- bm|t‑Newsletter Q3 2018 (16. October 2018)
- bm|t‑Newsletter Q2 2018 (23. July 2018)
- bm|t‑Newsletter Q1 2018 (24. May 2018)