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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.

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

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.

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

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