INSEAD Library

Includes bibliographical references and index

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Nurturing Science-based Ventures An International Case Perspective Contents 1 Opportunity Recognition ............................................................................ 1 1.1 Starting from the Idea ............................................................................... 1 1.2 From Idea to Opportunity: A Deliberate Process ...................................... 2 1.3 Where Do Opportunities Occur? ............................................................... 2 1.3.1 Unexpected Occurrences ................................................................ 2 1.3.2 Incongruities.................................................................................. 3 1.3.3 Process Needs ................................................................................ 3 1.3.4 Industry and Market Changes ........................................................ 3 1.3.5 Demographic Changes ................................................................... 3 1.3.6 Changes in Perception .................................................................... 4 1.3.7 New Knowledge............................................................................. 4 1.4 Validating Opportunities............................................................................ 4 1.4.1 Product/Service Feasibility ............................................................ 5 1.4.2 Industry/Market Feasibility ........................................................... 5 1.4.3 Organizational Feasibility .............................................................. 5 1.4.4 Financial Feasibility ...................................................................... 6 1.4.5 Personal Fit..................................................................................... 6 1.5 The Window of Opportunity ..................................................................... 6 1.6 The Business Concept Proposal ................................................................. 7 1.7 The Big Question: Should You Tell Anyone Else Your Idea? .................. 8 1.8 Cases in This Chapter ................................................................................ 8 CASE 1-1 Optima Environnement SA: Turning a Wonder Tree into an Eco-business................................................................. 11 1 Company Background............................................................... 12 2 PhytoflocTM and the Water Treatment Industry ...................... 13 3 Moringa Proteins....................................................................... 17 4 Moringa Oil............................................................................... 19 5 Licensing Moringa Technology................................................ 20 6 Financial Investments ............................................................... 21 7 Optima's Challenges and Options ............................................ 21 8 2004 and Beyond....................................................................... 23 CASE 1-2 Cognosense SA: Validating an Opportunity ................................ 27 1 The Company............................................................................ 28 2 Product Portfolio ....................................................................... 30 3 Cognosense's Mobile Business Opportunity ............................ 30 4 Understanding the Dynamics of the Mobile Market ................ 31 5 Developing the Appropriate Business Model ........................... 34 6 Setting the Course for Growth .................................................. 38 CASE 1-3 Shockfish (A)................................................................................ 47 1 Beginnings................................................................................ 48 2 The Product............................................................................... 48 3 What Was the Best Market for Spotme? .................................. 50 4 The Contract ............................................................................. 52 CASE 1-4 Redigo: Putting a New Electric Vehicle on the Road .................. 53 1 History...................................................................................... 54 2 The Vehicle............................................................................... 56 3 Market Developments in Urban Mobility ................................. 58 4 Where to Go with Redigo......................................................... 65 2 Planning the New Venture................................................................................ 85 2.1 What Is a Business Plan? ......................................................................... 85 2.1.1 Why Write a Business Plan9 ....................................................... 86 2.1.2 Who Should Write the Business Plan? ......................................... 86 2.1.3 Who Will Read the Business Plan?.............................................. 87 2.1.4 What Should Be in the Business Plan? ........................................ 87 2.1.5 Common Pitfalls........................................................................... 88 2.2 Key Elements of the Business Plan ......................................................... 89 2.2.1 New Venture Team...................................................................... 89 2.2.2 Market Analysis and Sizing......................................................... 91 2.2.3 Industry and Competitor Analysis ................................................ 92 2.2.4 Intellectual Property ..................................................................... 93 2.2.5 The Business Model..................................................................... 96 2.2.6 The Marketing Plan...................................................................... 98 2.2.7 Financing the Venture ................................................................ 102 2.2.8 Talking About Risk.................................................................... 102 2.3 Cases in This Chapter ............................................................................ 103 CASE 2-1 Shockfish (B) .............................................................................. 107 1 Crossing the Chasm................................................................ 108 2 Funding................................................................................... 109 CASE 2-2 IR Microsystems (A): June 2002 ................................................ 111 1 InfraRed (IR) Microsystems in January 2002 ........................ 112 2 Infrared Spectrometry ............................................................. 114 3 Market Analysis and Marketing Strategy ............................... 116 4 5 Strategic Plan........................................................................... 124 Time to Sign off on New Plan................................................. 126 131 132 133 136 140 CASE 2-3 InMotion Technologies Ltd......................................................... 1 Background.............................................................................. 2 Creation of the Company......................................................... 3 Development of the Company................................................. 4 The Future................................................................................ CASE 2-4 Boblbee (D): The Urban Backpack............................................. 143 1 Background.............................................................................. 144 2 Getting Boblbee to Market...................................................... 146 3 Industry Environment.............................................................. 153 4 Working the Numbers.............................................................. 156 CASE 2-5 VistaPapers (A): December 1994................................................ 167 1 VistaPapers: Enabling Quality Printing for SOHO Market..................................................................... 168 CASE 2-6 VistaPapers (B): September 1995............................................... 1 Feedback Received on the Initial Business Plan..................... 2 Back to the Drawing Board: January to September 1995 ....... 3 The Revised VistaPapers Business Plan: September 1995..... 179 180 181 182 CASE 2-7 VistaPapers (B-2): November 1995............................................ 187 CASE 2-8 VistaPapers (C): Going VistaPrint.com...................................... 189 1 VistaPrint.com Business Plan: March 2000............................ 190 CASE 2-9 Lyncée Tec SA: Scaling up a Technology Venture.................... 1 Company Background............................................................. 2 The Product.............................................................................. 3 Competing Firms and Technologies........................................ 4 Management Resources and Networking................................ 5 The Business Plan.................................................................... 6 Funding the Venture................................................................ 7 Outlook.................................................................................... 3 199 200 200 202 203 205 210 211 Venture Financing...................................................................................... 219 3.1 Financing Ecotypes and Resource Maps: Matching Needs with Funders......................................................................................... 219 3.1.1 Debt Financing............................................................................ 220 3.1.2 Equity Financing......................................................................... 220 3.1.3 Mapping Resources: The General Framework .......................... 221 3.1.4 Resource Maps and Financing Ecotypes..................................... 224 3.2 Business Valuation ­ Science or Art?..................................................... 234 3.2.1 Valuation Techniques ................................................................. 235 3.3 Cases in This Chapter............................................................................. 238 NOTE 3-1 Venture Capital Investment Contracts: A Primer and Taxonomy.......................................................... 241 1 Introduction............................................................................. 242 2 Conflicts Addressed in Venture Capital Contracts ................. 243 3 Conflict-Mitigation Strategies................................................. 249 4 A Simple Taxonomy of Major Contract Clauses.................... 258 5 Conclusions............................................................................. 282 CASE 3-1 AVIQ Systems AG: Creative Technology, Innovative Financing................................................................ 295 I AVIQ Systems......................................................................... 296 CASE 3-2 Tatis Limited............................................................................... 1 Global Trade Patterns: A Data Management Nightmare ........ 2 Tatis: Bringing out the Smarts................................................ 3 Market Entry Strategy............................................................. 4 Financing Tatis Limited.......................................................... 311 312 313 316 316 CASE 3-3 Genedata..................................................................................... 323 1 Company Background............................................................. 324 CASE 3-4 Venture Valuation AG: The Genedata Assignment................... 1 Company Background............................................................. 2 Venture Valuation Product Portfolio...................................... 3 The Genedata Project.............................................................. 4 The Valuation Exercise........................................................... 333 334 335 338 339 CASE 3-5 Novartis Venture Fund: Valuation Dilemmas............................ 355 1 Novartis Venture Fund............................................................ 356 4 Growing the Entrepreneurial Firm: Building Lasting Success............ 365 4.1 Why Grow the Firm?.............................................................................. 365 4.1.1 Measuring Growth...................................................................... 366 4.1.2 Challenges to Growth, or Why Some Entrepreneurs Don't Scale............................................................................... 366 4.2 Strategies for Growth.............................................................................. 367 4.2.1 Internal Strategies: Organic Growth........................................... 367 4.2.2 External Strategies: Partnering for Success ............................... 369 4.3 Management Skills and Leadership....................................................... 371 4.3.1 Organizing Growth..................................................................... 371 4.3.2 Organizational Blueprints .......................................................... 373 4.3.3 Managing People........................................................................ 375 4.3.4 Other Necessary Management Competences ............................ 376 4.4 The Troubled Company.......................................................................... 377 4.4.1 Strategic Issues........................................................................... 377 4.5 Cases in This Chapter............................................................................. 378 CASE 4-1 IR Microsystems (B): Taking Tunable Diode Laser Spectrometry (TDLS) to Market in 2006....................................................... 383 1 New Product Offering............................................................. 384 2 Next Steps................................................................................ 388 CASE 4-2 IR Microsystems (C): Epilogue................................................... 395 1 IR Microsystems' Outlook for 2006........................................ 395 2 IR Microsystems Acquired by Leister Process Technologies............................................................................. 396 CASE 4-3 AC Immune SA: Taking Research into Development.......................................... 397 1 The Opportunity...................................................................... 398 2 AC Immune SA....................................................................... 398 3 The Venture's Assets............................................................... 399 Protecting Assets..................................................................... 401 4 5 The Competitive Landscape.................................................... 401 6 Industry Characteristics .......................................................... 403 7 Developing Options in a Dynamic Environment.................... 405 The Next Strategic Moves....................................................... 405 8 CASE 4-3 Handout AC Immune and Genentech: Exclusive Global License Agreement.................................................................... 413 CASE 4-4 Covalys (A): Managing the Company's Growth and Development Strategy ....................................................... 415 1 Company Background............................................................. 416 2 The Life Sciences Industry...................................................... 417 3 Shaping Covalys's Growth and Development Strategy.......... 419 4 Outlook.................................................................................... 423 CASE 4-4 Handout Covalys: Expansion Plans............................................. 429 CASE 4-5 Technology Strategy at Dartfish.................................................. 431 1 The Technology....................................................................... 432 Company History.................................................................... 433 2 3 Application Domains and Business Models............................ 434 4 Where to Go from Here?......................................................... 438 CASE 4-6 Netcetera (A): Hiring an External CEO? ...................................... 443 1 Netcetera.................................................................................. 444 2 Netcetera's Development 1996-2000...................................... 444 3 Changing the Management: Hiring a New CEO?................... 448 CASE 4-7 Netcetera (B): Organizing for Sustainable Business Success....................................................................... 453 1 Netcetera's Learning Points from the External CEO Decision.............................................. 454 2 3 Trying a Participative Approach to Organization................... 454 Adapting to Market Developments......................................... 455 CASE 4-8 Netcetera (C): Reflections and Outlook ..................................... 463 1 New Projects............................................................................ 464 2 New Objectives....................................................................... 464 3 New Challenges....................................................................... 464 CASE 4-9 Boblbee (E): Inventing the Urban Nomad.................................. 465 1 Marketing Strategy.................................................................. 466 2 Trouble Begins........................................................................ 468 3 The Crisis................................................................................. 470 4 Product Development and Repositioning................................ 470 5 The Way Forward.................................................................... 473 CASE 4-10 EndoArt SA: Creating and Funding a Medical Technology Startup (A)........................................... 489 1 Company Overview................................................................. 490 2 Evolution of the Firm.............................................................. 490 3 Turning the Tide...................................................................... 497 CASE 4-11 Google Search Engine and Advertisement............................... 503 1 Creation................................................................................... 504 2 The Technology and Original Idea.......................................... 505 3 Business Model....................................................................... 506 4 Exploding Growth................................................................... 507 5 Market/Competition................................................................ 508 6 Google and Yahoo's Complex Relationship............................ 511 7 Microsoft's Intentions Revealed.............................................. 512 8 Current Actors in the Market.................................................. 513 9 Google's Investments............................................................... 514 10 Back to the Dilemma............................................................... 515 5 Harvesting................................................................................................... 521 5.1 Harvesting Options............................................................................... 522 5.1.1 Milking the Cash Cow............................................................... 522 5.1.2 Trade Sale.................................................................................. 523 5.1.3 Merging or Being Acquired by a Larger Firm.......................... 523 5.1.4 Buyouts...................................................................................... 524 5.1.5 Leveraged Recapitalization of the Company............................ 526 5.1.6 Initial Public Offering (IPO)..................................................... 526 5.2 Specific Challenges in the Harvesting Process..................................... 529 5.2.1 Timing..................................................................................... 529 5.2.2 Valuation................................................................................... 530 5.3 Cases in This Chapter........................................................................... 530 CASE 5-1 EndoArt SA: Creating and Funding a Medical Technology Startup (B)............................................................ 533 CASE 5-1 Handout Allergan Announces its Acquisition of EndoArt....................................................... 1 Forward-looking Statements................................................... 2 About Allergan, Inc................................................................. 3 About EndoArt S.A................................................................. 535 536 537 537 CASE 5-2 Sentron at the Crossroads (A).................................................... 539 1 Company History.................................................................... 540 2 Sentron's Business Model and Operations.............................. 541 3 The Sensor Technology Market.............................................. 544 4 Competitors' Technologies and Products................................ 546 5 Alternative Future Strategies................................................... 546 6 Decision Looming................................................................... 547 CASE 5-3 Sentron at the Crossroads (B)..................................................... 553 1 The Proposed Merger.............................................................. 554 2 Afterthoughts........................................................................... 554 CASE 5-4 4M Technologies and the Optical Disk Revolutions.................. 1 Company Background............................................................. 2 Optical Storage Media: A Short Introduction......................... 3 4M Technologies: Integrated Manufacturing Solutions for the Digital Age................................................................... 4 The Future............................................................................... 557 558 559 562 565 CASE 5-5 Generics...................................................................................... 577 1 The Genesis of Generics.......................................................... 578 2 A Culture of Innovation.......................................................... 579 3 Consulting Activities: Creating Value Through Intellectual Property................................................................. 581 4 Optimizing the Creation of Value........................................... 582 5 Managing a Complex Process................................................. 588 6 Growth Challenges.................................................................. 589 7 Moving On............................................................................... 591 CASE 5-6 GigaTera Inc: Pulling the Plug?................................................. 1 Optoelectronics: the Soaring Opportunity.............................. 2 Company Background............................................................. 3 Brakes on the Development of the Optoelectronics Market................................................. 4 How GigaTera Dealt with the Market Changes...................... 5 Deciding on the Future............................................................ 597 598 599 601 604 607 6 Corporate Entrepreneurship.................................................................... 6.1 Why Do Large Corporations Pursue Entrepreneurship? ....................... 6.2 How Can Corporations Promote Entrepreneurship?............................. 6.2.1 Encouraging Corporate Entrepreneurs....................................... 6.2.2 Designing the Entrepreneurial Organization.............................. 6.3 Cases in This Chapter............................................................................ 611 611 612 612 613 614 CASE 6-1 Rebuilding a Passion Brand: The Turnaround of Ducati (A)................................................. 617 1 Federico Minoli....................................................................... 618 2 Situation at Ducati in 1996...................................................... 618 3 Quick Fixes.............................................................................. 626 4 Priorities for the Next Few Years............................................ 627 CASE 6-2 Rebuilding a Passion Brand: The Turnaround of Ducati (B)................................................. 633 1 Phase 1: Build the Brand......................................................... 634 2 Phase 2: Rationalize the Factory............................................. 641 3 Phase 3: Refocus on RandD....................................................... 641 4 Results..................................................................................... 642 CASE 6-3 Innovation Leadership at Logitech............................................. 643 1 Company Background............................................................. 644 2 Company Organization............................................................ 645 3 Innovation Philosophy and Drivers......................................... 646 4 Corporate Culture and Values................................................. 649 5 Innovation Process.................................................................. 655 6 Future Challenges.................................................................... 660 CASE 6-4 Logitech: Getting the ioTM Digital Pen to Market.................... 1 Logitech's Entry into the Digital Pen Environment................ 2 Logitech's Digital Pen Project................................................. 3 Logitech's ioTM Launch......................................................... 4 Evaluation Phase..................................................................... 5 Looking Ahead........................................................................ 667 668 668 677 682 683 CASE 6-5 The "mi adidas" Mass Customization Initiative......................... 695 1 Global Footwear Market......................................................... 696 2 adidas-Salomon AG................................................................ 696 3 mi adidas.................................................................................. 697 4 Phase I: The mi adidas Pilot.................................................... 697 5 Competitors' Footwear Customization Initiatives................... 699 6 Phase II: The mi adidas Retail Tours...................................... 700 7 The Future of mi adidas........................................................... 707 CASE 6-6 New Business Creation at Tetra Pak: Reinventing the Food Can....................................................... 721 1 Company Background............................................................. 722 2 3 4 5 6 7 8 9 10 Starting Project Phoenix: Genesis (October 1993--March 1996).................................................. 723 Restarting and Reorienting Phoenix (April 1996--May 1997)......................................................... 726 Clarifying the Value Proposition............................................. 728 Starting a Partnership with Nestle (Project Arizona) .............. 730 Reinforcing the Project Organization and Visibility .............. 731 Starting a Second Partnership with Bonduelle (Project Edix)........................................................................... 732 Moving to Real Life Field Tests and the Creation of Tetra Recart'......................................................................... 732 Developing the Tetra Recart Organization and Business............................................................................. 734 Addressing Tetra Recart Growth Challenges ......................... 735 Index..................................................................................................................... 777