FAST ION BATTERY Harvard Case Solution & Analysis


Question 1

            There are a number of challenges which are faced by the Fast Ion Battery Company. In terms of the people, the challenges were raised as a result of the demand of the customers for the low cost products and the shift in the needs of the customers of the company. The initial objective of the company was to make use of the new technology and target it towards a specific market segment however; when the company failed to locate that market segment then it had changed its focus from grid scale storage towards the development of the batteries for the electric vehicles. However, the main challenge faced by Fast Ion Battery Company was in terms of its customers as the company had not been able to grab the required interest from its potential customers for the new transportation segment on which the company was working on.

The management was not able to build up any commercial agreements as a proof of the market validation. Secondly, if the company is not able to develop agreements with this market then the company would not get its required financing and there would be low chances of capitalizing on this opportunity and the new CEO will also ensure that whether the company has sufficient runaway which were required to penetrate this market. Finally, the initial investor’s situation also affects on the investment decision for further rounds of financing.

Both the investors were at different points of their life of the funds when the initial investment had been made by them in Fast Ion Battery Company. The investment fund of WSC is a new one and they have limited syndicates in consumer technology. Whereas Blue lock had spent five years with their fund and they had the potential to commit around $ 25 million to a single deal unlike WSC which can only commit $ 10-12 million. Therefore, these differences complicate the financing decision furthermore, as Blue lock has refused to make further investment in Fast Ion Battery Company.

Question 2

            There are a number of different benefits and costs associated with the extension of the bridge round financing. If the bridge round financing is extended to Fast Ion Battery Company, then they would be able to hire a new CEO who would turnaround the technology segment based on the new timeline as shown in Exhibit 5. Another benefit is that the company would be able to develop a market of batteries for the electric cars. According to  Davidson if all the things work out well as planned, then this deal would also tap the untapped market for the grid scale storage and yield a 0.5 billion dollar exit on a deal of $ 75 million in total.

Along with this, as the market for the new product would be developed, the management of the company and the VC partners would all be able to generate huge return on investments. However, the costs associated with the bridge round financing are also significant. One of the risks is the changing investment climate for the venture capital investors and most of them through that the new capital commitments would decline significantly for the clean tech sector and the investments would increase rapidly for the services, software and the consumer focused internet technologies.

Furthermore, the investment with bridge round would lead to lower step ups and more dilution for the early stage investors. This had also been observed throughout the rounds of A123 Systems. Finally, the exit options such as the IPOs have also outperformed for services, software and customer focused internet technologies as compared to clean tech. Therefore, looking at all of these factors it could be said that the costs associated with the extension of the bridge round would be huge as there are high risks inherent in the future of cleantech.  .................

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