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A Case Study On Fast Ion Battery: Group-62-B

1) Fast Ion Battery was incorporated in 2008 to develop batteries for electric vehicles but struggled to find a clear market segment or secure funding. 2) The company faced difficulties getting additional funding from venture capitalists as the cleantech sector saw reduced investments and companies like A123 Systems faced layoffs. 3) Fast Ion Battery needed $5 million in bridge financing to continue operations but the venture capital firm was considering options like providing the funds with or without warrants and pay-to-play requirements.

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asifabdullah khan
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575 views22 pages

A Case Study On Fast Ion Battery: Group-62-B

1) Fast Ion Battery was incorporated in 2008 to develop batteries for electric vehicles but struggled to find a clear market segment or secure funding. 2) The company faced difficulties getting additional funding from venture capitalists as the cleantech sector saw reduced investments and companies like A123 Systems faced layoffs. 3) Fast Ion Battery needed $5 million in bridge financing to continue operations but the venture capital firm was considering options like providing the funds with or without warrants and pay-to-play requirements.

Uploaded by

asifabdullah khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
  • Group Overview: Introduces the case study with the group's name and members participating in the analysis.
  • About Fast Ion Battery: Discusses the background of Fast Ion Battery including incorporation details and challenges in the energy storage market.
  • Industry Analysis: Analyzes the Fast Ion Battery industry using frameworks like Porter's Five Forces and PESTEL Analysis to understand external factors and market dynamics.
  • Company Analysis: Explores the internal aspects of Fast Ion Battery through a SWOT analysis to evaluate strengths, weaknesses, opportunities, and threats.
  • Problem Statement: Details specific challenges Fast Ion Battery faces, including financial and leadership issues, requiring resolution for success.
  • Alternatives Analysis: Assesses potential financial strategies considered by venture capital companies for addressing business challenges.
  • Recommendations: Provides strategic recommendations based on the analysis of alternatives and valuation outcomes for Fast Ion Battery.

A Case Study on

Fast Ion Battery

Group-62-B
2
Group Profile

Group-62
Serial No. Name MBA ID
1. Sheikh Saifullah Khalid 2027
2. Nusrat Jahan 2009
3. Md.Ullash Hossen 2227
3
About Fast Ion Battery

 Fast Ion Battery was formally incorporated in May 2008

 Address the need for radical innovations in the energy storage landscape

 Cleantech investors have decided to pull back from investments

 Fast Ion failed to identify a clear market segment that would use its technology

 Technology and marketing teams were constantly being pulled in different


directions

 Made some progress in developing a product for industrial customers

 Facing difficulties in getting funding


4
Analysis of Economy

 Venture capitalists reduced new capital commitments in clean-tech


sector

 A123 systems struggling with large-scale layoffs

 Advancement of cloud-computing that reduced the cost of learning

 Open sources technology getting popularized

 High chance to decline substantially cleantech start-ups

 The investment needed to learn about the viability


Industry Analysis of
Fast Ion Battery
6
Porter’s Five Forces

Bargaining Threat of
Bargaining
Rivalry power of substitutes
Threats of power of
among customers
New suppliers
competitors
entrants

HIGH Moderate Low Low High


7
PESTEL Analysis

Political Factors Economic Factors


P E Consumer Disposable Income GDP
Regulatory frameworks Political Economic Trend & Rate of Economic Growth,
Pricing pressures Factors Factors Price Fluctuations in all Markets
Social Factors Technological Factors
Aging population S T High acceptance of technology
Social Technological Increasing internet users
People Interested in technology Factors Factors
Legal Factors
Environmental Factors Intellectual property right
Populated country E L protection
Environmental Legal Favorable business laws
Ignoring the activity that may Factors Factors
hamper the environment
Company Analysis of
Fast Ion Battery
9
SWOT Analysis

Strengths Weakness
 Developing batteries for electric vehicles
 High industrial customers
 Qualified employees
S W  Confliction between technology and
marketing team
Strengths Weaknesses  Bad management
 Cash insufficiency

Opportunities Threats
 New innovations  New innovations by competitors
 Welcoming venture capital investors
 Have chance to access new skilled
O T  Large investment by foreign
investors
Opportunities Threats  Appointment of new CEO may vary
and experienced investors
the firm value
10

Risk Analysis of Fast Ion Battery

Business risk Financial risk


 Undefined business model  Unavailability of fund
 Improper customer  Venture capitalists losing
segmentation motives to invest in cleantech
 CEO issue industry
 Bad management issue

Risk: High Risk: High


Problem Statement of
Fast Ion Battery
12

Problem Statement

 Improper business model


 CEO issue
 Funding problems

Require $5 million bridge


financing for operation
13

Alternatives Considered by Venture Capital Companies

Probable alternatives:
▸ Bridge financing without warrants or Pay-to-play
(PTP)
▸ Bridge financing with warrant but no PTP
▸ Bridge financing with both warrants and PTP

Additional decision tools:


▸ Decision tree with value of abandonment
14

Valuation Input Estimations

▸ Bridge round starting date: December, 2011


▸ Required rate of return estimation*:

Failure risk premium 3%


Riskless rate of return 1%
Service premium 13%
Financial risk premium 5%
Illiquidity premium 29%
Required Rate of Return 51%

*Source: Marco Da Rin and Hellmann, T. (2020). Fundamentals Of Entrepreneurial Finance. S.L.: Oxford Univ Press Us, pp.184–186.
15

Decision Tree Assuming Series C Investment

▸ Series C June 2014 ▸ IPO December 2016


Pre money $378 mn

Post money $210 mn


Pre money $175 mn

Failure $0
16

Alternative 1: 5 million Bridge Financing


Before Series A:
Ownership at exit
Founder’s Common Ware Street
Ownership 55.6% 17 Capital
% 24 Franconia Ven- Bluelock Ven-
19
% tures tures
% 10%
▸ Value at exit 23.8% 7%
24%
Series B Investor Series C Investor

  2008 2009 2010 2011 2012 2013 2014 2015 2016

Bridge Financing
Base (1,500,000) (2,250,000) - (2,500,000) (5,000,000) - (5,000,000) - 90,000,000

NPV (1,172,101)
17

Alternative 1: Simulation Analysis


18

Alternative 2: Warrants but No Pay to Play

Before Series A: Ownership at exit


Founder’s Ownership Common
55.6% Ware Street Capital
10% Franconia Ventures

▸ Value at exit 24%


16%
Bluelock Ventures
19%
Series B Investor
24% Series C Investor
6%
24%

  2008 2009 2010 2011 2012 2013 2014 2015 2016

Warrant only (1,500,000) (2,250,000) - (2,708,333) (5,000,000) - (5,000,000) - 92,184,466

NPV (1,158,649)
19

Alternative 2: Simulation Analysis


20

Alternative 3: Both PTP and Warrants

Before Series A: Ownership at exit


Founder’s
Ownership 55% Common Ware Street Capital
10%18% Franconia Ven- Bluelock Ventures
tures
19%

▸ Value at exit 26%


Series B Investor Series C Investor
1% 26%
26%

  2008 2009 2010 2011 2012 2013 2014 2015 2016

PTP and Warrant (1,500,000) (2,250,000) - (2,708,333) (5,000,000) - (5,000,000) - 99,468,547

NPV (980,172)
21

Alternative 3: Simulation Analysis


22

Recommendations

Alternatives NPV Value at exit


No warrant, no PTP (1,172,101) 23.8%
Warrant but no PTP (1,158,649) 24%
Both warrant and PTP (980,172) 26%

Decision: WSC and Franconia should not engage in financing


Fast Ion

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