In certain circumstances, expanding a business in the traditional sense can actually limit value for a company whose technology’s greatest potential is as an enabler. An enabling technology is a technology that may have difficulty succeeding in the marketplace on a standalone basis, but can significantly increase the performance of another technology or company when combined.
Companies possessing enabling technologies must, of course, prove their technology is effective, perhaps through clinical trials, beta customers, or technology partnerships. For these companies, investing heavily in sales efforts or growing their geographic footprint may even be counterproductive. Often these companies are well advised to focus the majority of their efforts on further developing their core technology and increasing its attractiveness for integration into existing products as opposed to building out a standalone business.
We believe that there is an inherent founder and investor bias toward “company building”, largely because that kind of progress is more easily measured (sales, customers, employees), and both founders and investors can find it difficult to recognize and properly assess progress that is less easily measured (patents, new discoveries, advanced know-how, learnings from a test). At bm|t, we recognize this bias and work closely with founders to properly evaluate their unique opportunity set to collaboratively reach an optimal outcome. This requires that the founders and investors share a vision and establish a trust that allows for pursuing paths that might be less measurable but more value creating.
Our appreciation for companies with less measurable paths was recently reinforced, because two of our most successful investee-partners did not generate substantial revenues but possessed technology that was so unique and highly protectable that the companies dramatically increased their value without significantly expanding their business in the traditional sense.
With our underlying goal of catalyzing Thüringen’s economy, bm|t invests across the full spectrum of innovations – those that should indeed be the basis for large, standalone enterprises as well as enabling technologies. Whatever each company’s optimal path may be, we look forward to the shared journey.
Your bm|t Team
* Our use of the term value in this newsletter is intended to be interpreted more broadly than simply shareholder value, as we appreciate that there are many aspects to value creation.