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Fast Ion Battery

Solution Id Length Case Author Case Publisher
2775 1562 Words (7 Pages) Ramana Nanda, Stephanie Puzio, Robert F. White Harvard Business School : 815025
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They had known each other for a long time, but Davidson and Lerner became close friends. They had met in college through common friends but had never gone beyond the status of casual acquaintances. They hadn't seen each other in years, but their paths met again when the HBS Class of 2005 all sat together in Section B. In the subsequent two years, their friendship blossomed to the point where they climbed Kilimanjaro together. Fast Ion was created by a former MIT postdoc in response to the pressing demand for ground-breaking developments in the field of storing energy. Bill Gates placed the scale of this problem in the context in his seminal TED talk entitled "Innovating to Zero," when he said, "all the batteries on the Planet can presently store just under 10 minutes of such world’s largest electrical consumption." Therefore, societal changes in technology for energy storage suitable for large-scale deployment were required to fully take advantage of improvements in unreliable renewable energy sources like solar and wind.

Following questions are answered in this case study solution:

  1. What are the costs/benefits from the point of view of Fast Ion Battery and the investors of introducing the abandonment option imbedded in bridge financing (Exhibit 4)? List arguments in favor and against extending the bridge round of funding.

  2. What are the contractual implications of non-participation in the bridge round (Exhibit 4)?

  3. Build the revised Cap Table (based on Exhibits 2 and 5) for Fast Ion by including the $5 million Bridge round at $1.50/share. Assume that WSC and Franconia Ventures split the investments Bluelock would have made. Do this under two assumptions:

    a. Bluelock does not participate and the “pay-to-play” clause is not implemented.

    b. Bluelock does not participate and the “pay-to-play” clause is implemented?

  4. Do you think Bluelock should participate? How does you answer depend on whether the “pay-to-play” clause is implemented? 

Case Study Questions Answers

1. What are the costs/benefits from the point of view of Fast Ion Battery and the investors of introducing the abandonment option embedded in bridge financing (Exhibit 4)? List arguments in favor and against extending the bridge round of funding.

Costs

Fast Ion Battery wasted its seed money without first identifying its customer base. The misuse of monies occurred due to poor management. The group was not working together toward a common goal; rather, members felt pulled in many different directions. As a result, they didn't research their target market enough and went bankrupt before their items ever hit the shelves. The company's founder did not steer the team toward producing solutions for the electric vehicles industry, despite the fact that this was an area of interest among potential clients. 

The fast ion battery is a type of green power battery being developed to meet the growing demand for innovative solutions in the field of energy storage. A technology like this was created by a grad student at MIT. During its Series A fundraising, Fast Ion raised $10 million from a number of investors and VC firms. With this money, we hoped to demonstrate the efficacy of the green technology to potential buyers and gauge their interest in making a purchase decision.

Benefits

Davidson, an investor and board member at Fast Ion, is aware that the lack of capital prevents the company from hiring a new chief executive officer. He has to get the necessary capital, but no fresh investors are available right now. This means that Davidson will have to lobby his or her other investors and VCs to consider providing the bridging cash. A personal investment in the course's funding is necessary to demonstrate his dedication to the work. 

The startup was on the brink of failure if it hadn't received the bridge loan. Now that he's convened the board, he must convince the investors to back Fast Ion Battery. Considering the expanding market for electric vehicles, in which Fast Ion's offerings would be in high demand. Davidson and the rest of the board members have to bring in a new chief executive officer. Someone with knowledge of the industry and the energy field at large. The CEO position at Fast Ion calls for a strong leader who can inspire the company to explore uncharted territory and tackle difficult problems.

2. What are the contractual implications of non-participation in the bridge round (Exhibit 4)?

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