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Part 2

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Joint value creation between ACE & Sanus §  Result: negotiate to get a maximal win-win situation

§  Both firms can offer each other a lot §  The large firm: §  business and market intelligence §  application technology §  marketing know-how §  large scale manufacturing §  credibility among large potential clients §  patent writing skills §  … §  Start-up: §  new technology, business model, etc.. §  entrepreneurial risk taking and decision making §  …

© Wim Vanhaverbeke 22 03/02/13

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Tensions and debates: The following conflicting interests

•  High upfront technology investment

•  Opportunity to work with other parties

•  Time to develop products/markets

•  No risk for Sanus •  Limited, more focused approach

on other applications •  Access to ACE resources

•  No upfront dtechnology investment

•  Exclusivity

•  Quick results

•  No risk for ACE •  Technology to be used in

strategic areas of ACE •  Full access to IP of Sanus

Sanus ACE Food Specialties

© Wim Vanhaverbeke 23 03/02/13

How to organize for OI? External Venturing at ACE Five reasons not to start a power play with

external ventures: 1.  Bad reputation: when the large, investing firm is looking

for interesting start-ups as a recurrent practice 2.  Pushing too hard for a particular application (based on

the business model and application markets of the large investing firm)

u  Market potential of start-up technologies is still very uncertain because of the early stage technology. Keep options open for unintended but interesting applications. Every start-up struggles with focus vs keeping options open issue

u  Could limit exit possibilities and exit value for other shareholders (by lock-in to/dependency on corporate). Limits business potential of start-up (and thereby shareholders value)

…. © Wim Vanhaverbeke 24 03/02/13

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How to organize for OI? External Venturing at ACE Five reasons not to start a power play with

external ventures: 3.  Might kill the spirit of good cooperation. 4.  Kill entrepreneurial spirit by creating another "corporate

puppet on a string" 5.  Could result in litigation if perceived as abuse of

economic power

© Wim Vanhaverbeke 25 03/02/13

Some assumptions for the financial and strategic investments

ACE Venturing: Assumptions for the CV investment n  Investment : 5-10 million euro n  10% participation of ACE n  Multiple after 5 years = x 5

ACE FS: Assumptions for the strategic investment n  Sales: 50 million / year 5 years after launch - lasting till 10th year n  Sales : Linearly increasing in first 5 years after launch n  Expected (average for new businesses) profitability : EBIT 20% n  Launch expected after 2 years

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Strategic investment Sanus

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10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10 11 12

Mill

ion

euro

Year   Sales   EBIT  (in  mill  euro)  

1   0   0  2   0   0  3   10   2  4   20   4  5   30   6  6   40   8  7   50   10  8   50   10  9   50   10  10   50   10  11   50   10  12   50   10  

NPV (r = 8%)

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Comparison financial and strategic investment

Financial return (in mill euro) n  Investment 5 10 n  10% particpation 0,5 1 n  Multiple after 5 years (x 5) 2,5 5 n  Gain 2 4 n  NPV 1,36 2,72

Strategic investment (in mill euro) n  Total sales 400 n  Total EBIT 80 n  NPV EBIT 42,78

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Investment Management Process (post-closing)

Kick off Exit

Explore mutual interests

Execute coopera-tion

Formalize coopera-tion

Prepare for exit

Follow on financing

Monitor and add value

Venturing role/responsibility

SBU role/responsibility

Financial return Investment Manager

Strategic return Strategic Venture Champion

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03/02/13 37 © Wim Vanhaverbeke – UH – Vlerick - ESADE

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03/02/13 38 © Wim Vanhaverbeke – UH – Vlerick - ESADE

Fabuless™ n  Fabuless™ as a food ingredient

Fabuless™ can be incorporated into many food categories: Yoghurt Milk drinks Soups Nutritional Beverages Meal replacement products Ready prepared meals

n  Fabuless™ as dietary supplement The Fabuless™ Mini-shot concept offers Fabuless™ in single-dose containers (7.5 ml) for use as a dietary supplement.

n  Fabuless™ has been launched in several markets including US, France,

Spain, Portugal, Italy, United Kingdom and Sweden.

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03/02/13 40 © Wim Vanhaverbeke – UH – Vlerick - ESADE

LTP (Lipid Technologies Provider AB ) and DSM n  Swedish company with a technology platform based on formulated

lipids n  DSM Venturing:

u  invested in LTP in September 2003 u  mid 2005, LTP entered into a global Marketing & Sales agreement

with DSM Food Specialties t  the exclusive right to market Olibra® (Fabuless™) in the dairy

food n  LTP has introduced Olibra® in the food supplements category

(individual cups to be consumed as a single dose or by adding to a meal) in USA, France, Spain and Scandinavia, etc…

n  LTP AB has been acquired by DSM - 28th September 2006. n  How to manage a spin-in successfully?

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LTP (Lipid Technologies Provider AB ) and DSM n  Swedish company with a technology platform based on formulated

lipids n  DSM Venturing:

u  invested in LTP in September 2003 u  mid 2005, LTP entered into a global Marketing & Sales agreement

with DSM Food Specialties t  the exclusive right to market Olibra® (Fabuless™) in the dairy

food n  LTP has introduced Olibra® in the food supplements category

(individual cups to be consumed as a single dose or by adding to a meal) in USA, France, Spain and Scandinavia, etc…

n  LTP AB has been acquired by DSM - 28th September 2006. n  How to manage a spin-in successfully?

03/02/13 42 © Wim Vanhaverbeke