Note to Instructors:Radha Jalan andElectroChem, Inc.:Energy for aClean PlanetFrances M. AmatucciSusan Coleman

The case illustrates the financial and managerial challenges faced by a womanentrepreneur in an emerging high-tech industry. ElectroChem, Inc. designed and manu-factured polymer electrolyte membrane (PEM) fuel cells as an alternative energy sourcefor commercial application. The firm was losing money when its founder, Vinod Jalan,unexpectedly passed away and his wife, Radha, took control of the business. Under herleadership, ElectroChem grew from $422,000 in 1992 to over $2 million in sales in 2001.Radha aggressively pursued government contracts, a major source of funding for the fuelcell industry. She also successfully negotiated a merger with another fuel cell firm, therebyincreasing ElectroChem’s sales and visibility. Finally, she managed to survive the tacticsof a hostile angel investor group who intended to take over the fuel cell tester stationportion of her business. In the winter of 2002, Radha was considering how best to competein this increasingly competitive growth industry, as well as how to obtain the resourcesnecessary to succeed.

Key Issues and Discussion Points

The ElectroChem, Inc. case focuses on two key issues. First, as a relatively small firmin an emerging high-tech industry, the company faced a number of financial challenges.As the case points out, many firms in the fuel cell industry depended heavily on govern-ment contracts as a source of funding. Thus, revenues were highly unpredictable and mostfirms in the industry were unprofitable. They constantly “hustled” for grants and contracts,as well as for other external sources of financing, including equity investors. The caseillustrates the danger of taking on angel investors who may have a different vision for thecompany than the founding entrepreneur.

A second issue deals with the challenges that Radha faced as a woman entrepreneurin a male-dominated industry. Although well-educated and hardworking, Radha did not

Please send correspondence to: Frances M. Amatucci, tel.: (412) 749-3785, e-mail: amatuccif@comcast.net

PTE &

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have a background of education and experience in the fuel cell industry. These humancapital deficiencies initially made it more difficult for her to run the company and left heropen to the maneuverings of unscrupulous angel investors. Her persistence and strong willenabled her to survive, but her experience points to the importance of having members ofthe management team who have education, training, and experience appropriate for theindustry.

Potential Audience and Uses

This case can be used in undergraduate and graduate courses in the areas of entre-preneurship or entrepreneurial finance, small business management, or strategic manage-ment of technology and innovation. The case is somewhat unique because its protagonistis a minority woman entrepreneur.

Instructors could use the case to illustrate the financial challenges faced by anentrepreneur in an emerging industry. The financial statements could be used to calculateratios that will indicate that ElectroChem experienced difficulties in the areas of liquidity,asset management, debt management, and profitability. Further, sales levels were some-what erratic given the firm’s heavy dependence of government contracts. Students maywish to discuss how attractive the industry really is in light of its unstable revenues andnegative profitability.

Instructors could also use this case to discuss possible sources of funding for such afirm. As a relatively small firm with an uncertain future, ElectroChem was not really acandidate for the venture capital, which could have provided much needed externalcapital. Alternatively, Radha sought out external investors with almost disastrous results.Students can discuss the options that Radha actually had for funding as well as steps thatshe could have taken to avoid the problems that developed with her equity investors.

The case provides some interesting information on the fuel cell industry, its develop-ment and potential. It highlights the important role played by government agencies infostering the growth of the industry due to its potential impacts on national defense,security, and the general good. Instructors could use the case to initiate a discussion of theopportunities and risks associated with entering an industry having tremendous growthpotential yet with an unclear timeline for general acceptance and commercial viability.

Suggested Teaching Approach

The class could begin with a discussion of the overall attractiveness of the fuel cellindustry. What are the opportunities and long term prospects for growth and profitability?What are the various risk factors? What is the role of government in fostering or protectingthe industry?

This could be followed by a more specific discussion of ElectroChem and its situation,including SWOT (Strengths, Weaknesses, Opportunities, Threats) and financial ratioanalysis. Students could discuss the financial and managerial challenges faced by the firm.What are its prospects for survival and profitability? What steps can Radha take to achieveprofitability and secure additional sources of capital? As an entrepreneur and as amanager, what has she done right and what has she done wrong? What can we learn fromher mistakes?

Finally, students can discuss the challenges that Radha faced in a male-dominated,high-tech industry. Her lack of education and experience in this field had led Radha to rely

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heavily on the advice of investors who may not have had her interest at heart. Radha sawherself as a victim of discrimination and thought that her investors had taken advantage ofher. How might this belief have affected her attitudes and actions? What lessons canpotential women entrepreneurs learn from Radha’s experience? How do “human capital”and “social capital” complement financial capital for emerging firms?

In summary, the following questions may be used to guide a class discussion:

1. What are the competitive forces in the fuel cell industry? Identify the potential oppor-tunities and risks as reflected in the driving forces for fuel cell technology.

2. Why did Radha take over the management of ElectroChem? What challenges did sheface?

3. What does a SWOT analysis reveal about ElectroChem’s position within the fuel cellindustry?

4. What does your analysis of case Tables 3 and 4 reveal about ElectroChem’s financialcondition?

5. What steps did Radha take to turn around ElectroChem? How has Radha positionedElectroChem strategically in the marketplace for fuel cell technology so far?

6. How could Radha have avoided the incident with Bill West and Peter Clinton? Whatlessons can be learned for future interaction with equity investors? What other sourcesof external funding could Radha have considered?

7. Evaluate Radha’s performance during the 10 years she has led ElectroChem. Developa set of recommendations for her to strategically position ElectroChem for the future.

Suggested Readings

Amatucci, F.M. and Sohl, J.E. (2004). Women entrepreneurs securing business angel financing: Tales from thefield. Venture Capital: An International Journal of Entrepreneurial Finance, 6(2/3), 181–196.

Brush, C., Carter, N.M., Gatewood, E., Greene, P.G., & Hart, M.M. (2004). Clearing the hurdles: Womenbuilding high-growth businesses. Upper Saddle River, NJ: FT Prentice Hall.

Coleman, S. (2002). Constraints faced by women small business owners: Evidence from the data. Journal ofDevelopmental Entrepreneurship, 7(2), 151–174.

Eisenmann, T. & Willis, R. M. (2004). Fuel cells: The hydrogen revolution? Harvard Business School case#9-804-144. Boston: Harvard Business School Publishing.

Leach, J.C. & Melicher, R.W. (2003). Entrepreneurial finance. Mason, OH: Thomson South Western.

Role of the Authors

Frances M. Amatucci is an adjunct professor at the Huizenga School of Business andEntrepreneurship at Nova Southeastern University. She teaches courses in entrepreneur-ship, strategic management, and international business. Her research interests includeissues related to women and minority entrepreneurship and international entrepreneur-ship. She is the former vice president of the Minority and Women Division of the U.S.Association for Small Business and Entrepreneurship. She holds a PhD from the KatzGraduate School of Business at the University of Pittsburgh.

Dr. Amatucci was executive director of the Small Business Institute at Salem StateCollege in Massachusetts, when, in 1997, she was introduced to the protagonist, by the

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director of the Small Business Development Center (SBDC). As a client of the SBDC,Radha Jalan knew and trusted the director, and agreed to participate in what began as alarger study of ethnic entrepreneurs. Dr. Amatucci conducted all of the interviews, devel-oped the fuel cell industry note, and documented the angel investor event. The initialinterviews occurred at the firm and were tape-recorded and transcribed by her. Manysubsequent telephone interviews were conducted over time to update the case. Initially,the protagonist, company name, and financial statements were anonymous and confiden-tial, but the passage of time has now enabled the authors to release the case with actualnames and location while key actors in the investor event and the financial statementscontinue to be disguised. Dr. Amatucci presented an earlier version of this case, “GlobalClean Energy, Inc.” at the 10th Annual Case Colloquium at the Academy of ManagementAnnual Meeting in Washington, DC in 2001.

Susan Coleman is the Ansley Chair of Finance at the University of Hartford. Sheteaches courses in corporate and entrepreneurial finance at both the undergraduate andgraduate levels. Her research interests include sources of capital and financing strategies forwomen- and minority-owned firms. Dr. Coleman put together the financial statementsfor the ElectroChem case and developed those sections of the case relating to financialissues and problems. She also assisted in the development of the Note to Instructors and inrevision of the case over time in response to reviewer comments.

Frances M. Amatucci is an adjunct professor at the Huizenga School of Business and Entrepreneurship atNova Southeastern University.

Susan Coleman is the Ansley Chair of Finance at the University of Hartford.

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