1) What are the relative benefits and costs associated with extending a Bridge round of

funding to Fast Ion? Given these, should WSC extend a Bridge round to Fast Ion
Battery?
The instructor can get into the first issue by taking a vote, “Who would like to extend a Bridge
round to Fast Ion Battery? Who does not want to extend the Bridge Round?” The class tends to split
evenly on whether this is a good idea, with strong opinions on either side. To get this dynamic
initiated, the instructor can pick a student who is strongly against the Bridge Round and ask them to
play the role of Donna Lerner and ask a strong supporter to play the role of John Davidson. The
instructor can start the class discussion by asking Donna Lerner to call Davidson, letting him know
she is not going to back Fast Ion any further. It may be worth reminding the students that Donna and
John know each other for several years, that they were classmates and HBS and that there is an
implicit power dynamic given that Donna works at a larger fund and is personally more successful.

This role play need only last a few minutes, but it can bring to life the fact that while it is easy to
academically decide whether or not to abandon an investment, these decisions are embedded in a
broader context, where relationships and competing viewpoints push against the decision.

The instructor can now turn to the student playing John Davidson and ask them to defend the
decision to extend a Bridge round of financing to the investment committee at WSC. The class is
asked to play the role of the investment committee, asking clarifying questions, playing the role of
skeptics, and trying to ensure that John Davidson is not asking for further funding because WSC is
his “pet project”.

The following headings may be useful in organizing the discussion (and can be summarized on
Board 2M as shown in TN Exhibit 1):

Arguments in Favor of Extending the Bridge Round of Funding:

 An argument in favor of extending a Bridge Round of funding to Fast Ion is that in many
ways, the inherent qualities that made the startup attractive have not changed. It has a revolutionary
technology in an important market. Davidson believes that the technology has the potential to not only
dominate in the electric car market, but also play a role in the much larger market for grid scale storage,
that can make it worth hundreds of millions of dollars. The technology has won a competitive award
from ARPA-E and the startup had begun to develop a strong IP portfolio, all of which were important
selling points of the company.

 A key element of this argument also hinges on the question about whether the lack of
progress was due to the technology of the management of the firm. In part, the technology was seen to be
inappropriate for the grid-scale storage market, but students may argue that the challenges the startup
was facing were driven more by the founder’s lack of success in focusing the team. Now that the CEO
search was well under way and two promising candidates had been identified, proponents for extending
the Bridge round will argue that the worst is likely behind this firm. Indeed, those in favor of the bridge
round will argue that all startups face some hiccups and the good news is that these have been identified
early, putting the startup “only” a year and $5 million off track.

 In addition, Fast Ion’s projections suggest that it has developed a capital light business model,
which makes the economics for the investors quite attractive, despite being in a sector that is typically
considered to be very capital intensive. Investor IRRs are still projected to be good, even after factoring in
the year’s delay and extra funding. See TN Exhibit 8.