Note to instructors: Radha Jalan and ElectroChem, Inc.: energy for a clean planet.

The case illustrates the financial and managerial challenges faced by a woman entrepreneur in an emerging high-tech industry. ElectroChem, Inc. designed and manufactured polymer electrolyte membrane (PEM) fuel cells as an alternative energy source for 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 her leadership, 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 fuel cell industry. She also successfully negotiated a merger with another fuel cell firm, thereby increasing ElectroChem's sales and visibility. Finally, she managed to survive the tactics of a hostile angel investor group who intended to take over the fuel cell tester station portion of her business. In the winter of 2002, Radha was considering how best to compete in this increasingly competitive growth industry, as well as how to obtain the resources necessary to succeed.

Key Issues and Discussion Points

The ElectroChem, Inc. case focuses on two key issues. First, as a relatively small firm in 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 government contracts as a source of funding. Thus, revenues were highly unpredictable and most firms 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 case illustrates the danger of taking on angel investors who may have a different vision for the company than the founding entrepreneur.

A second issue deals with the challenges that Radha faced as a woman entrepreneur in a male-dominated industry. Although well-educated and hardworking, Radha did not have a background of education and experience in the fuel cell industry. These human capital deficiencies initially made it more difficult for her to run the company and left her open to the maneuverings of unscrupulous angel investors. Her persistence and strong will enabled her to survive, but her experience points to the importance of having members of the management team who have education, training, and experience appropriate for the industry.

Potential Audience and Uses

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

Instructors could use the case to illustrate the financial challenges faced by an entrepreneur in an emerging industry. The financial statements could be used to calculate ratios that will indicate that ElectroChem experienced difficulties in the areas of liquidity, asset management, debt management, and profitability. Further, sales levels were somewhat erratic given the firm's heavy dependence of government contracts. Students may wish to discuss how attractive the industry really is in light of its unstable revenues and negative profitability.

Instructors could also use this case to discuss possible sources of funding for such a firm. As a relatively small firm with an uncertain future, ElectroChem was not really a candidate for the venture capital, which could have provided much needed external capital. 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 that she 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 development and potential. It highlights the important role played by government agencies in fostering 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 the opportunities and risks associated with entering an industry having tremendous growth potential 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 cell industry. 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 protecting the industry?

This could be followed by a more specific discussion of ElectroChem and its situation, including SWOT (Strengths, Weaknesses, Opportunities, Threats) and financial ratio analysis. 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 achieve profitability and secure additional sources of capital? As an entrepreneur and as a manager, what has she done right and what has she done wrong? What can we learn from her 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 heavily on the advice of investors who may not have had her interest at heart. Radha saw herself as a victim of discrimination and thought that her investors had taken advantage of her. How might this belief have affected her attitudes and actions? What lessons can potential 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 opportunities 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 she face?

3. What does a SWOT analysis reveal about ElectroChem's position within the fuel cell industry?

4. What does your analysis of case Tables 3 and 4 reveal about ElectroChem's financial condition?

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

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

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

Suggested Readings

Amatucci, EM. and Sohl, J.E. (2004). Women entrepreneurs securing business angel financing: Tales from the field. 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: Women building 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 of Developmental 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 and Entrepreneurship at Nova Southeastern University. She teaches courses in entrepreneurship, strategic management, and international business. Her research interests include issues related to women and minority entrepreneurship and international entrepreneurship. 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 Katz Graduate School of Business at the University of Pittsburgh.

Dr. Amatucci was executive director of the Small Business Institute at Salem State College in Massachusetts, when, in 1997, she was introduced to the protagonist, by the 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 a larger study of ethnic entrepreneurs. Dr. Amatucci conducted all of the interviews, developed the fuel cell industry note, and documented the angel investor event. The initial interviews occurred at the firm and were tape-recorded and transcribed by her. Many subsequent telephone interviews were conducted over time to update the case. Initially, the protagonist, company name, and financial statements were anonymous and confidential, but the passage of time has now enabled the authors to release the case with actual names and location while key actors in the investor event and the financial statements continue to be disguised. Dr. Amatucci presented an earlier version of this case, "Global Clean Energy, Inc." at the 10th Annual Case Colloquium at the Academy of Management Annual Meeting in Washington, DC in 2001.