accomplish a given task. I was intrigued by the process and admired the dogged determination of
the young entrepreneurs.
Ultimately, this company, Fuel Tech, raised $75 million from private investors around the globe. The technology I described never proved to be commercially viable. The company founders scrambled to find an alternative path to business success for Fuel Tech. To my utter amazement, they were able to acquire some operating companies at attractive prices. The company was eventually sold at a price that netted handsome returns for the investors and the founders. Later, the lead entrepreneur, William Haney, acquired the rights to some environmental technology developed at MIT. He founded, and currently is chairman of, a company called Molten Metals, which has a current market capitalization of almost $500 million. During his Fuel Tech days, he learned how to make money, a far more valuable skill, I submit, than the ability to invent.10
One final comment on opportunities involves what I call “arbitrage” businesses. Basically, these businesses exist to take advantage of some pricing disparity in the marketplace. The classic entrepreneurial example was MCI Telecommunications which was formed to offer long distance service at a lower price than AT&T. Similar current examples of arbitrage exist in the health care business in which entrepreneurs are finding ways to offer comparable services to hospitals at much lower costs. Or, some of the industry consolidations going on today reflect a different kind of arbitrage -- the ability to buy small businesses at a “wholesale” price, roll them up into a larger package, and take them public at a “retail” price, all without necessarily adding true value in the process.
Taking advantage of arbitrage opportunities is a viable and potentially profitable way to enter a business. In the final analysis, however, all arbitrage opportunities go away. It is not a question of whether, only when. The trick in these businesses is to use the arbitrage profits to build a more enduring business model.
Ultimately, this company, Fuel Tech, raised $75 million from private investors around the globe. The technology I described never proved to be commercially viable. The company founders scrambled to find an alternative path to business success for Fuel Tech. To my utter amazement, they were able to acquire some operating companies at attractive prices. The company was eventually sold at a price that netted handsome returns for the investors and the founders. Later, the lead entrepreneur, William Haney, acquired the rights to some environmental technology developed at MIT. He founded, and currently is chairman of, a company called Molten Metals, which has a current market capitalization of almost $500 million. During his Fuel Tech days, he learned how to make money, a far more valuable skill, I submit, than the ability to invent.10
One final comment on opportunities involves what I call “arbitrage” businesses. Basically, these businesses exist to take advantage of some pricing disparity in the marketplace. The classic entrepreneurial example was MCI Telecommunications which was formed to offer long distance service at a lower price than AT&T. Similar current examples of arbitrage exist in the health care business in which entrepreneurs are finding ways to offer comparable services to hospitals at much lower costs. Or, some of the industry consolidations going on today reflect a different kind of arbitrage -- the ability to buy small businesses at a “wholesale” price, roll them up into a larger package, and take them public at a “retail” price, all without necessarily adding true value in the process.
Taking advantage of arbitrage opportunities is a viable and potentially profitable way to enter a business. In the final analysis, however, all arbitrage opportunities go away. It is not a question of whether, only when. The trick in these businesses is to use the arbitrage profits to build a more enduring business model.
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