Emma, Eirik, and Steffen founded HydroSafe AS while they were studying. In one of the management classes they were in together, Emma realized during a company visit to a fish farm the issue with waste from fish farming destroying the sea bottom beneath fish farms’ cages. The environment is an important issue for Emma. She grew up in the northern part of Norway, where the sea is the biggest industry in terms of fishing, tourism, and transport of people and goods; thus, Emma always sought to protect and take care of the oceans. She talked about the issue with Eirik and Steffen, and Eirik came up with an idea after talking to one of his professors in hydrodynamics. Eirik took the course in hydrodynamics as a part of his study profile in mechanical engineering, but he also had a profile in economics. He could illustrate the idea and present the concept but was not knowledgeable enough in hydrodynamics to design the different parts and simulate whether the technology would work. They needed an additional member with extensive knowledge in hydrodynamics. Steffen, studying information and communications technology, wrote a project description that the team handed over to Eirik’s professor. The professor told the team that this was theoretically possible, but it would probably be impossible to implement it and make it work. They published the project description, and Per, a very dedicated and proficient student, decided to write his master’s thesis about the team’s solution.

In the last year of the team’s studies at the university, the four started the company HydroSafe, developing an advanced hydro-pump to be installed below fish farm cages. Their product would register the current in the water under the cages and send streams of water to push the waste from the cages into a large funnel that sucked the waste into a cleaning system, avoiding the waste reaching the sea bottom and damaging the life living there. However, to be able to let the system’s nozzles send the correct amount of water at the right speed, the system also needed to correctly register the currents below sea level around the cages. Thus, the complexity of the system forced the team to seek more resources in terms of computer scientists, mathematicians, and mechanical product developers. In addition, the team would need to collaborate with a fish farm, a producer of fish farm equipment, or a supplier of fish farm equipment. The latter was the best option for HydroSafe as this could give them the right channels from production to implementation.

Through his study work, Per had created an algorithm for analysing the current and making the system send the right amount of water with the correct speed to direct the waste particles into the funnel. However, as the work he did in his master’s thesis was only theoretical and with simulations, the team used the autumn and winter after graduation to create a proof of concept of the system. They received NOK100,000 from Innovation Norway to test the proof of concept and investigate the market’s interest, and an additional NOK100,000 of soft funding from other sources to buy the necessary tools and equipment for their work. The feasibility study showed that the market wanted their product, and different fish farmers and environmental organizations saw significant value in their solution. Now, 2 years after the founding of the company, and almost 1 year after graduation, the team had manged to illustrate the possibility of their system and needed additional resources to be able to further develop with sensors, pumps, nozzles, and cleaning system.

At this time, Eirik had estimated (with input from Per on the different technological steps) the resources that were needed to be able to develop the product further. In total, the team would need a minimum of NOK1 million, such that Emma could start part time in the company, in addition to a full-time computer scientist who could implement the algorithm with the different components in the system, such that a first prototype could be developed. After the first prototype, a second full-scale prototype would be developed, which could be tested in a live environment such as a small stream or near the harbour in the city of Trondheim. This would require some additional people in the team: a product developer, and Per, who would need to develop the algorithm further according to the test results from the first prototype. This would be costlier as much equipment for this test needed to be purchased and as Emma would be hired for a full-time position at this stage, in addition to part-time positions for Eirik and Steffen. This second stage, lasting a year and a half, was estimated to cost NOK4.5 million. Including overheads, Eirik estimated a total of NOK6 million to fulfil both development stages, making HydroSafe ready for early-stage venture capital.

After an entrepreneurship event early in January, HydroSafe obtained some PR through an interview with an entrepreneurship magazine, and the angel investors Tommy Solstad and Johnny Kolhaug contacted Steffen shortly after. Tommy and Johnny were two young entrepreneur  who had had huge success with their company that they had recently sold, which focused on gathering different services for consumers in one platform, and were now looking for different cases to invest in. The company they founded and sold used a web platform to reach their customers, and they succeeded because of their huge customer base. Now they had invested in a few similar ventures that used web platforms to reach their customers with their services or goods.

 In the meeting between HydroSafe and the angels, Tommy and Johnny were focusing on a detailed budget and wanted more insights into what the burn rate would be during the development and how far they could reach with different amounts of capital. Both angels had limited understanding of the technological aspects of HydroSafe’s technology and were unable to fully understand it as they had backgrounds in economics and web application development. However, they both had extensive experience from negotiations with investors as they had taken their own company through several investment rounds before they sold it. 

The two angels were interested in putting in a small amount of money to help HydroSafe to reach the next level and wanted to invest NOK500,000 in the company. There were no discussions about shares or influence in the company after such an investment, but this would probably be a subject in a second meeting.

Mikkel Strøm, the board chair of AquaFarms, a multimillion fish farm equipment supplier, became CEO 4 years ago, after the previous CEO resigned following several controversial investments and collaborations with new ventures. In these investments and collaborations, the entrepreneurs in the smaller ventures were often forced out and received the minimum in return for their effort, while AquaFarms exploited these ventures’ work and technology in AquaFarms’ products. With Mikkel Str.m as the CEO, AquaFarms reduced the number of investments in new ventures but had in the last year invested in two cases where it seemed the power balance between AquaFarms and the entrepreneurs was stable. However, based on the history of bad investment approaches in combination with the same board for the last 5 years, AquaFarms’ reputation in the entrepreneurial environment was not good.

AquaFarms shared the market equally with Fish Supplies AS and had many research projects in Norwegian fish farms, which could therefore be a valuable door opener for HydroSafe. One issue was to reach the second prototype for HydroSafe; another was to enter the market. If none of the suppliers of fish farming equipment would collaborate with HydroSafe, the way would be long and hard to introduce the product to the market. The supply chain control of AquaFarms and Fish Supplies had to be exploited to be able to enter the market. If not, the series from venture capitalists would probably be near NOK40 to 50 million, something that would never happen given their return-on-investment goal. Emma had previously been in contact with Fish Supplies, but they did not at that time show any interest in HydroSafe.

One last option to obtain the necessary capital was public funding—for example, through Innovation Norway, a governmental organization supporting new ventures with funding. HydroSafe could receive up to NOK500,000 from Innovation Norway, but to be able to use this on salaries, which HydroSafe needed, the team had to match and pay for 50% of the salary costs. Thus, the team had to obtain money from other sources—through either investments or grants. The latter would be the best, but gathering half a million in grants would be time- and resource-consuming and would probably postpone any hiring for several months or even a year.

Another option would be to apply for any Horizon2020 project or the FORNY programme under the Research Council of Norway, aimed at increasing the commercial utilization of results from publicly funded R&D in Norway. Emma knew that the Research Council would soon start a project for students and recent graduates, but she did not know when this would occur, how much this would give if granted, or whether HydroSafe had to match the funding with their own capital. In addition, the Norwegian Research Council’s other projects often required the new ventures to collaborate with established companies and would only cover 40% of the total costs in these projects. These projects also needed a lot of time in application writing and had application deadlines in the autumn with feedback late in January or early February, meaning the future of the company would be uncertain for several months.

For Emma and HydroSafe, the grant from Innovation Norway was something they had to apply for, and something they would probably receive, but how the team was going to match it was the question bothering Emma. They could apply for a loan, but few banks would help a business without revenue; their network could probably help them with private loans. However, this was a possibility and strategy Emma did not feel comfortable with and that sheknew too little about.

After the weekend, the team met for their weekly meeting, and Emma was waiting for Steffen and Eirik to get ready. Emma had called both Eirik and Steffen Sunday afternoon and told them about the call from Mikkel Str.m, and asked them to prepare for discussions regarding the two options of potential private investment, in addition to the third option to seek funding only through grants and public funding. Both the two angels and Mikkel Str.m expected feedback by Monday, and Emma feared that the team would not agree and end up with a bad mood between the team members, not only in terms of which option to pursue but also in terms of ownership in the company. Emma could give away many shares to get the company moving forward, but she knew that Steffen wanted to minimize his loss of shares to investors.

The day had not started well as Eirik had received an invoice of NOK20,000 from HydroSafe’s accountant—twice the size they expected—and now their bank account approached negative numbers. Emma now knew that this meeting would end with either controlled liquidation or a plan to continue the development of the company. Before the weekend, she felt confident, but now she did not know the better option for HydroSafe. Eirik and Steffen looked at her, and they started the meeting.