Posted: March 1st, 2023
Case write-up: Hardina Smythe and the Healthcare Investment Conundrum
Case write-up: Hardina Smythe and the Healthcare Investment Conundrum.
The case exposes students to the deal-by-deal basis and investment strategy.
Case questions:
Evaluate the merits of the three deals and decide which of the three good deals is best for Vine Brook or Hardina at this time.
(There is a strong basis for arguing that any of the three deals is preferable).
Guidance:
1. Flesh out the notions of risk (riskier vs less risky): beta risk and idiosyncratic risk that applies in a VC context, and also consider the risk when discussing the three alternatives. Address why focusing on beta risk alone is incorrect in venture investing.
2. Which style is more advantageous to select a deal. In other words, explain which element Hardina should bet on. Style is more important.
• Management
Readings: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1504496
• Technology or product:
Readings: https://www.semanticscholar.org/paper/Should-Investors-Bet-on-the-Jockey-or-the-Horse-%3F-Kaplan-Sensoy/196c5b5682d74edaec135b69f082a1bac8dbfae8
• The market (market size): More innovative ideas seems easier fund in the boom times
Readings: https://hbswk.hbs.edu/item/investment-cycles-and-startup-innovation
3. Future financing risk(funding needs ) when analyzing the three deals.
4. Evaluation of the companies into the context of the firm (Vine Brook) and Hardina’s own ambitions: How important that she makes a recommendation, should she just list the characteristics of each deal. Who will make the decision, Hardina,Cliff or the firm as a whole? Explore the question of whether Hardina should have an opinion about what the firm should do
5. Partner time (resources to manage deals):
– VC’s most valuable resource is partner time. If she recommends a deal that require a lot of partner time, what is likely to happen?
– The trade off between generality and specialization. Merits of Hardina’s specialization.
Readings: http://web.mit.edu/iandeseminar/Papers/Spring2006/Lerner.pdf
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