PureTech Opinion: Strategic Partner or Venture Capital (VC) firm?

The PureTech Ventures Example

PureTech Ventures
In May 2011, Daphne Zohar, founder and managing partner of PureTech Ventures had a big determination to make.

In early May 2011, Daphne Zohar, founder and managing partner of PureTech Ventures, a life science venture creation company in Boston, MA, had essentially four options:

  • Negotiate a deal for an early strategic partnership
  • Close a financing round with the Venture Capital (VC) firm based on the term sheet she just received
  • Combination of option 1 & 2
  • Receive a grant from non-profit or the government

PureTech – The Third Option

As far as the third option goes, it seems very unlikely as closing a round of financing with the VC is a clear signal to the willingness of PureTech to engage in future potential funding. This third option will cause potential pharmaceutical partners to distance themselves from a possible deal. Therefore, combining both arrangements, even though an option, should not be pursued.

The fourth option would be on an excellent approach as it aligns with PureTech interests of non-dilutive financing. Unfortunately, it is not on the table for this case, so it has to be ruled out. PureTech has to decide between a strategic partner and a VC. After analyzing both scenarios, it is clear that they are almost perfect opposites of each other. In the end, different costs and interests are involved with each one.

PureTech’s strategy should be simple

The company’s strategy is simple, create quality startup companies, and raise money through non-dilutive financing. PureTech likes to carefully help startup companies as much as they can look for potential partners to join them or acquire them in the future.

PureTech Ventures, through time developed an excellent network and relationship with pharmaceutical companies in the industry. Note that the company has shown little interest in going to an IPO as soon as they can. These interests clash with those of the VC.

The nature of Venture Capital Firms

A Venture Capital firm would not likely be involved in a long time relationship with the company (or possible strategic partners which might help with other startups in the future). They are only interested in getting as much profit out of the venture in which they have invested their capital. At the end, PureTech might want to maximize their return on every single deal they make, but they have the vision to look at a bigger picture in which the VC has no interest.

After all, the question is, what’s best? What’s your opinion?

If you are interested in business related articles, check out a 5 Stage Approach to Dealmaking!

Original Publication:

Rivera Pecunia, Gustavo. “Opinion: Strategic Partner or Venture Capital (VC) Firm?” Pecunia Group, Pecunia Group, 24 July 2018, https://pecuniagroup.com/strategic-partner-or-venture-capital-firm/.

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