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The PureTech Ventures Example

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

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 potential future financing. This will cause potential pharmaceutical partners to distance themselves from a possible deal. Therefore combining both delas, even though an option , should not be pursued. The fourth option would be on a very good approach as it aligns with PureTech interests of non-dilutive financing, but unfortunately it is not on the table for this case, so it has to be ruled out. PureTech is left with essentially deciding between a strategic partner and a VC.After analyzing both scenarios it is clear that they are almost perfect opposites of each other. There are different costs and interest that are involved with each one.

PureTech strategy is simple, create quality startup companies and raise money through non-dilutive financing. Also PureTech would like to closely help these startup companies  as much as they can and look for potential partners to join them or acquire them in the future. PureTech has developed a good network and relationship with pharmaceutical companies in the industry and has shown that is not interested in going to an IPO as soon as they can. These interest clash with those of the VC. A VC would not be interested in 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. PureTech might wants to maximize their return on every single deal they make, but they have the vision to look at a bigger picture which the VC has not interest.

So the question is… What’s best? What’s your opinion?