Hardina Smythe Case

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Assignment #1 - Hardina Smythe

How should Vine Brook evaluate each of the three potential investments? Which investment should Hardina Smythe recommend?

The nature of the situation

- Economic environment

- Hardina in a new position

- Offers have plusses and minuses, but the deal breakers for the offers are...

Deal 1 - AlwaysCovered Software

Raising $6M

Strength

- Veteran CEO with strong management backing

- 400M market, or 1B if expand across hospital

- already in four mid-sized groups and probably moving to expand across 2

- First mover advantage

- Clear Exit: Acquisition

- Modest Burn Rate

Weakness

- Easily Replicable Software

- Must move fast / Risk

- Difficult to evaluate in the short run

- Hardina is considering external unrelated variables, i.e. How she will look as oppose to focusing on the opportunity

Deal 2 - BioChallengers, Inc.

Raising $40

Strength

- Huge market $3.5B

- Better product

- Less Risky

- IPO or Acquisition possible due to industry - Possible before trial results

- Strong Portfolio of Drugs

- Quick exit - Acquisition

- She would look good due to high return

Weakness

- Long development time

- High PreMoney Valuation

- Little understanding of science behind product

- Must TRUST outside sources

- Arbitrary FDA approval process adds RISK

Deal 3 - SweetDreams Technology

Strength

- Market 40M americans = $3B market

- Market monopolized by inferior product

- Valuation will not be much higher than 19M post money

- Already Tested on pigs

Weakness

- Relationship focus based deal

- Leadership

- Requires hand-on approach by Vine Brook

Recommendation

Base of problem is what is called the “Resource Problem”

Clear Strategy Needed

Must ignore not related factors

Looking for quick return

Weak Scientific background will hamper Deal 2
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