Redhill Capital’s Use of Political Instruments

Topic: Business Analysis
Words: 600 Pages: 2

The complementary role of government and market forces in venture capital (VC) finance is to provide intervention that raises the fund’s reputation to attract more money from institutional and private investors. In addition, governments worldwide have created different political instruments to boost investment in early-stage small and medium enterprises (SMEs). These measures cover directly such as investing directly in the firm and indirectly through regulation policy and investing in VC funds instruments for the SMEs. Another complementary role of the government and market forces in the biotechnology and medical technology industry is to offer support that ensures the successful application of science and technology. For instance, the government offers research and development of medical technology with deep historical roots that help to advance some treatments such as artificial heart programs. Further on, market forces such as technological advancement and international transactions have led countries to collaboration in biotechnology and medical technology fields to develop medicines and vaccines with fewer side effects. Therefore, the complementary roles of government and market forces have led to the significant growth of VC finance, biotechnology, and medical technology industries.

For an innovation to be funded by VC, it should first submit its business plan to a venture capital firm. If the firm gets interested in the proposal, it performs due diligence that thoroughly investigates the innovation’s operating history, business model management, and products. This background check is crucial because VC firms usually invest large funds in any innovation. To perform this check, the firm hires skilled individuals with previous investment experiences, Masters in Business Administration, and equity research analysts. After completing the check, the VC pledges to invest capital in the innovation in exchange for equity in the company. Pledge funds to support the innovation can be offered at once, but in most cases, they are provided in rounds. The VC firm then takes an active role in the financed innovation, advising and monitoring its progress prior to releasing additional funds. After 4 to 6 years of initial investment, the VC firm exits from the innovation by initiating an initial public offering (IPO), acquisition, or merger.

Lu had worked in the health industry in China and has gained experience in marketing, sales, and project management with Johnson & Johnson China and Medtherm instrument. In addition, she is a partner of Sequoia Capital, whose parent company is in the U.S. She also has a Master of Business Administration from the Chinese University of Hong Kong and a Bachelor of Science in Clinical Medicine from Medical College, HuaZhong Science & Technology University. Having all these skills to operate a VC firm is the main reason she decided to resign from her career to start Redhill Capital. Since starting the company, her decisions have been validated because she has acquired a partnership from Su and hired 11 employees.

The outbreak of Covid-19 presented threats of businesses closures due to restrictions put in by the government to prevent widespread of the virus. In addition, the pandemic presented other threats such as reduction of funds by VC firms, job loss, and unfavorable conditions for startup companies. On the other hand, the pandemic presented opportunities such as starting up working available capital regardless of its insufficient and innovations of the door-to-door services to prevent overcrowding in public places. It also presents innovations of working from home, which has been converted to a new norm. Due to Covid-19, Redhill should adjust its strategy by reducing its funding and its evaluation, and this will ensure it aligns to companies in RMB Fund 1, plans for RMB Fund2, and plans for USD Fund 1.

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