Redhill Capital: Strategy in a Pandemic

In late May 2020, the two founding and managing partners at Redhill Capital, in the Pearl River New City district of Guangzhou, China, were considering various reasons why the year was developing far differently than they had expected. The two-year-old venture capital firm’s limited partners and investees were all shocked by the dire developments, as was the entire country and the whole world. Earlier that year, rapidly spreading outbreaks of COVID-19, which had started in Wuhan, in China’s Hubei province, had led to hundreds of thousands of deaths, and many countries were closing down their borders. With the world seemingly plunging into a deep depression, the two founders of Redhill Capital were wondering about the future of their venture capital firm, which normally invested in medical technology and biotechnology. How should the company’s strategy be adjusted to survive the crisis and take advantage of new opportunities in the rapidly changing world?

This case was written for an entrepreneurship course at the senior undergraduate or graduate level. It also has been successfully used in courses on management of innovation in China. It is suitable for courses on innovation where the instructor wishes to introduce the Chinese context. Instructors can also use the case in courses that cover China’s reform and opening up policy, to introduce market mechanisms of innovation. If the case is used in a course where concepts of financing rapidly growing start-ups have not yet been covered, students should first become familiar with entrepreneurship and venture capital financing. After working through the case and assignment questions, students will be able to do the following:<ul><li>Understand the career choices of a young woman who is starting her own venture capital (VC) firm.</li><li>Learn about the nature of VC, the interface between government policy and private markets, and how VC in the United States differs from VC in China.</li><li>Understand the process by which a general partner (GP) structures a VC firm, by recruiting limited partners (LP), on the sell side, and putting together a portfolio of investees, on the buy side, to attract LPs in successive funds and maintain the VC firm’s sustainability.</li><li>Learn about managing and adapting a VC firm through a crisis.</li></ul>

• innovation
• China
• venture capital
• early stage financing
• technology financing
• private equity
• limited partnership
• general partner
• fund raising
• due diligence
• funding
• cash call
• carried interest
• biotech
• medtech
• healthcare
• globalization
• pandemic
• COVID-19