This case describes the background to an upcoming negotiation between a Chinese social entrepreneur (Jamie Zheng) and a venture capitalist (Chris Liu). Case (A) lays out the situation from the perspective of Jamie, who is trying to attain first-round investment in order to better grow Smart Health, which was founded by Jamie. However, Jamie’s purpose for the firm includes not only the pursuit of profit but also a desire to have a social impact by making life easier for the elderly. This provides a potential conflict, as Jamie’s social purpose may impede the company’s commitment to the pursuit of profit. After negotiating with five investors, Jamie still could not reach an agreement, especially with Smart Health’s social goal being an important condition for its future development. However, Jamie is optimistic heading into this meeting with Chris, as Jamie believes Chris shares the same vision and understands the unique nature of Smart Health as a social enterprise.
Case (B) presents the perspective of Chris, who, on a personal level, likes Jamie’s idea of helping the elderly. However, as a traditional venture capitalist and an agent of XYZ Capital, Chris understands the importance of investing in firms based on their potential profitability. Therefore, Chris needs to ensure a sound return on investment, which includes some control over how the firm makes financial decisions in the future.
Students will be asked to play the role of either Jamie or Chris and negotiate on how they can come to an agreement on the venture capital firm’s potential investment in Smart Health and what degree of control the venture capital firm should have over Smart Health, in order to ensure it meets its financial obligations. They must haggle over one issue—social purpose. The key question for this negotiation is: How does one reach a deal when there is more than just a financial incentive at stake? How does one negotiate when the social purpose of the firm is among the issues at hand?