Smart Health (B): Negotiation with a Social Purpose

Byron Y. Lee, Liman Zhao

Research output: Other contributionCase Studies


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 attempting 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 for the firm 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/goal. 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? The hybrid nature of a social enterprise adds exponentially to the difficulties of reaching a negotiated deal with any investor. Social enterprises face the inherent paradoxical tensions of creating dual value (i.e., social value and economic value). On the one hand, social enterprises are driven by the nature of the desired social change. We call this the social purpose (or social mission, goal, or objective). On the other hand, and no less important, is the need for the social enterprise to be at the very least sustainable or creating value through market means. Given these two goals, the negotiation between a social enterprise and an investor is complicated. How should social goals/purpose be valued? How is this valued differently for the investor? How should the financial and social goals of the social enterprise be balanced? What are the tradeoffs? How social enterprises manage these tensions is considered in this negotiation case and is an important issues that is commonly encountered by social enterprise’s especially during the process of considering venture capital funding.
Original languageEnglish
Number of pages4
Publication statusPublished - 30 Jun 2020

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Field Case

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Published by

China Europe International Business School


  • negotiation
  • social enterprise
  • social enterprises
  • social venture
  • emotion
  • social purpose
  • fund-raising

Case studies discipline

  • Negotiation
  • Social Enterprise
  • Strategy

Case studies industry

  • Health Care Services


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