PE for Sperm, VC for Algos and Biotech: Finance and IVF part 2

David Sable
3 min readAug 7, 2023


(part of the Basic Science of Finance for RE’s and Embryologists series)

Recapping part 1 of Finance in IVF notes, recall the description of private equity (PE) investments as buying and selling cash flows, metaphorical checks that arrive in the mailbox every week or every month, whether from winning the lottery or from the profits of a predictable business. Let’s address two further points: PE vs VC, and an intro into “after the check clears.”

PE vs VC: Private equity versus venture capital

How is private equity different from venture capital (VC), another type of big check that professional investors write to buy businesses?

It’s pretty straightforward:

PE buys the lottery tickets after we know the winning numbers.

VC buys them before.

Most lottery tickets end up worthless, as do most venture-backed companies. The ones that do succeed may end up being worth 20 times or 100 times what the VC’s paid for them. Venture strategy involves investing in a bunch of different companies. You expect the ones that work to pay for the ones that don’t. Think software and AI, and drugs and biotech.

A venture investment, once profitable and generating cash flow, may exit to a PE firm. The opposite usually doesn’t happen.

After the check clears: different paths.

Once the PE firm owns and controls the practice, they can do anything they want with it. They can follow a passive strategy, hoping that a combination of the practice growing organically and the market paying more for that type of business in coming years gives the PE firm a profitable exit. Maybe they buy a 1 million dollar cash flow practice for 8x, or 8 million dollars. It grows to 2 million dollars, and they sell it into a hot market five years later for 12x, or 24 million dollars. That’s a 50% return in five years.

The firm can follow an active growth strategy, investing time and expertise (and maybe more capital) into accelerating the growth of the business, or buying similar business and combining them (a “roll up”), a 2+2=5 sort of math when its done well.

In both of these examples, the business can be worth a lot more after the transaction than it was at the time the check was written.

But remember that the firm that buys the business may have other agendas, strategies that are good for the investment return but not necessarily good for the company.

One strategy involves using the cash flow as the basis for borrowing money. Recall from the part of basic science of finance that you can borrow money using the expected cash flows of your business as collateral.

Owners of a business borrow against their cash flows to invest in the further growth of the business, or to buy other businesses or use it for research and development — all growth strategies.

But they can also borrow against the cash flows and keep the money for themselves. When the business continues to thrive, this is called leveraging the business, or “rationalizing the cap structure.” If there is a market for the hard assets of the business, the owners can sell off the assets and keep the proceeds. In these strategies, the goal is not necessarily the health or the survival of the business itself — the goal is the return on the investment itself.

If the underlying business fails, then so be it.

Next: what about IVF?



David Sable

bio fund manager, Columbia prof, ex-reproductive endocrinologist, roadie for @PriyaMayadas. I post first drafts.