How to handle the virtual state of corporate venture today

William Taranto of the Merck Global Health Innovation Fund writes how the switch to working from home can make investors more productive. But the downside is loss of personal interaction.

When the going gets tough, it’s common for some corporate VCs to head for the hills. Today, it’s a narrative that’s emerging again amid the covid-19 crisis.

Global corporate venture deals fell from a total of 580 in April/May of 2019 to 486 in the same period this year, according to Global Corporate Venturing. However, institutional VC deals are also headed for a decline, with PitchBook anticipating a drop in transaction volume over the next several quarters, as well as a downturn in valuations.

Despite the negative predictions, I believe CVC will not only stick around, but also be a vital part of the innovation ecosystem going forward.

CVC Bill Taranto, Merck
William Taranto, Merck Global Health Innovation Fund

Merck Global Health Innovation Fund remains fully committed to “doing” venture. We understand that many of today’s most successful companies were funded in times of uncertainty. In fact, to put our money where our mouth is, we’ve recently completed two spin-outs, three follow-on investments and two new deals in 2020, all since the pandemic hit. And we intend to increase that pace going forward in 2020.

It hasn’t been easy. It’s hard to do venture when you can’t venture out into the world, meet founders and conduct due diligence the way we did historically. But it is possible if you do some innovating of your own and set up a smoothly functioning system to do CVC virtually.

Finding real benefits in virtual CVC

Are people who work virtually more productive? The question has long been debated and now, as most people are working virtually, we have an answer: Yes!

Here at GHIF, we’ve found that less travel has brought more open calendars and more interaction, not less. Our calendars have freed up and we’re enjoying greater access to internal Merck business partners. We’re also more available to our portfolio companies and CEOs.

But what about conferences, meeting people and networking in person? This is a valuable part of our business. However, many conferences like Global Corporate Venturing are now virtual, so we’re still able to develop relationships and source deals. We have also established a centralized, coordinated way to manage face-to-face meetings, workshops and collaborations to maintain our innovation efforts. We have discovered that this approach increases our “return on time,” brings the right stakeholders to every meeting and expedites a process that is often delayed by real-world obstacles.

Another immediate concern when covid-19 first hit was board meetings and how we conduct them going forward. They’re not the same these days, but they do still work virtually. Especially in cases where there are established relationships and the situation is relatively stable, board meetings can be conducted effectively via apps.

Challenges to virtual corporate venture

All that said, we realize virtual corporate venture presents difficulties. Perhaps the worst is the absence of personal interaction in the diligence process. But what I have found is hardest to do without face-to-face contact is diligence on a new investment. That’s why references have become even more important. We take the time to gain very deep insights into the people or companies we are vetting.

Internal connections weaken as well. It’s important to keep in mind that these interactions are vital, and you must find ways to continue them virtually.

Another challenge is the generational divide. “Older generation” venture capitalists need to better understand social media and virtual communication – rather than physical gatherings – to broadcast ideas, establish viewpoints and take action.

A final point: remember that work-life balance is further tilted when everyone works virtually. Your team, like ours, is no doubt accustomed to a 24/7 business environment. See to it that your team takes regular breaks and ensure that all the people you interact with aren’t suffering from isolation or overwork.

William Taranto is president of Merck Global Health Innovation Fund.