The growing role of corporate venture capitalists (CVCs) in financing innovation is undeniable. In 2018, according to CB Insights, CVCs invested $52 billion in U.S. startups, an historic high and more than triple the $15.2 billion they invested in 2013.
But what’s changing in corporate venture capital is not only the increased activity, but also a rethink of investment strategies. It’s not just about chasing innovation outside the current businesses. Corporates are increasingly partnering together in syndicates to accelerate large-scale innovations that can fundamentally reshape industries.
Corporate partnerships creating greater market value
When pulling together a corporate venture syndicate, capital is seldom the scarce resource. The bigger challenges are accessing global networks, channels and scale. To address these challenges, leverage is created by bringing corporates together that has a multiplicative effect on accelerating growth.
Historically, corporates come together on a formal basis to tackle industry inefficiencies through structures like exchanges, group purchasing organizations, and standards bodies. It’s often a difficult and lengthy process.
But corporate venture syndicates are much easier to transact. Today, corporates are shaping ecosystems by investing in earlier stage companies with the potential to fundamentally disrupt the way business is done.
It’s especially true in edge and cloud computing, machine learning, and precision medicine specifically oncology. Bringing technologies together can have a profound impact on improving patient outcomes, something that benefits all players in the ecosystem.
An inside look at a corporate partnering strategy in oncology
Merck GHIF, the global venture arm of Merck, is evaluating corporate partnering opportunities more aggressively now than in year’s past. Our strategy is to be certain about the healthcare problem that needs to be solved and provides benefit to Merck, while ensuring we are well aware of the value and needs of other corporations.
Today Merck believes oncology patients should have timely access to the best cancer care backed by evidence. Specifically:
- Typing and profiling technologies should be available to patients in all settings;
- Current evidence based guidelines should be available to all physicians to enable better decisions on treatment choices;
- Patients should have widespread access to clinical trials; and
- Better care management can significantly improve outcomes through real time monitoring and contextual interventions.
To address these needs, Merck is actively working with life science and healthcare providers to ensure these types of solutions take root in the real world. But Merck also needs them to get bigger, which means that the firm is looking to work with tech players and providers who have what we call “Digital DNA,” robust Data sets, broad Networks and powerful Applications.
Merck GHIF made a recent series of investments with firms that are typically perceived as our competitors. In 2017, we partnered with the venture arms of Amgen and Roche in a $30 million Series D round in Syapse, which uses precision medicine to improve cancer care. Last year, we co-invested with Pfizer’s VC arm, leading Strata Oncology’s $26 million Series B round to help accelerate adoption of its tumor profiling capabilities. Over the past three years we’ve worked with McKesson, Orix and the American Cancer Society to build out Navigating Cancer’s oncology care management platform.
And we plan on doing much more in the near future.
Investing for impact and scale
Ultimately, our goal in corporate partnering is to provide strong venture returns. This means we must invest at scale. It also means we’re fundamentally changing the way we do business. Investment success is creating a new source of revenue for the long-term of the company or dramatically lowering costs of production.
This is the challenge facing all corporate venture investors, making sure these investments are having an impact on the parent corporation. That’s why corporate venture partnering is happening more and more. Given we’re all in the risk business, what better way to increase the odds of success than to partner with others with similar objectives and scale?
Dave Stevenson is a managing director of Merck Global Health Innovation Fund and is responsible for identifying opportunities in all areas of digital health, with a particular focus on oncology and provider and patient engagement. He can be reached at firstname.lastname@example.org.