By Gary Dushnitsky
Last month, Teva Pharmaceuticals, has announced the launch of a corporate venture capital fund. The new fund will be headed by Dr. Aaron Schwarz, a Teva veteran, and will seek investment in biotech companies. In doing so, Teva joins a list of leading pharmaceuticals that increasingly shift their attention externally as a way to stimulate their product pipeline. The innovative and talent profile of biotech start-ups, coupled with the changing economics of R&D in the industry, implies that Teva’s venturing arm will find a playing ground populated with other corporate investors such as Pfizer Ventures, GSK’s SR One, Eli Lilly’s Lilly Ventures, Novo Nordisk’s Novo Ventures, and so on.
In a recent Business Strategy Review article, London Business School professor Gary Dushnitsky notes that corporations across a wide array of industries are adopting a venturing approach. Corporate venture capital (CVC) is increasingly regarded by organisations as a vital weapon in their entrepreneurial and innovation armory. About 20 per cent of the Fortune 500 have created a CVC unit, according to a 2009 study, including such firms as BASF, Cargill, Dow, Deutsche Telekom, Intel, Johnson & Johnson, Reed Elsevier, Siemens, UPS, and others.
Professor Dushnitsky debunks some common myths regarding corporate venturing. He observes that CVC units are becoming an integral part of firms’ innovation strategy: while the average lifespan of CVC unit was 2.5 years during the 1990s, it has almost doubled to 3.8 years during the 2000s, with more than 40% investing continuously for four years or longer. Moreover, mirroring the ever globalizing venture capital market, professor Dushnitsky finds that the fraction of CVC investments in US-based ventures declined from 88% (1991–2000)to 75% (2001–2009).
*** Gary Dushnitsky is an Associate Professor of Strategy and Entrepreneurship at London Business School. Additional analysis on the topic corporate venture capital performance, structure, and compensation is available at www.dushnitsky.com.
He is a former General Partner at Google Ventures (GV) in Europe, former head of Google for Entrepreneurs in Europe, and founding head of Campus London, Google's first startup hub. Eze writes on Israeli tech, venture capital, artificial intelligence, and founder strategy.
He is also the founder of Techbikers, a nonprofit that brings together the startup ecosystem on cycling challenges in support of Room to Read.
