So Merck has created a $250 million venture fund, joining GlaxoSmithKline’s SR-One, the Novartis Venture Fund, Pfizer Venture Investments and JJDC.
This is the big players tossing their hands up in the air and exclaiming “we can’t do it anymore.” Corporate R&D jobs are cut, the stock jumps on news of layoffs and corner office suits get a bonus. The Harvard Business Review will quickly publish glowing case studies on the management that takes “BOLD STEPS” to implement “creative destruction of the dominant paradigm” and “jettison non-core assets” (people) while they “ruthelessly focus on ROI and value creation” or some such nonesense.
Look, there is no theoretical upper limit on a public company’s stock price. The entire company is focused on running the number up, right now, while I can get piece of the action. Corporate managers of a certain age are all too happy to create a stock bubble. And if they have to cut off an R&D operation, so be it.
Of course, after 50 or 100 years of operation, perhaps that R&D department has grown too big, too lumbering and too inward focused, as compared to the garage start-up. It’s just human nature to delegate and compartmentalize. One day, you’re inventing new ways to manufacture more penicillin and the next day you turn around and you have three layers of management over the purchasing agents who buy light bulbs and copy paper. Meanwhile, the garage start-up is completely paperless!
Even blockbuster discoveries can only pay for so much overhead. And you’ve still got to pump up the stock price. So management commissions another consultant to produce another study which recommends to start acting like a start-up. But you can’t do that because you already own all this real estate. So, the decision is made to buy a start-up. And if buying one is good, then buying into ten must be even better.
Which brings us right back to Merck, GSK, JNJ, et. al. The biggest corporations paint themselves into a corner with their age and size. They have fewer options, the only way they can enjoy the characteristics of a start-up is to buy one…