A venture fund’s objective is to invest capital into early-stage companies to fuel growth, increasing the probability that they are acquired or reach public markets. That’s how an “exit” is achieved, with the invested capital returned at a risk-adjusted profit. Corporate venture capital (CVC) differs from orthodox venture capital because, alongside financial returns, a CVC’s goal is often to create strategic value for a core business.
Delivering this strategic value is much easier said than done, and therefore not well addressed by most CVC funds.
Outlined below are four distinct practices that optimize strategic and financial value.
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Define strategic value alongside financial return
Strategic value comes in many forms. Pharma corporate venture should develop investments that might generate a valuable new target, drug, or vaccine candidate, improve the probability of pipeline success, reduce the cost of R&D, accelerate clinical trials — and more through the entire value chain. It is not necessary to acquire such businesses outright, but it is necessary to cultivate them into standardized, scaled solutions for scientists, regulators, clinicians, patients, and payors.
Assessing the value of an asset — financial and/or strategic — is as much art as science. Financial value can be estimated using discounted cash flow analysis, which relies on pro forma projections and assumptions about future market pricing and multiples, or through comparable-company analysis. Quantifying strategic value is much more difficult. One derivative indicator of strategic value is whether the core CVC business engages with the portfolio company, through piloting, partnering, licensing, and/or purchasing products or services. A CVC that can’t generate this type of engagement is just delivering capital without a strategic return.
Lead internal collaborations that power sourcing and diligence
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Placing relevant strategic investments requires deep familiarity with the parent company’s objectives and priorities. This means dedicated internal workstreams with business leaders and subject matter experts who help refine and prioritize use cases and understand unmet needs. In-house CVC resources also help with pipeline building and technical, scientific, and clinical due diligence. Proper engagement is time-consuming and requires operational, process, and communication excellence — skills anathema to the normal concerns of most venture investors.
Many benefits accrue from generating that upfront buy-in. Deep collaboration raises the CVC’s probability of succeeding in highly scientific and technical markets. It also instills early business awareness and engagement, so portfolio companies develop faster pilots and larger partnerships, executable in a shorter timeframe.
Drive leverage through syndication
Most CVC investors are equipped to lead negotiations and price rounds, but there’s a strong case for prioritizing syndicate creation.
Syndication provides leverage through agile, coordinated activity on negotiating terms, dividing or delegating board activities, and considering future mergers and acquisitions. It also extends financial leverage, allowing a fund to cover more of the market and back a broader range of strategic interest areas. Joining syndicated deals priced by expert financial investors tends to produce a fair market price. A CVC can always walk away when pricing runs ahead of what its internal modeling supports.
Even with reduced board involvement, a fund can stay engaged through shareholder and information rights — quarterly financials, board materials, regular check-ins — whether it holds a board or observer seat or is simply an shareholder.
Occasionally, a CVC will need to play a more significant company-building role, In such cases it can place a convertible note or lead a round outright — but always with an eye toward delegating responsibility over time. The correct level of involvement is a case-by-case decision, considering the strategic relevance of the platform, the stage of the company, and the experience of its board and management team.
Deliver the payoff
None of this works as one single move, but as a pattern: sourcing shaped by internal collaboration, pricing and development sharpened by syndication, and continued engagement all the way to exit. Funds that operate this way tend to see their strategic and financial returns reinforce each other over time rather than trade off against one another.
The key lies in recruiting and training leaders who roll up their sleeves and work seamlessly with internal partners. When portfolio investments help a business develop better therapies or reach patients faster, they deliver strategic value — and ultimately value to patients and providers.
Photo: Hong Li, Getty Images
David M. Rubin, Ph.D., is a Managing Director in Merck GHIF, where he leads the drug discovery and precision medicine practice. Dr. Rubin ran and helped build life sciences companies in the USA, UK, Denmark, Hungary, and India. He was awarded National Institutes of Health and American Cancer Society Fellowships to support his research at Harvard Medical School on ubiquitin-dependent protein degradation. He received a B.A. in biology from SUNY Binghamton and a Ph.D. from Temple University. Junk Birds, his collection of previously published short stories, was published in 2025.
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