A Wharton Corporate Venture Capital Expert Sees Wisdom in Google's Bio-science Investment

Corporate venture capital investments don't always have to be directly related to the company's line of business, and they don't necessarily signal a coming acquisition. Sometimes, they are just smart investments intended to help create a new market for a company's existing products or to advance technology that will add value to those products. Google's recent investment in Adimab may be an example of the latter, according to Wharton entrepreneurship and management professor Gary Dushnitsky.

Adimab is a New Hampshire start-up that, according to a recent New York Times "Bits" blog report, "can help pharmaceutical companies find effective monoclonal antibodies – genetically engineered versions of proteins the body makes to latch onto invading pathogens." Pharmaceutical giants Roche and Merck have already signed up to use Adimab’s technology, which, according to The Times, "involves creating a huge library of candidate antibodies in yeast cells."

To be sure, Google could see the Adimab investment, estimated to be about $10 million, as an eventual money maker should the startup's success lead to an IPO. But in the meantime, Google and Adimab are likely to advance each other's core technologies: algorithms that filter through vast databases to find just the right thing — whether it is the lyrics to "The Buzzard Was Their Friend" by Dan Hicks & His Hot Licks, or a monoclonal antibody that can halt the invasion of a deadly pathogen.

"Algorithms are at the cutting edge of drug discovery," says Dushnitsky, whose recently published paper, "Entrepreneurial Finance Meets Organizational Reality: Comparing Investment Practices by Corporate and Independent Venture Capitalists, found that the compensation of corporate VC specialists is an important factor in their success.

Another example of a firm winning an investment from Google is Pixazza, a Mountain View, Calif., company that has developed technology that enables consumers to mouse over images on web sites to gather more data and see related products. "The common thread here is that Google is being open to facilitating the development of technology that can enhance search," says Dushnitsky.

More from Knowledge at Wharton:

Want to Crank Up Corporate Venture Capital Performance? Consider Matching Independent VC Pay Packages

How Corporate Venture Capital Investing Increases Innovation