Darmstadt-based family-controlled company Merck has been active as a venture capital provider for many years. Focused on Life Science, Healthcare, and Electronics, the company established its corporate venture capital arm, M Ventures, in 2009. Roman Werth, Head of Group Strategy, M&A and Venturing at Merck, explains that the motivation behind creating M Ventures was to develop a tool for accessing early innovations aligned with the company's strategic priorities.

„Without focusing on financial returns, it is challenging for M Ventures to remain competitive in the long-term battle among financial and strategic venture capital players,“ says Werth. The strategic aspect of M Ventures was intended to gain a deep understanding of new markets and technologies, and to represent Merck in early-stage innovations.

When M Ventures was founded, the primary focus was on the Healthcare sector. „Through M Ventures investments, we can share the risks of innovations that are too early or immature to be fully integrated into large companies, thus complementing them to provide Merck with several growth options,“ explains Werth.

In 2021, Merck increased the capital base for M Ventures for the third time, by 600 million euros. The exact current financial scope and volume of invested capital are not disclosed. „M Ventures is designed as an evergreen fund, where returns replenish investment capacity“, notes Werth. After an initial allocation of 40 million euros in 2009, Merck increased this amount to 150 million euros in 2013, and to 325 million euros in 2016.

Over the years, the Merck Group has gradually expanded its business beyond Healthcare activities into the market segments of Life Sciences and Electronics. Concurrently, M Ventures has been financially positioned to increase the scope of its VC investments in line with Merck's broadened strategic interests and beyond.

With the recent allocation of 600 million euros, M Ventures, according to Werth, „continues to leverage its expertise to create and finance a new and larger portfolio of innovative companies that align with Merck’s business unit strategies.“ The increased allocation enhances M Ventures’ ability to fund „companies that are either larger or take longer to realise their full value proposition.“ M Ventures maintains „sufficient equity to contribute constructively to company development, positioning our fund on par with larger players in the industry,“ adds Werth.

M Ventures has built a substantial portfolio over the years. The VC unit has invested in 100 companies to date. Currently, the portfolio consists of more than 60 active investments. The portfolio includes everything from groundbreaking pharmaceuticals and advanced life-science tools to the next generation of computing technology, explain Hakan Goker and Owen Lozman, who jointly lead M Ventures as Managing Directors in Amsterdam.

„With the maturation of the fund, the M Ventures portfolio includes both early-stage and late-stage companies, which have the opportunity for a well-timed exit – whether through an acquisition or an IPO“, says Goker.

The two Managing Directors do not provide details about the levels of participation and financing tickets. „In general, we invest at a level where we can make a constructive contribution to the company's boards. The amount varies, of course, with the stage of the companies. We have invested in early seed rounds, but recently we have also participated in later rounds that require higher initial investment amounts“, Lozman states.

Typically, M Ventures participates in financing rounds as part of a consortium, to share financial responsibility and risk. „However, there are also exceptional cases where we have identified a technology or market need for which there is currently no company. In these rare exceptions, we have also spun off or established new companies in close collaboration with a founder or entrepreneur, where we were the sole investor in the first round. But even in such cases, we prefer to work with a consortium“, notes Goker.

There is no shortage of potential candidates. „In 2023, we reviewed almost 1,900 business opportunities in biotechnology and technology. From that, we conducted in-depth due diligence on 19 companies and invested in seven“, says Lozman.

There are no regional focuses for venture capital financing. „A priori, we are geographically agnostic, as we want to invest in visionary companies, groundbreaking technologies, and smart minds, wherever they may be in the world“, Lozman emphasises. However, M Ventures has indeed made several investments in German companies.

The typical holding period is currently between 7 and 10 years. „As a corporate venture capital with an evergreen structure, we have the ability to hold and finance companies until exit“, says Goker. „Alongside the company, we can navigate periods of unfavorable economic conditions for financing rounds and exits – whether through an acquisition or an IPO."“

The executives do not wish to provide specific figures regarding M Ventures' profitability, but say that they are „very satisfied“ with the returns achieved. „The overall return expectations align with those of the top-performing institutional investors“, states Goker, referring to successful exits via M&A or IPOs. Examples include the companies Calypso, Synaffix, Forendo, and Progyny.

A good example of a successful listing is Progyny, with a current market capitalisation of over 2 billion dollars – in this case, M Ventures was an early investor in the Series A round. An example of mergers and acquisitions is Calypso, „a company we founded that was acquired by Novartis earlier this year“, says Lozman. Lonza took over Synaffix, and Organon acquired Forendo.

Regarding the „strategic benefit“ for Merck, the Managing Directors explain that there are many collaborations with companies in which M Ventures is invested. But Merck itself has not yet taken over any of its portfolio investment companies.

The investment success has garnered M Ventures a lot of positive feedback. For instance, M Ventures team members have repeatedly been honored with Rising Stars and Emerging Leaders Awards by Global Corporate Venturing. In terms of rankings, M Ventures was listed among the top 20 biotech venture capitals (companies and institutional investors) in the Oppenheimer ranking for 2023 and is ranked among the top 20 to 50 venture capitals worldwide in various industry publications. „Another benchmark for our leading position in the industry is the view of our investment partners. Here, it is evident that we are on par with leading global VCs in the biotech and tech sectors, most of which have larger investment allocations“, notes Werth.

M Ventures believes it differs „in several ways from institutional funds“. „For one, it is an evergreen fund“, emphasizes Werth. „While the overall return expectations align with those of top-performing institutional investors, we are more flexible in searching for the best exit opportunity for a portfolio company because we do not have to think and act within fund cycles“, he adds. Another important distinguishing feature is „that our portfolio companies can benefit from our affiliation with Merck by having the opportunity – without obligation – to use our expert network for expert feedback and industry perspectives and to explore industry collaborations.“