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Merck’s Global Health Innovation Fund leaders Bill Taranto and Joel Krikston trace nontraditional careers into CVC, explain GHI’s shift to pharma-services and “enterprise coverage,” and spotlight global IDEA Studios plus wins like Livongo and Preventice. They share a bullish outlook on data-driven digital health, and advise entrepreneurs to focus on specific pharma use cases with validated results.
Joel Krikston: Thanks, Jim. Great to be with you. I work for Bill in the Global Health Innovation Fund. I'm one of the senior partners that covers a part of the organization, specifically the commercial organization. So think of all of the Merck and MSD brand teams, marketers. Salesforce is globally looking at challenges in their business where external innovation could likely be part of the solution.
It's really my job to play that translational role to help connect those groups to whatever that external innovation might be, and help them realize how to use that tool in their hands. I also lead our MSD IDEA studios, which are the two efforts we now have running out of Singapore and out of Berlin to really extend the reach of the fund beyond the us.
Jim Barrood: Great. Bill?
Bill Taranto: I'm president of the Merck Global Health Innovation Fund, and so I oversee all the fund activities from interfacing closely with corporate on any of the corporate mandates, managing our board and then, helping the managing partners through the process of getting an investment qualified and through approval through our board.
And then post any investment managing the portfolio along with the partners. But general oversight of all the activities of the fund is my main role.
Jim Barrood: Got it. Okay. Let's circle back to you, Joel. Tell us how you got to where you are now. You can take it from high school or college but I want to hear your story.
Joel Krikston: I love that question. because I think, bill, I'm sure you do too. I spend a lot of time with people who are very interested in how you get to this current role. And I think what's interesting about what we do inside pharma is that this is not a normal career pathway. We're not following a finance development program or a marketer development program.
It's a very niche function. So my own personal story is I came out of business school at NYU and started working in investment banking and randomly was placed in a healthcare group. Mostly healthcare services, mostly working with big public companies on different types of transactions. But over that period of time was at Chase when we merged with a small boutique out of San Francisco called Hambrecht and Quist, which actually started the famous JP Morgan Healthcare conference many years ago.
But they were really focused on health tech. Technology in general on the West Coast and specifically Silicon Valley and getting exposure to early stage companies. That was really my first taste of what it was like to work with entrepreneurs who were either raising private capital, perhaps going public.
And the energy level and the enthusiasm around those types of projects was really palpable for me, and I realized that I think at that point in time that's where I wanted to start. Positioning my career towards, so I left banking in 2006 and had an opportunity to join Johnson and Johnson as they were re-imagining their diagnostics franchise.
It was really the first time they were moving to be first in the market with new content that required a clinical story. We were solving a problem in the diagnostic pathway. And so my job was to figure out and really quarterback a team as a business development professional who was building a business case for senior management to say, if we could solve this problem with the new biomarker, with some kind of a new test, we could get patients to therapy much more effectively and much sooner, and have a real impact on outcomes.
And if we were successful in telling that story, building that commercial case. Building the product development case, my job would then switch to the external environment to go out and find that technology. And I think a lot about that role because it's very similar to what we do today at GHI from an enterprise coverage perspective.
We really look to define those problem statements and then try and match the need to the external innovation environments. So I did that for a couple years at J&J, and then joined their venture group, JJDC. And was working really as a counterpart to lead investors on biotech deals, med tech deals.
But I found a little niche for myself in Whitespace and found an opportunity to work on areas where j and j either didn't have a presence, or the presence was relatively disorganized. So I looked at things like neuromodulation regenerative medicine, and one of those areas was digital health. And this was around 2009.
So the High Tech Act had passed. Health systems were putting in EMRs. The digitization of healthcare data was here. And I could see, regardless of whether I continued as an investor or maybe as an entrepreneur or returned to banking, there was so much opportunity in the digital health space that I felt like that's where I needed to put down my roots.
So I spent my four years at JGDC really trying to build a digital health practice, and then had an opportunity to join Bill in 2013. Inside Merck, which had made this big commitment through GHI, just to external innovation, which included of course, digital health and I guess the rest is history from there.
So it's been a wonderful journey. I think denoted by always trying to get closer to early stage innovation. And then viewing venture capital as this really fascinating way to have one foot in the entrepreneurial world, but then trying to bring it back into these big organizations and help 'em innovate, which is always a challenge, particularly innovate in areas that aren't necessarily their core competency has been super rewarding for me.
Jim Barrood: That's a great story, great journey. Bill, go ahead.
Bill Taranto: You're going to unfortunately hear the same sort of story because it's really similar to Joel's believe it or not. But just for context, which is funny. When I graduated in 1985 I fell into this because of the same sort of thing of how'd you get your career?
I go, this is not what I wanted to do. I wanted to be an ad man. Actually, I was a marketing major and I thought it was funny. I could make commercials and I had all these interviews with all the big advertising houses, McCann, Deutsche, just different reasons. I didn't get placed. But then in 85, if you might recall, wall Street was hiring like crazy.
And I had a college roommate that got placed at one of the banks, said, oh, why don't you apply? And I was like, ah I'm not a finance guy. I'm an A man. Ended up getting placed and similar to Joel getting assigned into healthcare and did that for a number of years and then got the opportunity again like Joel.
To go to j and what was great about j and j I was in a different group than Joel. I wasn't part of JGDC. We're an independent group investing in technologies and digital long before Joel even, I think, had joined JJ We were doing this in, starting in 19 99, 98. And it wasn't even called, it was just it, that it was health IT, then HIT and then all of a sudden digital.
We were asked to really start to look at that space, and that's where I really learned to hone my investment skills and really understand what formed the basis of what we brought to j and j, my colleague Joe Bobbi and I, around ecosystem investing. That phrase, data is the currency you can usually transact into the future market.
We wanted all our companies to be data companies. We also learned point solutions don't work. We needed an integrated solution and all those things. We built a really nice practice at J&J. It was quite successful and really out of the blue I got a call from Merck going, oh, we would like to start a technology and digital fund.
We love what you're doing at Merck. And the funny question was, do you have a therapeutic fund? They go, no. And I was like, that's interesting. You want to start a tech fund before your therapeutic fund. Now they had done things through bd, but they didn't have a true therapeutic fund, which didn't start till five years after us.
That one started in 2015. But they wanted to do this. And it's like anything in life when you're in the right place, right time, right offer. And really the ability to build from scratch a fund in the way that I thought I could build it from all the lessons learned from all the years of doing what I was doing.
And Merck really gives us that sort of white paper or whiteboard to say, we don't know this space. We just know you're good at it from j and j. Build us your venture fund. And that's what we did over the last 16 years is build one of the most successful, I think, digital health technology funds that are out there.
And it was very fortunate. Just, I fell into this and every move I made just was the right move for me to learn and grow my career. So I like, I've liked all three places I've been, and they've been all fantastic to me.
Jim Barrood: Yeah, no it really is incredible. It's been that long and you guys are one of the most successful, it seems, funds of its type in the industry.
And for those who aren't aware, talk to us more about that bill. How far it's come, big picture and what's worked over the years and bring us up to the current day.
Bill Taranto: Yeah. So, the fund has shifted over time. We made a big fundamental change in 2017, which I'll explain, but when the fund was first started people forget that we were just a $125 million fund focused on pure adjacency.
And we did that really well. And we doubled the fund in 2013 to 250 million. Then again in 2015 to 500 million. And during that time, we also started a private equity firm. Which allowed us to do what? The roll ups that we used to like to do. How do you build that integrated sort of ecosystem? It's by bringing companies together.
And we used to do this, concept around ecosystem investing, which still exists today, but in a slightly different format. But what fundamentally happened to us in 2000, sort of 16, 17, was when Merck shifted from being almost a primary care pharmaceutical company. To a biologics company with the launch of Keytruda, which we are today.
And what they asked us to do was, it wasn't that they were not interested in the adjacent market, but it was more about focusing on pharma and pharma services and the core business of Merck. And so we made two fundamental sort of changes, one of which Joel led, which I'll allude to, but the first was that, okay, what are we going to do differently?
The first is we have to change where we invest from a focus area. So we went to what we call pure Pharma services. And what we mean by that is looking at the value chain across pharma. So we invest in four broad areas. We look at the r and d space, where we look at things like AI and ML and drug discovery, large novel platforms, radiology and pathology.
How are we creating efficiencies in the. And, our RD organization that might allow us to do things differently and create a drug faster than we would in the past. And also then starting to look at the eClinical space and how we do clinical development differently, but really focusing on that RD space.
And that's probably where the largest part of our portfolio sits today is within that space. We also transitioned from being pure IT infrastructure, which we used to do a lot of that data security, privacy storage, aggregation, integration, harmonization and analytics informatics to more I would say broad it.
But then we moved into the supply chain, not so much manufacturing, but supply chain's actually been really good to us lately. And that's all, that's all data. And the idea is how do we track raw materials coming in and finished goods going out because we lose a lot of product to fraud, theft, and damaged goods.
We ship it the wrong way. Just really creating efficiencies in the logistics sort of world around pharma. But that's all data and digital to us. And then where Joel focuses, we still focus on access to care. So how do we bring our medicines and any kind of medicines to the industry. Critical decision support tools remote monitoring can be social determinants of health.
Just anything that really helps access. And then the last space we invest in is still real-world evidence and data. How do we bring data? Large data sets to Merck and informatics and analytics on top of that, but that's just the pharma services piece. The other big fundamental change we made too is how do we better work with the organization?
And Joel came up with, we call it enterprise coverage, but the fundamental way behind it is how do you work with the organization? What we ended up doing was assigning the senior partners in the group to different parts of the organization. The idea was for them to sit on their leadership teams and understand their use cases.
And the whole idea is if we could understand the things that they were working on, what were the problems they were trying to solve that are not just their problems, but their industry problems. So if we solve something for Merck, we're solving something for the industry, we solve something of the industry.
If we're solving something for Merck, and then really focusing on those use cases that are more enterprise wide in which we can single out and then place equity and assets that might then solve that particular use case and then build an ecosystem around it, which might be multiple assets that we can potentially roll up into a larger play that builds scale and all those kinds of things that we're trying to do.
So those two big fundamental changes that we made over time was really shifting our focus more to pharma services and then understanding how we better work closely, not only with the organization, but how we solve both industry and Merck problems. And that was the big change.
So today we're now a $600 million evergreen fund. Still growth equity is the primary focus. We will do A and B rounds occasionally. We don't really do too much startup or seed capital in the main portion of the fund. But really, still doing this kind of the same things we were doing, but in a much more focused way.
Jim Barrood: Got it. And Bill, why don't you tell us some examples of success. What would the common person maybe be aware of if they saw a brand?
Bill Taranto: If you just think of terms of exits, we certainly had it. A few things that we had built, even pre switch. We had built Preventice, which was probably one of the first big ecosystem companies we built.
That was the cardiovascular monitoring company that exited Boston Scientific for one and a half billion. I think more recently. Things like Livongo, which most people would know, the diabetes ecosystem company which got sold. Did IPO and then was sold to Teladoc for $18 billion.
Recently some successes. Joel just recently exited Arcadia, which is a big population health company which has done really well. I think, the way we've looked at it, we've done really well financially. But it's more about looking at in the end, the legacy when we look back is, do we bring assets that exist in the world that are doing good things.
Cancer IQ was another one that we ended up selling to One Oncology, which helps a patient manage their journey. A really fantastic company around, care navigation and cancer. You look back in that company, it's not a big company, but it's doing really good things in healthcare and that's the way we look at it more.
Yeah, we've been really successful from the standpoint of both strategic and financial exits. But I think the way I tend to see legacy is, do we have really good companies that exist in a world that are still today driving really positive outcomes for patients?
Jim Barrood: Got it. So Joel, tell us about the Idea Studio and what you're covering and how that compliments or works with what Bill just spoke about.
Joel Krikston: Yeah, I think their perfect extension of what Bill just described, and as you, if you think about our challenges, GHI, a lot of corporate venture capital measures their strategic impact because they're building an m and a pipeline for the mothership. If that was us, we would be bringing in early stage preclinical assets that Merck was doing a BD deal with or acquiring.
But by definition, that's not our remit. So then how do you as GHI show strategic value to the organization? And I think what's been fun for us is we can be very creative there, but our strategic value is driven by forming partnerships between Merck teams. And these portfolio companies solve a challenge in the world.
So as Bill was describing with navigating cancer, if you have a patient on a complicated oncology product where despite the fact you would think there aren't adherence problems associated with that drug, there are side effects that can be quite difficult for patients to manage. If we can have teams that are running patient education programs through a platform like Navigating Cancer and those patients are staying on therapy longer and getting to the clinical endpoints that they're seeking, that's really valuable work for us to do.
And it's stories like that we tell our strategic impact story through. So the Idea Studios were really a realization that so much of our work. Was relatively US-centric, which is not surprising because venture capital is a very local business. So if you have nine people sitting in New Jersey and Pennsylvania, it's very hard to understand what the needs are in Mumbai or Manila.
We came up with a formula to say, can we create regional partnerships with innovation teams that exist within MSD? They know the problem statements that their markets face. They have some grasp on the innovation ecosystem in those markets. They don't have access to venture capital, but if we as GHI could form partnerships with those teams, assuming those teams had the mandate from regional leadership to say these are the high priority use cases we choose to focus on.
We could partner with them to both identify novel emerging companies, whether they were pure technology enabled services, whatever the case may be. And then we as MSD could show up to those partners as both a commercial partner validating the utility of their platform, as well as a financial partner helping stabilize their early-stage startup.
And that has been extremely successful. So in just about 18 months, we've already done six deals across Europe and Asia Pacific. We are working on InsureTech and FinTech platforms because in markets where 70% of the population has to pay for therapies and vaccines out of pocket. It can be a real challenge to drive adoption and things like vaccination coverage rates.
Even if the intent is there, the ability to pay isn't there. We are not a FinTech company, so we can use this external innovation startup ecosystem as GHI to help support our business and our patients in those markets, and even in more advanced markets. For example, the Netherlands, Germany, the uk, partnering with health systems through startups.
To develop things like multidisciplinary tumor boards. A lot of these cancer patients go through a battery of tests. They're seeing multiple specialists, information is resident, and all kinds of siloed. Places can we support a company that's using technology to bring all of that information together into one place so that when these experts meet to review a case, they can actually get to a therapeutic decision much more quickly and efficiently, which gets a patient onto therapy much sooner.
MSD doesn't build software to sell to hospitals, but that doesn't mean that we can't try and support and help the broader healthcare ecosystem as GHI, by standing up and supporting companies that are doing those things, which ultimately have a real impact on patients. So I think that's always the fun part of our job.
It's a translational role, hearing a challenge in the business, but then having the domain expertise and an understanding of what's happening in the external environment. To try and marry those things together. And as Bill described, putting this ecosystem of capabilities around our leaders. They don't always have to use those companies, but they can tap into this sort of hybrid relationship between a pure vendor relationship or trying to build a capability themselves that they probably shouldn't be owning, operating, running for a host of reasons.
Jim Barrood: What about the Mark Digital Studio? Is that part of what you oversee?
Joel Krikston: We have two forms of incubators or accelerators to support the commercial business. We have the MSD Idea studios and those run out of Singapore and Berlin, and those could possibly expand in the future to include places like Latin America.
We also have in support of our research organization, the Merck Digital Sciences Studios, which is really a more traditional incubator set up. We have a cohort of companies that are selected through an application process. They receive funding both from us as well as some friendly co-investors that we've had good success with in the past.
They get access to certain types of programs, mentoring, leadership development programs for the startup teams, which is super valuable to those groups. And then we'll do our part both internally and externally to support their ability to tell their story, get access to the right audiences to showcase their innovations and their technology.
So think of that as more of a. High velocity technology evaluation type of incubator so that our colleagues at MRL can see many types of innovations over the course of a year, as opposed to the idea studios are much more targeted fit for purpose use cases in a specific market where we're looking for a singular partner as MSD to help us build a solution to address a problem.
Jim Barrood: Got it. Let me ask you, bill. Merck has gone through a lot of changes over the past decade and a half while you've been there, including a lot of m and a and, mergers, acquisitions. I'm just curious, as venture arms are sometimes pressured by management and you guys have seemed to have survived and flourished.
Can you give some retrospective on that? How was it going through those periods of change?
Bill Taranto: I think it's interesting. I've had, I'm on my third CEO and I've had 10 different direct line bosses. But what's separated the fund, I think ultimately, is that we've had a really strong narrative where we're going to invest, why we're going to invest, and how we're going about doing that.
So having both an investment thesis as well as an execution thesis, and being able to articulate that across the entire organization. I think on top of that I think I hired a really strong staff of excellent investors that not only know how to invest, but they understand how healthcare works and understand the market and we call connecting the dots.
They have this ability to say, I read this, I invested in that and someone told me about that. How does that all connect? And then being able to turn it into an investment that then we can articulate back to. Merck going, this is why we did this. This is why we're building the ecosystem we're doing.
I think the other interesting thing is we've been flexible, right? We had to do a fundamental shift back in 2017. We never changed our strategy though. And our investment needs, what we just did was change our focus which, what from broad adjacency to narrow pharma services. And so I think, that's really what's helped us the most is really having a strong narrative.
Being able to communicate with our parent on everything we're doing. And that's across the organization. It's not just up to others, I think a big lesson learned for us over the years is making sure that we're communicating across the entire organization and not just being, communicating to the upper levels, that it requires communication across all levels of the organization and partnering with them at all levels of the organization.
Jim Barrood: I think that's such an important point, Bill, to over communicate to all levels because sometimes it's hard to understand what's going on, especially when you don't see the returns right away. And that's one of the challenges. What about the landscape in general? Bill and Joel, obviously, CBC has gone through ups and downs over the past decade.
Decade and a half, two decades. What, where are we now? You guys seem to be doing great, but clearly the dynamics have changed. So tell us how you see things.
Bill Taranto: Yeah I'll go first. Joel. It's still the rise of the corporates. I still think there's a lot of corporate venture firms that are starting.
I think where the pressure comes is the first three years, maybe even five years of the fund. There's a lot of pressure on the organization, right? And they have to make choices about what they fund and if the fund isn't successful early. That was one of the things that helped us too. I didn't really mention that, but we had strong financial returns early in the fund that shows that we knew what we were doing, that we actually could be stewards of the money, be smart investors around the capital that they were entrusting to us.
But there's a lot of pressure on corporates today, on what's the right use of capital. In order to grow their business. Do I, do I spend 10 million on this? Interesting potential five year out technology, or do I invest today in marketing and sales that might have a greater impact today.
So there's a lot of pressure, I think, on the corporate, on making those kind of choices. But it's also incumbent on the. Venture fund, which I said before is, but if you're, if you have a strong narrative about why you exist and what exactly you're doing, and very focused about that, you have a better chance of surviving as a corporate venture arm.
Now, there are things that happen no matter what, GE, which was a longstanding venture fund, blows up. It's inevitable these things will happen. But there are rules of engagement that I think do help corporates that survive those early years and then the demands of the corporate, shifting over time.
And then the markets don't help. It's, it, we've, since c COVID, exits haven't been fruitful. Valuations are down. Money is coming back into the market a bit. We're seeing early stage rounds getting funded. The a and b still struggle a little, but growth is coming back where we invest.
So we're seeing lots of capital come back in and what you hope when the public markets open up towards the end of the year, we start to see more m and a. We just exited a company early this year, so we're starting to see light at the end of the tunnel. But it's a long game. The one thing I'll just say about healthcare and digital, just from where I have the most knowledge. It's if you're going to talk to your parent, just make them understand it's a long game. If you're looking, two to three years, it's probably not the right space for you to be investing in. Joel, I'll let you expand on what you know, your thoughts as well.
Joel Krikston: Yeah. This is the kind of thing I feel like you could talk about forever, Jim. Maybe a couple things. Strike me. Having done CVC now for almost 20 years I think one is for CD, C firms to always aspire to be true financial investors. Most of the ones I've seen blow up and we've even had our own growing pains.
It's very easy to fall in love qualitatively with a story behind a startup. Patients should have more access to their medical information. Of course, they should. So let's write a check into this investment. But really having the discipline to interrogate the business model. Look at the financials, think about their cash needs.
How are you going to build a strong syndicate? What happens when they miss a forecast? I think that's historically where CDCs are weak and then they get paid a plate or they start handing losses to the parent organization and all of a sudden it's not really that fun anymore to do venture capital, right?
So I think for us. Continuing to truly try and be an elite venture firm, not just a corporate venture firm, is something we all continue to aspire to. And we have some very heated conversations in our staff meetings. The quality of an asset, not just because Merck somewhere likes it, but is this really a good financial investment or not?
And I think that ties to the second thing I would say, which is, writing a check into a venture deal is not hard. Super easy. There are a million companies trying to get financed. Writing a check into the best deals is really hard. Getting a seat at those tables being thought of in the same light as an A 16 Z or an Oak or a Third Rock, or whoever those companies are.
That's pretty rarefied air. And I think the beauty of enterprise coverage now for us is that we truly have a playbook for how to deliver Merck, where appropriate to those companies. As a customer. We have a team whose job it is to help coach the startup in terms of what are the use cases, where are the budgets, who are the sponsors?
How do you craft your message? Bill had the vision to create a sidecar funding project within our fund, which enables us to pay for or co-fund the first experimentation a Merck team does with one of our portfolio companies, which shockingly, if you have a little money to share, you make friends pretty quickly across the organization.
But we have delivered over and over again to our portfolio companies, Merck, as a customer, and that's been a great thing for Merck. But when we differentiate ourselves now as a corporate venture group out in the wild. People believe that entrepreneurs actually send other entrepreneurs to us to say, this is what it looks like to work with a strategic partner.
And just to put that in perspective, I think when we started enterprise coverage about seven, eight years ago, Bill, we probably had one relationship between our portfolio companies and Merck teams. Today we have about 55 of them representing over a quarter billion dollars of spend. So we have truly professionalized what it means.
To drive the strategic connectivity between the startup and the mothership. And that to me, mixed in with being viewed by your peers in the venture community writ large, not just in the corporate venture community as a high quality investor who brings something to the boardroom, who understands how to work with management teams, who's in the trenches through all the ups and downs of growing an early stage business.
I think those two things have put us in a. Pretty unique category as a CDC and I. I think that's something we fight very hard to protect.
Jim Barrood: Yeah. No, that's really special. But let's just double click on that for a second. What are you seeing out in the industry as a whole, not just in pharma, there's been a lot of, it's been a graveyard as for a lot of companies.
But now there's a tilt maybe toward venture studios in general. But what are there formulas that you're seeing that are working better than others? Obviously, yours has worked for Merck. But what can you tell us about other models, other industries and the CVC model?
Joel Krikston: Bill, I, we participate in something called the Global Corporate Venturing Group, and we actually spend a lot of time with corporate venture funds from other industries.
I, I think there's a couple themes I hear over and over again from groups as it relates to what leads to success, right? One, one is. This idea of having very senior sponsorship at the highest levels of the organization, which Bill figured out they won't. So we really have the C-suite of Merck as our investment committee, minus the CEO and the CEO when he was the CFO was on that committee.
So he's deeply aware of what we do. I think those groups also understand that building relationships with startups before you invest. It is a natural part of the process. Running urgently to something that feels opportunistic, I think in our experience, doesn't always work out so well. I think when we build a relationship, we build a rapport, we study how that asset is performing without our support, or we expose that asset to groups that we partner with internally to get their perspectives, that sort of shared diligence approach.
That seems to work very well for us. In fact, we now, as venture investors, do our very best to be embedded in as many work streams as we can handle across the organization so that at the moment they're first describing the challenge. We are in the room and it may never turn into a venture investment, but we are part of the process of translating the use case to the external environment, and that has led to a much higher hit rate and success rate for us.
Once we do make those investments of forming those strategic partnerships, I think the best groups I see, regardless of whether it's healthcare or other industry, have really professionalized that approach. They reach down into the org, they make it clear to the organization that we don't have our own separate strategy, we serve you.
We are a venture fund that exists to empower your business. So let us in. We're not here to tell you what your digital strategy is. We're not here to tell you what innovation looks like. We're here to learn from what you're trying to do and then take our tool and make it work for you. And I. And I remember we spent a bunch of time with the woman who runs the Boeing Fund, who's phenomenal, I'm blanking on her name.
She was telling those stories even to the point of having awards that the venture fund would give out. To internal innovators who were working with them on diligence processes or projects to just show their support for sort of these co-opted innovation programs, which I think is really interesting. So I think those are two things I see in the broader environment that sort of speak to the groups that have figured it out and have some longevity to their effort.
Jim Barrood: Got it. Bill, tell us about the outlook in venture in pharma. Specifically, how do things look these days? I know it's been a challenging time these past couple years for investors. Tell us what you are excited about.
Bill Taranto: I think so where we invest I think is really exciting.
The one interesting thing about pharma services, broadly speaking, is you have a built-in client, because most of the companies we're, other than culture, we're the same company. We have the same types of employees doing the same types of jobs, all trying to create ethical pharmaceuticals that get to market.
And how do you get 'em to market in the right way? How do you distribute 'em? How do you know, get your logistics done? How do you market them? But if you really look at the pharma companies, they're all solving mostly the same use cases. And so for us, it's a great area to be investing in because you're really solving something that's a key issue for not only your parent company, but really for the industry.
And it's one of the reasons why we as an industry sort of came together on the venture side and basically said, we don't need to acquire a lot of these things. They just need to exist in the world. And if they exist in the world, then the secret sauce is, if Pfizer's better than something then Merck, then guess what?
Merck, you better get at it. Now certain areas are going to be a little more proprietary, like the AI and ML and drug discovery. Obviously if something hits the pharma's going to try to acquire that or license it in. But that notwithstanding most everything else, if you look at what we invest in and we invest with all the other pharma players basically because we know these things are better when they just exist in the world and we're not trying to own them outright.
And it's been a really good model of, so what it makes you then is very bullish. On at least the pharma part of digital. I still think that AI is going to play a tremendous role and we're still learning about how, especially on the patient acts or the patient side, how does that play out?
Are there going to be rules around that? We certainly don't want to be finding something out a about a patient we weren't supposed to be finding out about. How does that all get regulated and mandated? I think certain things maybe didn't turn out as well as one like DTX, partly because I think the industry was demanding probably more rigid clinical trials than the industry wanted to do.
And maybe over time, DTX, reforms itself and comes back. But we do see trends broadly in digital. Data is still the key. And anything that has a data component that drives value for the industry and outcomes and better patient response, all those things are.
Are still positive. So I think it's picking the right places within healthcare that you're, and it gets to Joel's sort of premise around solving a use case, right? If you're solving the right use case for the industry, you're going to be able to build scale in a strong company. One-off apps and those kinds of things.
We've had too much of that. We don't need that anymore. We don't need another diabetes app. We have plenty of those kinds of things. So, I think really trying to understand industry needs. What you saw is really creating efficiencies, better patient care, all the things you're trying to do, cost savings, that's what ultimately drives value, and that's where you have to invest.
But I'm very bullish still on, on digital and healthcare, and especially pharma.
Jim Barrood: That's good to hear. This has been a great conversation, folks. We usually do just one tip or just one thing. What's just one tip for entrepreneurs who are looking to partner or collaborate with Merck? Joel?
Joel Krikston: Yeah. We talk about this a lot and I think part of the coaching and mentoring we do with even companies we've already invested in, there's such a draw for the entrepreneur to talk about everything they can do to show all of their capabilities, and we've spent a lot of time trying to line up that demonstration of capabilities within the context of a very specific Merck need. So I think there's a temptation to think I want to tell a bigger story. I want an investor to think I can do it all. I've sat through, I don't know how many pitches in my life where somebody's describing to me effectively what equates to 10 different verticals, 400 different capabilities.
If their company was successful, they would literally become the economy. And you're that's not. Actually, compelling to me as an investor. It's so cliche to hear people talk about focus, focus, but it's really true. If you can tell me your story in the context of having an understanding about my business.
Or you ask me specific questions about my business, right? What's your company? You have a huge franchise around lung cancer therapeutics. What's your company doing to drive earlier stage lung cancer diagnosis? Let me tell you what our tool does to help you on that journey. That is a pitch that will open up a hundred doors as opposed to I have some platform technology that can diagnose every disease that's ever existed, right?
I think that's always my tip to entrepreneurs. Tell me your story through my lens. Because we're ultimately your customer.
Bill Taranto: Got it. Bill? Yeah, I think on top of that, understanding what it is you're trying to solve and then how, do you understand how pharma works? Pharma has a lot of different divisions and learning to communicate with those different divisions is right, but understanding how the system works and then understanding how healthcare works and where you fit.
Within that system and being able to articulate it. But ultimately, if you're not solving something that the industry needs, whether it's pharma, whether it's hospitals, whether it's payers, providers, you're not going anywhere. And the key is making sure that you have something that someone needs.
And then I think to Joel's part, being able to tell your narrative, articulate it in a way that gets your story across.
Jim Barrood: Got it. One more, one tip for entrepreneurs in the health sector who are raising money right now,
Bill Taranto: bill. That's a tough one. I think the key thing is making sure that as part of that narrative, that you have results.
You're showing whatever it is, your tool, your application, your platform, whatever it is that you have, and you can actually show verified results that there's some clinical validation to your platform. Or that you can show that you do actually save money. You can show that you have cost savings or you're creating efficiencies that you actually have proof of results is just more important than telling the, just a general story about what you have.
Joel Krikston: I love that. I would add to that there's, I think we've all seen the slide with the Harvey balls, where the startup with 14 people, every ball is filled in as a complete competency, mature, and then their biggest competitors across the industry only have two balls filled in. Which I always laugh at.
That's the ultimate nuclear slide in a presentation. I would actually encourage people to flip that over, right? You're much better off showing me an understanding of the competitive landscape. And if you study this stuff at all, you realize that you're much better off many times trying to be one of many with a better product than being all by yourself, trying to convince the world of some new modalities, some new technology, some tools.
The rate of evolution right now on the back of AI is so breakneck. In fact, it's very hard, I think, as investors, to figure out what's going to be obsolete in six months. And there's some great stories in health tech right now. If you look at a bridge and ambient and you partner with an epic and then all of a sudden epic's launching their own thing, being able to tell.
The story of the competitive set that you operate in and then telling us why you are going to ultimately be one of the successful players is much more compelling than telling me nobody's thought of a patient medical record tool when any investor has seen 6,000 of those over the last 10 years.
Jim Barrood: Got it. Those tips are awesome. Now we're onto lightning questions. I'm going to start with you Joel. If you could hire any fictional character to join your innovation or venture team, who would you choose?
Joel Krikston: This is hilarious. I thought about this. I couldn't sleep last night. I was thinking about this and I'm going to, I actually came up with Wiley Coyote, which I thought that's a bad one.
because he never seemingly succeeds. And I don't think that's the case for GHI. But I do think you have to be on the receiving end of multiple sort of TNT explosions in your face doing the job that we do. But you come back and you try something different the next time, and then the next time, and then the next time.
So I'm sure half your viewers won't know who Wiley Coyote is, but the elderly here. I just thought that's good, that would be a good person to hire in, right? Because Okay, next. Excellent. He never gets it and he would keep trying.
Jim Barrood: All right, next question. What's a gadget tool or app you use every day that you can't live without?
Joel Krikston: That's for me. I think like everybody else, I'm just blown away by chat. GPT, it is truly like having a team of people who work for you, whether I'm creating a memo, trying to replace a ceiling fan, building a resume, the amount of work that tool is able to do for you, literally redefines processes.
That previously you might avoid because it's too laborious. It's painful. You can't use voice to create the solution. So I think that's one that's just amazing to, to,
Jim Barrood: Okay. Fair enough. What's one business book, podcast, or thinker that deeply influenced you?
Joel Krikston: I, all right. Am I going for the hat trick here, bill?
All right. Yeah, no, I'll answer mine. I guess this is one thing I tell a lot of people who tell us they're interested in venture capital, but I think if you're not a student of the industry, it's hard to believe you really want to do this. And I think one of the first books I ever read was Crossing the Chasm by Jeffrey Moore.
It is truly the tale of being an investor. It's told through the lens of driving new product adoption, but that's literally the life we live day in and day out. Sitting on boards, moving from early adopters or the vision of the output of a specific widget, to thinking about how to build a company around that, a customer service organization around that compete, communicate your message to potential customers.
Move from vision to risk avoidance or the other values that exist for the customer downstream, I think about that book all the time, so I think that's one that's really interesting. It's for entrepreneurs, but I think as investors in startups, it's absolutely required reading.
Jim Barrood: Got it. Okay. Bill onto you… fictional character.
Bill Taranto: So I came up with from Game of Thrones, Terry and Lannister, and the reason was because he was a massive strategic thinker. He leveraged his network like no other, and everything he did was VA was value added. And I thought that would be an interesting addition to our staff that is creative.
Jim Barrood: Okay. Both are creative, frankly. All right. Gadget tool or app?
Bill Taranto: I use E-Trade constantly. I can't stop looking at it. A, not only my own portfolio, but just, trading all the time and just, I don't know. I'm on that thing all the time. I shouldn't be, but gives me a heart attack.
Jim Barrood: Oh my God.
What's that in the business book or podcast?
Bill Taranto: So one book that I always loved because it gave me a little bit less, if you remember Liar's Poker about the Bond Tradesman. It's a bit of a funny book that was probably in the eighties, but really the end of the story is don't get caught up in all the money.
Don't get caught up in all the hoopla. Just do the right thing and you know you'll be successful when it's too, it's very easy to get caught up in all the flashiness of Wall Street and all those kinds of things. And I always, I just liked the book. It was entertaining.
Jim Barrood: Nice. All right. This has been really a great conversation, folks.
We usually end with a poem or a saying or a quote. Joel, kick this off please.
Joel Krikston: Yeah. I think, when we relaunched in 2017 as enterprise coverage, there was really a cultural shift. This idea of servant leadership, which permeates our group today. I think it's what earns credibility, we earn trust.
Inside the organization, we get invited into those rooms because we're delivering value. So there's a famous leadership guru named John Maxwell, and he has a quote that I wrote down here, which says, people don't care how much you know until they know how much you care. And we've seen so many innovation teams come and go, and many of them would show up first day on the job, declaring themselves as a center of excellence.
The domain experts and those groups always had a very short shelf life. I think our success is GHI inside of Merck is because of that servant leadership mentality. We deliver value. We're in the trenches with them as they work through these projects. We can help fund some of these projects. We are truly viewed as extensions of their teams, not some competing entity with its own set of priorities that aren't.
Aligned with theirs, so that's the one that came to me. I think that's a powerful representation of how we operate as a team.
Jim Barrood: Great. Bill?
Bill Taranto: So mine is it's a bit about COVID. Something somebody said to me many years ago that really affected me. I had a law professor that twice a year would draw a picture on a chalkboard and just spend the class talking about the picture.
And one in one year he, or one class, he drew a picture of a rose. He began to tell the story about his daughter that was 12 years old, that was dying of cancer and wasn't going to make it. And he said, the reason I drew the roses, because the daughter said to him as she was, not going to make it.
Hey dad, just remember along the way, stop and smell the roses. And it really affected me from the standpoint is, and I and Joel know this, I'm part of this on my team. What are we doing? Like all the things that we're doing, what's at work? But every once in a while, you do have to step back and smell the roses and just live your life and do things that make you happy.
It's not all about work, right? In the end, there's other things that are meaningful. Your family, your friends, whatever it is, you've got to take that step back and smell the roses, and it's always infected me. I impart that wisdom on my staff constantly that there are times where you just got to take a day and smell the roses.
Jim Barrood: I love that. I love both of those. This has been great. Thank you so much, folks. Good luck. Thanks for joining us.
