AAA $9bn deal caps frenetic year

$9bn deal caps frenetic year

IT and technology sector corporate venturing units have been busy during the year to date. The merger of online messaging company Kakao, backed by internet companies Tencent and CyberAgent, with internet portal Daum Communications was by far the biggest deal, worth $9.4bn, making it a lucrative exit for the corporate backers.

The past year was also one of big changes, particularly at internet company Google’s corporate venturing arm, Google Ventures, where a flurry of talented people came and went.

Rahul Sood also left his role as general manager of Microsoft Ventures, the software company’s investment arm, after helping set up the unit in 2013. He was listed in the Global Corporate Venturing Powerlist in both 2013 and 2014.

Many units in the sector celebrated successes. Keith Muhart, marketing director at semiconductor technology producer Qualcomm’s corporate venturing division, said: “Qualcomm Ventures had numerous successful financial exits, representing a broad international scope.”

Among those successes, Muhart said, was Divide, winner of the Qualcomm QPrize in 2011 before securing investment from the company and being acquired by Google for $120m. The company also launched a $150m China fund, and set up an accelerator focused on robotics and unmanned aerial vehicles.

More than 70 new funds were established over the past 12 months.

People

Liu Erhai, who was managing director of Legend Capital, the corporate venturing arm of conglomerate Legend Holdings, the majority owner of computer manufacturer Lenovo, left the unit to set up Yuyue Capital with $200m in funding. He joined Legend Capital in 2003.

Wael Ghonim went from his position as a marketing executive for Google to join Google Ventures as an entrepreneur-in-residence.  Wesley Chan left Google to join Felicis Ventures as a managing partner. He had already left his position as general partner earlier in 2014 to become an entrepreneur-in-residence.

Steve Chen, a co-founder of video platform YouTube, Anish Acharya, a former investment partner at Google Ventures, and Chikai Ohazama, co-founder of geospatial data company Keyhole, a Google acquisition, also joined the unit as entrepreneurs-in-residence.

Peter Read, managing director of consultancy firm Entertainment Insight, and Tom Hulme, design director of consultancy firm Ideo, joined Google Ventures’ new European offices in London as venture partners. The London offices also welcomed Rohan Silva, previously entrepreneur-in-residence at Index Ventures, and Eze Vidra, Google’s head of entrepreneurs Europe.

Meanwhile, David Krane was promoted from general partner to managing director at Google Ventures. He now co-manages the fund. Krane has worked at the company for 15 years. Jessica Verrilli joined Google Ventures as a partner. She previously worked at social media network Twitter as director of corporate development and strategy.

Leena Rao joined Google Ventures as operating partner in June 2014, quitting her position as senior editor at technology news provider TechCrunch, only to leave in March 2015 to join media company Fortune as a senior writer.

Kevin Rose, who joined Google Ventures in 2012 when the company acquired his startup Milk, first went part time as a general partner to focus on his new startup North Technologies in August 2014, before stepping down fully in January this year.

Olivier Cognet left Belgian telecoms company Belgacom to become managing partner and chief financial officer of Ginko Ventures.

Intel Capital, the investment unit of the semiconductor technology producer, hired Kirill Cehoval as investment director for Russia and the Commonwealth of Independent States. He was previously vice president at Altera Capital. Tim Danford, a venture partner at Lightspeed Venture Partners, also joined Intel Capital as an investment director. Dharmesh Thakker left Intel Capital to become a general partner at Battery Ventures.

Ben Weinberg, formerly a principal at Element Partners, joined technology and trading firm Susquehanna International Group’s private equity subsidiary Susquehanna Growth Equity as a director.

Mobile messaging company Tango set up a $25m corporate venturing unit –Tango Global Games Fund – and hired Jim Ying to run the division. Ying previously managed a $10m fund for internet company Gree.

Microsoft Ventures general manager Rahul Sood stepped down to focus on his new gaming startup Unikrn. Sood was ranked number 25 in Global Corporate Venturing’s Powerlist 2014. He said: “I had an itch to go back to being an entrepreneur again, and I have always been in the gaming space. I have always had a personal interest and I felt like now Microsoft Ventures was up and running and everything was going well, the time was right to jump out and create something.”

Hewlett-Packard Ventures, the investment vehicle of the computing company, welcomed Ray Schuder as managing director. Schuder joined from his position as head of AMD Ventures, the corporate venturing arm of chip company AMD.

Funds

Having identified more than 70 new funds over the past year, here we focus on the top 10.

Legend Capital raised the year’s largest fund at $500m. Dubbed LC Fund VI, it will focus on telecoms, media, technology and healthcare, as well as consumer goods, cleantech and advanced manufacturing industries.

Semiconductor company MediaTek contributed $48.8m to a $488m fund set up by Summit view Capital and the municipal government of Shanghai. Other contributors were Semiconductor foundry SMIC, financial services firm Knight Capital, Shanghai Jiading Venture Capital and Tsinghua Holdings, the for-profit entity affiliated with Tsinghua University. The fund is expected to have a final close of $1.6bn.

Infosys, an IT services provider, established a $250m Innovate in India Fund to invest in artificial intelligence, automation, mobile technology, design products, collaboration and connected cloud.

Carmel Ventures secured capital from search engine provider Baidu, insurance company Ping-An and internet company Qihoo 360 for a $194m fund.

Semiconductor company Qualcomm committed $150m to a fund aimed at China-based mobile IT companies. It will focus on the internet, e-commerce, semiconductor, education and health industries. The fund is managed by the company’s investment unit, Qualcomm Ventures.

Enterprise software provider OpenText allocated capital to fund of funds Kensington Venture Fund, which closed at $141m. Financial services providers BMO Financial Group, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Scotiabank, TD Bank Group and wealth management firm Richardson GMP also contributed.

Google set up a $100m European fund when it opened Google Ventures’ new offices in London and later expanded the fund to $125m.

Intel Capital created a $125m fund that will invest only in startups run by women and minorities. The fund is managed by Intel Capital’s managing director and vice-president Lisa Lambert, who also talked about the standing of women in corporate venturing at this year’s Global Corporate Venturing Symposium (see special report).

Internet-of-things technology company AGT International committed an undisclosed amount to a $120m fund run by Moonscape Ventures, a firm set up by AGT’s co-founder and chief executive Mati Kochavi.

Internet company Tencent and social media platform Renren contributed capital to a $102m fund established by investment firm Singulariteam.

Several other corporates also launched funds of $100m. Among these are architectural software producer Autodesk, networking equipment manufacturer Cisco, cloud computing software producer Salesforce, IT consultancy Wipro, and e-commerce company Rakuten.

 

Qualcomm Ventures and pharmaceutical company Novartis formed a $100m fund. Dubbed DRX Capital, it focuses on digital health and was named both New Entrant of the Year and Fund of the Year at the Global Corporate Venturing Symposium.

A range of companies set up corporate venturing units in the past 12 months. Chief among them is MediaTek, which dedicated $300m to its new unit, while instant messaging service Line put its new division in charge of $100m.

Daum Kakao established the $91m K Venture Group before acquiring K Cube Ventures, invested $15m in it and setting it up as a corporate venturing arm.

Internet company Qihoo 360 provided $60m to its new investment vehicle, while internet services provider GMO Internet dedicated $18m to its unit. IT company FPT Corporation partnered 500 Startups to establish a $1m investment arm, while social media network Twitter and ZTE USA, the US subsidiary of Chinese smartphone manufacturer ZTE allocated undisclosed sums to their new investment divisions.

Twilio, a cloud communication technology provider, set up a $50m fund to support startups developing technology based on its platform, with communication platform Layer following suit, though the latter has not disclosed the total capital allocated.

Box set up a $40m fund to support startups developing products built on the cloud storage company’s offering. Wearable technology producer Pebble put aside $1m to support startups creating products for its smartwatch.

Deals

Half this year’s 10 biggest deals were worth more than $1bn, while all were worth at least $500m.

The merger of Kakao and Daum Communciations to form Korea-based Daum Kakao was the most significant deal. The transaction valued the new company at $9.4bn and provided a hefty return for Kakao’s backers, internet companies Tencent and CyberAgent. The deal was structured as a reverse merger – Kakao was absorbed by publicly-listed Daum, despite Kakao having nearly four times the capital.

Rocket Internet floated in Frankfurt, yielding $1.8bn. The incubator and venture capital firm has been backed by internet services provider United Internet, telecoms company Philippine Long DistanceTelephone Company, conglomerate Access Industries, and Holtzbrinck Ventures, the venture capital firm spun out of publisher Georg von Holtzbrinck.

Intel provided a combined $1.5bn in funding for semiconductor venture Spreadtrum Communications and RDA Microelectronics. Intel secured a 20% stake in the venture, which is majority-owned by Tsinghua Unigroup, an affiliate of Tsinghua University.

Internet company Mail.ru acquired social media network Vkontakte for $1.47bn. Mail.ru already owned 52% and bought out investment fund UCP’s 48%.

Cloud infrastructure technology provider Virtustream was bought by IT technology provider EMC Corporation for $1.2bn. Virtustream was backed by software company SAP and Intel.

Smartphone manufacturer Xiaomi, backed by technology and media company International Data Group and Qualcomm Ventures, closed a $1.1bn series E round, valuing the company at $45bn. The round won Xiaomi the award for Large Investment of the Year at the Global Corporate Venturing Symposium last month. All-Stars Investment, DST Global, Singapore wealth fund GIC, Hopu Fund, Yunfeng Capital and Ratan Tata backed the round.

Google led a $542m series B round for visual imaging technology developer Magic Leap. The round also featured Qualcomm Ventures, film and comics producer Legendary Entertainment, plus venture firms Kohlberg Kravis Roberts, Vulcan Capital, Kleiner Perkins Caufield & Byers, Andreessen Horowitz and Obvious Ventures.

Snapchat, a communication platform that offers self-destructing messages, obtained $537.7m in a series F round from e-commerce company Alibaba, financial services conglomerate Fidelity, York Capital and Glade Brook Capital. The company is expected to increase the round to $650m, at a valuation of $16bn.

Google also acquired satellite imaging company Skybox Imaging for $500m. Among the company’s backers was Norwest Venture Partners, the venture capital firm managing funds on behalf of financial services provider Wells Fargo.

Zenefits secured $500m in a series C round which reportedly included Comcast Ventures, the corporate venturing division of the cable company. The round was co-led by Fidelity and TPG, and included Insight Venture Partners, Founders Fund, Khosla Ventures, Sound Ventures, Andreessen Horowitz, Institutional Venture Partners and actor Jared Leto.

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