The consumer sector’s underlying characteristics lie in technological progress and a quest for customer-centricity. These are a manifestation of the broader trends in the sector, which revolve around its digital transformation and changing consumer habits and preferences. The sector is now also hit by short-term concerns about supply chain disruptions caused by the Covid-19 pandemic, though it is unclear (at the time of writing, at least), what the exact impact of these will be.
Our two previous reports on this sector stressed the importance of demand-side changes in content and packaging that have gone hand in hand with supply-side disruption thanks to the rise of e-commerce and the digitisation of retail. These trends are most likely to continue deepening over the short and medium term (and not only because of the ongoing pandemic which has confined many people to their homes at the time of going to press). The industry’s obsession with customer-centricity – understanding consumer preferences and increasing one-on-one connections – is a result of the digitisation of the sector. If the worldwide health crisis ultimately triggers a more severe recession, discretionary consumer spending will be affected, more so than expenditures on staples. This would deepen the need for differentiation of consumer brands.
With these headwinds, players will see themselves forced to look for solutions in technology. The 2020 Consumer Products Industry Outlook report by consulting firm Deloitte explains that with much economic uncertainty around the corner, leaders of companies in the sector will have to “balance prudent investment strategies with technology initiatives that address the needs of increasingly empowered consumers”. The report adds it is the dynamics of “Industry 4.0” mixed with rising customer expectations that are at the core of the challenges: “As companies prepare for a potential downturn, many businesses face competing pressure to invest in Industry 4.0 technologies or risk losing ground to competitors.”
The report also mentions the important role of digitisation in supply networks: “Digital supply networks combine digital information from many different sources, transforming static, linear supply chains into an interconnected ecosystem of nodes. These systems dynamically shape the planning, production, and distribution of products. Digital supply networks will likely usher in a new era of digital fulfilment for consumers who desire a seamless customer experience.”
Food and beverages is one sub-sector of consumer that has seen a lot of growth. There is much excitement about the space, exemplified in the IPO of alternative protein producer Beyond Meat last year. The heightened interest is rooted in a host of demand-side factors, primarily consumer concerns from simple convenience to wellness and sustainability to alternative food sourcing and food traceability. The Deloitte report puts it succinctly: “Now, consumers are more knowledgeable about existing global issues such as food security, food and product safety, global sustainability, global pandemics, and third-world malnutrition.“ Indeed, we have seen in recent years how e-commerce is changing food and beverages along with a rising demand for products perceived as healthier, such as vegan food and alternative proteins.
According to CSP Daily News, a trade publication specialising in the sector, there are a number of broad trends that will continue to shape it, including the emphasis on experience-based shopping, cannabis going mainstream, the growth of plant-based food, the comeback of premiumisation in some categories and the growth of private label brands in others, the decline of tobacco-based products and the increasing popularity of added nutritional benefits to food and beverages (such as electrolytes, minerals, adaptogens and probiotics).
In a 2017 report, “Trends that will shape the consumer industry”, consulting firm McKinsey forecast that 1.4 billion people would join the global middle class (85% of them in the Asia-Pacific region), with each person spending between $10 and $100 per day by 2020. These new members of the middle class are expected to drive more growth in e-commerce, whose potential appears to be already shifting eastward.
The Brookings Institution projects, meanwhile, that the global middle class will reach 5.3 billion people by 2030, mostly in China and India. This demographic trend also translates into expected growth in e-commerce. According to data provider Statista, commerce is projected to grow by nearly 71% in China by 2023 versus roughly 46% in the US.
E-commerce seems to have exerted disruptive effects on the retail industry, as some analysts speak of a “retail apocalypse”. There are no shortage of arguments to support this catchy phrase – from vehement critics of cloud computing and online retailer Amazon like Scott Galloway (The Four) through the bankruptcies of retail brands like denim producer Diesel or department stores Sears, to a grim short-term consumption outlook for many brick-and-mortar retailers due to the effects of Covid-19.
However, despite its impressive growth rates, e-commerce sales are still a relatively small portion of all retail sales. According annual US Census Bureau estimates, it has accounted for about 10%-11.4% of the total in recent years (2018-2019). The disturbing picture in retail could be attributed not only to a shift in consumer preferences, but also a moderation in consumers’ willingness to spend. In recent years they have been expecting a recession amid a severe trade dispute between China and the US, Brexit-related uncertainty and most recently a global health scare. It is little wonder that consumers have been foregoing more lavish spending and saving money.
The rise of private label and a general “shift to value” have been observed in some mature markets as consumers look for ways to save money. According to consumer research firm Nielsen from 2018: “The largest markets for private-label products are found primarily in the more mature European retail markets. Comparatively, private label still has much room for growth, especially in North America, where penetration is still relatively low.” According to most recent research data by Nielsen, published in October 2019, sales were already growing four times faster than national brands even in the US.
Consumers’ tendency to save money has taken a toll on consumer brands and brand equity building. This is one of the major reasons executives from the sector obsess about customer-centricity, aiming to better understand and connect with consumers to enhance their brand’s offering and image. This, of course, will later translate into opportunities for monetisation. We are likely to continue seeing heightened interest in companies offering in-depth market research.
The fast-moving consumer goods (FMCG) is the segment in which brand erosion has been most pronounced, as there has been a shift of focus to small brands from established brands among younger consumers. According to McKinsey, US-based retailers were “giving small brands double their fair share of new listings”, largely because they tend to be positioned as premium. As a result, small brands attract “two to three times their fair share of growth while the largest brands remain flat or in slight decline”.
Small brands have also made a significant breakthrough in the health, beauty and wellness sub-sector. A McKinsey report, “The new model for consumer goods”, notes that in cosmetics, for example, challenger brands “already represent 10% of the market and are growing four times faster than the rest”. According to a report from retail analytics firm Edited, cited by Forbes Magazine, the global beauty industry is estimated at $532bn and moving on a rapid upward trajectory. Key segments of this sub-sector include personal care, beauty and anti-ageing products as well as healthy eating, nutrition and weight loss.
There are notable trends in the clothing and apparel subsector, where digitisation has already been a key disrupting factor. The sector is a concentrated one – it is estimated that the top 20 players, mostly from the luxury segment, earn more than 90% of profits of the whole industry. “The State of Fashion 2020” report by The Business of Fashion and McKinsey, describes the pessimistic mood of executives in this space: “For many in the fashion industry, the glass is half empty. The mood among respondents to our executive survey is sober across geographies and price points, and the pockets of optimism seen last year in North America and the luxury segment have steadily evaporated.” The report forecasts growth to slow to 3%-4% in 2020, with only 9% of respondents from the survey believing conditions will improve, compared with 49% who said the same the previous year.
In addition to short-term concerns about disruptions of supply chains caused by Covid-19 and consumers’ reluctance to increase spending, part of the problem lies in the industry’s sustainability track record.
According to the report: “The textile sector still represents 6% of global greenhouse-gas emissions and 10% to 20% of pesticide use. Washing, solvent, and dyes used in manufacturing are responsible for one-fifth of industrial water pollution, and fashion accounts for 20% to 35% of microplastic flows into the ocean. Consumers are increasingly waking up to this reality and demanding change. In August 2019, Kering CEO François-Henri Pinault spearheaded an industry-wide pact to achieve net-zero emissions by 2050. According to McKinsey’s 2019 Apparel Chief Purchasing Officer Survey, while the absolute number of sustainable fashion products remains low, there has been a fivefold increase over the past two years.”
Year in review
For the period between March 2018 and February 2019, we reported 335 venturing rounds involving corporate investors from the consumer sector. A considerable number of them (105) took place in the US, while 49 were hosted in Japan, 43 in China and 35 in India.
Many of those commitments (103) went to emerging enterprises from the same sector (mostly food and beverages, e-commerce and hygiene and beauty). The remainder went into companies developing other technologies in synergy with consumer sector incumbents: 51 deals in the services sector (primarily accommodation and travel tech as well as logistics and supply chain services), 44 in IT (primarily cybersecurity and enterprise software) and 35 in life sciences (mostly pharmaceuticals and medical devices).
Incumbents’ co-investments range from ride hailing (Go-Jek) and autotech (RideCell, AEye, Xiaopeng Motors) through e-commerce (Flipcart, Ninjacart) and co-working spaces (CoHive) to artificial intelligence and deep learning technology (AiBee, SenseTime).
On a calendar year-on-year basis, total capital raised in corporate-backed rounds plummeted from $43.35bn in 2018 to $19.99bn in 2019, representing a 53% plunge. The deal count also went down, but only by 5% from 353 deals in 2018 to 337 by the end of 2019. The 10 largest investments by corporate venturers from the sector were not necessarily in the same industry.
The leading corporate investors from the consumer sector in terms of largest number of deals were consumer electronics producer Sony, e-commerce firms Alibaba, Amazon, Rakuten and consumer goods maker Unilever. The list of consumer corporates committing capital in the largest rounds was again headed by Alibaba, but followed by Amazon and e-commerce firm JD.com.
The most active corporate venture investors in the emerging consumer businesses were telecoms firm SoftBank, Alibaba and internet company Tencent.
The emerging consumer businesses in the portfolios of corporate venturers came from the food and beverage tech space (Miss Fresh, Zomato, Swiggy, MycoTechnology, Good Catch), food e-commerce (Ninjacart), sharing economy and general e-commerce platforms (Grover, Meesho, Zilingo) as well as fashion and apparel (Mogujie).
Corporate investments in emerging consumer-focused enterprises went up from 256 rounds in 2018 to 296 by the end of 2019, a 16% increase. Estimated total dollars dwindled from $29.64bn in 2018 down to $11.75bn last year.
Deals
Corporates from the consumer sector invested in large multimillion-dollar rounds, raised mostly by enterprises in the same sector as well as transport, business services and IT. Three of the top 10 deals stood above the $1bn mark.
China-based logistics services provider Cainiao Smart Logistics Network received RMB23.3bn ($3.33bn) from Alibaba. The latter increased its stake from 51% to 63% through the investment, which included new shares and a secondary transaction of undisclosed size and involving an unnamed shareholder. Cainiao was co-founded by Alibaba, which owned a 48% stake at launch, diversified conglomerate Fosun and retailer Intime Retail Group in 2013. The company runs a logistics platform that connects delivery drivers, goods and warehouses to facilitate e-commerce deliveries. Alibaba had increased its stake in the business to 51% by investing $798m in 2017.
US-based electric truck developer Rivian completed a $1.3bn financing round that included Amazon and automotive manufacturer Ford Motor Company. Amazon is collaborating with the company on the development of a plug-in electric delivery van that will use Ford technology. It has placed an order for 100,000 vans. Funds and accounts advised by asset management firm T Rowe Price led the round, which also featured funds managed by BlackRock. Founded in 2009, Rivian is developing an all-electric sports utility vehicle and pick-up truck, both expected to come to market in late 2020.
India-based mobile payment platform Paytm received $1bn in a series G round featuring SoftBank’s Vision Fund and Ant Financial, the financial services affiliate of Alibaba. Asset management firm T Rowe Price led the round, which included venture capital firm Discovery Capital and which valued Paytm at $16bn. Ant Financial contributed $400m to the round, while Vision Fund supplied $200m. Paytm has built a mobile wallet enabling consumers in India and Japan to pay in stores, add credit to smartphones and settle utility bills. It has also entered the e-commerce, gaming and ticketing sectors and increased its focus on signing up merchants in small Indian cities and towns.
China-based facial recognition software provider Megvii received $750m in series E funding from investors including Alibaba at a valuation of more than $4bn. The round was reportedly led by a $200m investment from Bank of China Group Investment, the private equity arm of state-owned financial services firm Bank of China. Investment banking firm Macquarie Group, sovereign wealth fund Abu Dhabi Investment Authority and ICBC Asset Management, a division of financial services firm Industrial and Commercial Bank of China, filled out the investors. Megvii provides a software platform known as Face++ which uses artificial intelligence to identify faces, people and objects. The technology is used in consumer devices and retail but is also facing scrutiny due to the role of biometric systems in mass surveillance.
UK-based online food ordering service Deliveroo raised $575m in a series G round led by Amazon. Investment and financial services group Fidelity Management and Research, asset management firm T Rowe Price and investment firm Greenoaks Capital also contributed to the round, which will be completed once the company secures regulatory approval. Deliveroo spans more than 500 cities and towns across 14 countries in Europe, East Asia, the Middle East and Australia. The series G proceeds were put towards expanding the company’s delivery presence and expanding its engineering team.
China-based electronics recycling service Aihuishou raised a funding round sized at more than $500m, led by JD.com. As part of its investment, JD.com agreed to merge its own secondhand e-commerce platform, Paipai, with Aihuishou. The transaction reportedly valued the combined business at more than $2.5bn. Tiger Global Management, Morningside Venture Capital, GenBridge Capital, Tiantu Capital and Fresh Capital also participated. Founded in 2011, Aihuishou operates a consumer-to-business platform that enables individuals to sell used electronics such as laptops and mobile phones through an online bidding process. The company then extracts rare materials from the devices and sells them back to manufacturers.
Danke Apartment, a China-based operator of an online apartment rental platform, closed a $500m series C round co-led by Ant Financial. Hedge fund Tiger Global Management co-led the round, which also included Primavera Capital, CMC Capital, Gaorong Capital and Joy Capital. The transaction valued the operator at more than $2bn. Founded in 2015, Danke manages approximately 320,000 apartments across nine cities – Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Tianjin, Wuhan, Nanjing and Chengdu. The company splits up existing, large flats built for families into smaller units aimed at recent graduates and young professionals, making more exclusive neighbourhoods affordable to individual tenants. Danke takes care of housekeeping and maintenance. It also uses artificial intelligence-driven technology to calculate housing prices rather than relying on real estate agents.
US-based workspace provider Knotel closed a $400m financing round featuring e-commerce holding company Rocket Internet, media group Bloomberg, real estate developer Mori Trust and diversified trading group Itochu. Sovereign wealth fund Kuwait Investment Authority led the round through subsidiary Wafra and was joined by real estate advisory Newmark Knight Frank, private equity firm Mercuria and venture capital firm Norwest Venture Partners, while Bloomberg invested through its Bloomberg Beta unit. The round valued Knotel at more than $1bn. The company operates an international network of more than 200 flexible workspaces, employing a team of architects, interior designers and office experts to tailor spaces for the individual needs of each of its corporate customers. The company also plans to beef up its architectural office product rental service, Geometry, and its blockchain-based property acquisition analysis platform, Baya.
OLX, the classifieds-focused division of consumer internet company Prosus, invested $400m in Germany-based second-hand car marketplace operator Frontier Car Group (FCG). The deal reportedly includes a pending secondary investment along with direct equity purchased at a $700m post-money valuation. Prosus is a public-listed offshoot of media and e-commerce group Naspers. OLX will invest over multiple tranches, including an initial injection that makes it FCG’s largest shareholder at a sub-$350m valuation, and stocks committed from its existing partnerships with FCG in India and Poland. Founded in 2016, the company runs an e-commerce marketplace where drivers, dealers and fleet operators can buy and sell cars in eight countries. It also offers services such as investor listings and insurance. The company primarily targets developing economies where consumers are less likely to shell out for new vehicles.
China-based smart electric vehicle (EV) developer Xiaopeng Motors completed a $400m series C round that featured consumer electronics producer Xiaomi. The round also included chairman and chief executive He Xiaopeng, as well as a range of unnamed new and existing strategic and institutional investors, and undisclosed private equity firms. Founded in 2014 and also known as Xpeng, Xiaopeng is working on connected EVs that tap into artificial intelligence technology to offer features such as autonomous driving. The company’s first production vehicle, the G3 SUV, was launched in December 2018 and Xiaopeng reached a milestone of 10,000 vehicles rolling off the production line in June this year. Xiaomi made the investment as part of a strategic partnership. The corporate will offer its expertise and insights into consumer behaviour, technology know-how and market trends.
There were other interesting deals in emerging consumer-focused businesses that received financial backing from corporate investors from the same and other sectors.
SoftBank invested up to $1bn in Colombia-based logistics platform Rappi. The corporate’s $5bn Innovation Fund, which it is raising, supplied half the capital while its Vision Fund provided the other half. Founded in 2015, Rappi operates an on-demand delivery service in 35 cities across Argentina, Peru, Chile Uruguay and as its home country, as of the end of 2018. The company collects and delivers orders of consumer goods and is diversifying into other areas such as medicine deliveries and the establishment of a digital payment platform.
SoftBank’s Vision Fund led a $750m funding round for US-based snack delivery service GoPuff. Venture capital firm Accel, which was identified by The Information as an existing investor, also participated in the round. The Vision Fund has retained an option to invest a further $250m in the company. Founded in 2013 while its co-founders were at university, GoPuff runs an online platform where users can order more than 2,500 products ranging from snacks and beverages – alcoholic and non-alcoholic – to more widespread groceries and household goods. GoPuff is present in 150 US markets and is open 24 hours a day in its larger markets, and between noon and 4.30am in the rest of the cities. It charges a flat $1.95 fee per delivery and caters mainly to students, though it is looking at expanding that user base.
India-based business e-commerce marketplace Udaan has secured $585m in a series D round featuring Tencent and financial services firm Citi. Altimeter Capital, Footpath Ventures, Hillhouse Capital, GGV Capital, Lightspeed Venture Partners and DST Global also took part in the round, which reportedly valued the company somewhere between $2.3bn to $2.7bn. Citi invested through its Citi Ventures unit. Udaan operates an e-commerce platform that connects a network of about 25,000 large wholesalers and traders to a customer base of about 3 million smaller businesses, such as restaurants, farmers or local shops, facilitating the distribution of a wide range of consumer goods. Buyers and sellers can also access credit and working capital through the platform, and Udaan runs a supply chain network that supports delivery. The cash will allow both services to be strengthened as it adds more product categories to its offering.
Brazil-based fitness membership service provider Gympass raised a $300m round, led by the SoftBank Vision Fund. The round was also backed by SoftBank’s $5bn Latin America Fund, its first officially disclosed investment. SoftBank co-invested along with traditional VC firm Atomico, growth equity firm General Atlantic and investment group Valor. The last three were identified as returning investors, although no further details were disclosed about the company’s previous rounds. The round reportedly valued the company at more than $1bn. The fresh capital is expected to help Gympass to enhance its offering and technology as well as consolidate presence in existing markets and move into Asia. Launched in 2012, Gympass runs a corporate fitness platform which allows companies to facilitate gym membership as a benefit to their employees. The company has already struck partnerships with almost 47,000 gyms across 566 cities around North and South America as well as Europe.
China-based classified listings provider 58.com span out its secondhand goods mobile commerce platform Zhuan Zhuan with $200m of funding and resources from Tencent. The new company, dubbed Zhuan Zhuan Entities, will encompass the platform and some used goods channels from 58.com and Ganji.com, the listings site 58.com acquired in a $2.8bn cash-and-share deal in 2015. Zhuan Zhuan was launched in 2015 and is a mobile marketplace for secondhand consumer items.
Tencent has led a RMB2bn ($298m) series B round for China-based fresh food retailer Yipinshengxian. Longzhu Capital, the corporate venturing vehicle formed by local services platform Meituan-Dianping, also participated in the round, along with private equity firm Capital Today and venture capital firm Eastern Bell Venture Capital. Yipinshengxian operates a range of retail stores across 12 Chinese cites that sell affordable fresh food, including fresh produce. Customers can use a mobile app to order food to be delivered to their homes or a pick-up point.
Netherlands-based online grocery retailer Picnic has secured €250m ($275m) in funding from investors including NPM Capital, a vehicle for trading group SHV Holdings. The round included Hoyer, De Rijcke and Finci, which represent the Hoyberg, Kruidvat and Van der Wal families respectively. All three entities had joined NPM in a $108m round for Picnic in early 2017. Financial services firm ABN Amro put up €50m of the round in the form of a loan. Founded in 2015, Picnic runs an online supermarket that sells food and household goods, delivering to customers in 125 cities across the Netherlands and Germany. Picnic runs seven distribution hubs but the latest funding will support the development and construction of a larger, 42,000 square-metre distribution centre. The company expects it to support some 150,000 deliveries per week.
SoftBank provided $231m in series G funding for India-based online eyewear retailer Lenskart. The deal valued Lenskart at $1.5bn and came in the wake of a $55m investment by private equity firm Kedaara Capital, reportedly in the form of a secondary deal in which existing backers PremjiInvest and Chiratae Ventures sold shares. Lenskart runs an e-commerce platform focusing on eyewear and has moved into brick-and-mortar retail, opening more than 530 stores across India. It also sells glasses under its own brand, John Jacobs, and will put the funding into enhancing its supply chain capabilities and technology.
Exits
Corporate venturers from the consumer sector completed 30 exits between March 2019 and February 2020 – 18 acquisitions, 11 initial public offerings (IPOs) and one merger. On year-on-year basis, the number of exits went up slightly from 31 in 2018 to 33 in 2019, but the total estimated capital in those exits registered a more significant surge of 50% – $12.25bn up from the $8.1bn reported in 2018.
On-demand ride provider Uber agreed to acquire United Arab Emirates-based peer Careem for $3.1bn, providing exits for Rakuten, telecoms firm Saudi Telecom, Al Tayyar, Chinese ride-hailing service Didi Chuxing and carmaker Daimler. The price consisted of $1.4bn in cash and $1.7bn in convertible notes, which will be convertible to Uber stock at a price of $55 per share. Careem operates platform that covers more than 100 cities in the Middle East, Africa, Turkey and Pakistan, a digital payment business, Careem Pay and a last-mile delivery service called Careem Now. The deal came after a series of deals where Uber divested its local businesses in China, Russia and Southeast Asia to rivals in all-share transactions.
US-based on-demand ride provider Lyft, which counts several corporates among its investors, raised $2.34bn in an IPO in which it floated at the top of its range. Lyft issued 32.5 million shares priced at $72 each. It initially planned to issue almost 30.8 million shares priced between $62 and $68 each, before upgrading the range from to $70 to $72. The company was valued at $24.3bn in the offering. The offering comes after some $4.4bn in equity financing for Lyft, $250m of which came in a 2014 series D round featuring Alibaba, Coatue Management, Third Point Ventures and existing investors Andreessen Horowitz, Mayfield and Founders Fund. Founded in 2012, Lyft facilitated rides for some 30.7 million users in 2018 through a network of about 1.9 million drivers.
Pinterest, the US-based social media platform backed by Rakuten, raised $1.43bn when it floated on the New York Stock Exchange. The company priced 75 million shares at $19 each, above the $15 to $17 range it had set, giving it a reported market cap of $12.6bn. Founded in 2009, Pinterest runs an online platform with more than 250 million monthly active users where people can post and share images they like. It initially concentrated on building user numbers but has ramped up advertising revenue in recent years.
Harry’s, a US-based razor retailer backed by beauty product distributor Grace Beauty, agreed to an acquisition by consumer products supplier Edgewell Personal Care for $1.37bn last year. Edgewell agreed to pay approximately 79% in cash and the remainder in common stock. Harry’s shareholders will own approximately 11% in Edgewell following the deal, which was expected to close by the end of the first quarter of 2020. However, in February, the Federal Trade Commission sued to block the proposed acquisition of Harry’s, alleging that the company losing its status as an independent player would “remove a critical disruptive rival” that had forced down prices and increased innovation in a sector that had been dominated by Edgewell and consumer goods conglomerate Procter & Gamble. Founded in 2013, Harry’s runs an online platform that sells men’s grooming products as a subscription service.
Peloton Interactive, the exercise equipment and class provider backed by mass media group Comcast NBCUniversal and Grace Beauty, went public in a $1.16bn IPO. The company floated on the Nasdaq Global Select Market after pricing 40 million class A shares at the top of the IPO’s $26 to $29 range. Growth equity firm TCV paid $100m for almost 3.45 million class A shares, which have the same value but 5% of the voting rights of the class B shares owned by Peloton’s existing shareholders. Founded in 2012, Peloton sells advanced exercise bikes and treadmills with attached video screens that broadcast live video gym classes that are available through a paid subscription plan.
US-based alternative meat developer Beyond Meat, which counted food producers General Mills and Tyson Foods among its backers, floated in an IPO of roughly $241m on the Nasdaq Global Select Market. Beyond Meat issued north of 9.6 million shares, priced at $25 each, on the top of its price range. The company had upped the price range of its offering from $21-$23 per share to $23-$25. General Mills committed capital through its strategic investment arm, 301 ,as did meat producer Tyson Foods. The latter, however, had already exited before the IPO. Tyson held a 6.6% stake but divested after announcing it would develop its own meat-free products. Founded in 2009, Beyond Meat develops and supplies plant-based substitutes for beef, pork and poultry meats.
Up Fintech, the China-based digital brokerage also known as Tiger Brokers, floated in the US in a $104m IPO, enabling consumer electronics producer Xiaomi to exit. The offering consisted of 13 million American depositary shares (ADSs), each representing 15 ordinary shares, priced at $8 each, above the $5 to $7 range Tiger Brokers had set. IB Global Investments, a vehicle for brokerage firm International Brokers, agreed to buy an additional $7m of shares through a private placement and $6.1m of shares in the IPO. The company’s shares opened at $8.10 on their first day of trading before closing at $10.92. Tiger Brokers operates an online brokerage that targets Chinese customers worldwide. It has 1.58 million registered users and was responsible for $119bn of trades in 2018.
Broadband communications and video services provider Altice USA agreed to acquire one of its portfolio companies, US-based entertainment network Cheddar, for $200m, which provided exits for Amazon and a host of other corporates including Antenna Group, Dentsu, Liberty Global, Comcast, AT&T, NYSE and Broadway Video. Cheddar operates an online television network withtwo channels: Cheddar Business, which focuses on technology and the innovation ecosystem, and Cheddar News, which broadcasts general news stories. The network is accessible through online streaming platforms such as DirecTV Now, Hulu, YouTube TV, Snapchat, Facebook, Twitter, Twitch and Amazon, and through more than half of smart televisions in the US. The company also operates CheddarU, a network of some 1,600 television screens in gyms, cafeterias and the student unions of 600 university campuses. Its subsidiaries include RateMyProfessors, an online portal where students can review their lecturers.
Jumia, the Germany-headquartered, Africa-focused online marketplace backed by several corporate investors, went public in a $196m IPO in the US. The company issued 13.5 million ADSs on the New York Stock Exchange priced at $14.50 each, in the middle of the offering’s $13 to $16 range, valuing it at approximately $1.1bn. Payment services firm Mastercard bought another €50m ($56.5m) of shares in a concurrent private placement. The IPO comes after at least $466m in funding, including approximately $85m from alcoholic beverage provider Pernod Ricard, which invested through its Pernod Ricard Deutschland subsidiary at a $1.6bn valuation, also in December 2018. Founded in 2012, Jumia runs an e-commerce platform that operates in 14 African countries, but which made a $195m loss in 2018 against $150m in revenue according to the IPO prospectus. The company operated through parent company Africa Internet Group, a partnership formed by e-commerce holding company Rocket Internet and telecoms companies Millicom and MTN, until December 2018.
China-based social marketing services provider Ruhnn secured $125m in an IPO on the Nasdaq Global Select Market that qualified as an exit for Alibaba. The company issued 10 million ADSs, representing five ordinary shares, priced at $12.50 each, in the middle of the IPO’s $11.50 to $13.50 range. The IPO valued it at $413m and social media company Weibo bought $8m of shares in the offering. Founded in 2016 as Hanyi E-Commerce, Ruhnn oversees a network of social media influencers with a combined 148 million followers, providing training and connecting them to commercial partners for marketing opportunities. The company will use the IPO cash for strategic investments as it looks to expand its monetisation options, in addition to signing up new influencers and enhancing its technology capabilities.
GCV also reported several exits of emerging consumer-related enterprises that involved corporate investors from different sectors.
Online food delivery service Delivery Hero agreed to buy South Korea-based counterpart Woowa Brothers in a $4bn deal that will allow internet companies Naver and CyberAgent to exit. Delivery Hero intends to expand its Korean activities through the acquisition as well as accessing areas where Woowa Brothers is active, such as cloud kitchens and adjacent on-demand services. The latter built an app-based food ordering service that was responsible for 365 million orders in the year ending September 2019. It has more than 110,000 restaurant partners and made approximately $275m in revenue in 2018.
Verano, a US-based vertically integrated cannabis group backed by cannabinoid therapy developer Scythian Biosciences, agreed to an $850m acquisition by its peer Harvest Health and Recreation. The all-stock transaction assumes a Harvest share price of C$8.79 ($6.57). Verano operates licensed cannabis cultivation and manufacturing facilities, produces a wide range of cannabis products such as edibles, extracts and concentrates, and owns dispensaries under the brand name Zen Leaf. The company conducted a complex series of deals with Scythian Biosciences over the course of 2018 that resulted in the former becoming the owner of medical cannabis producer 3 Farm Boys.
The RealReal, a US-based secondhand luxury items reseller backed by telecoms firm Novel Group, raised $300m in its IPO, issuing 15 million shares priced at $20 each on the Nasdaq Global Select Market. The company had targeted a range of $17 to $19 for its shares. The offering valued it at about $1.65bn. Founded in 2011, The RealReal operates an e-commerce platform where users can sell and purchase secondhand luxury consumer goods such as handbags, apparel, jewellery, art and furniture. The company employs more than 100 art curators and other experts who verify each item before it is listed on the platform. It also maintains three brick-and-mortar locations across New York and Los Angeles.
Axcella Health, a US-based metabolic drug developer that counts food and nutritional product supplier Nestlé as an investor, went public in a $71.4m IPO. The company issued approximately 3.57 million shares on the Nasdaq Global Market priced at the bottom of the $20 to $22 range it had set. Undisclosed existing backers expressed interest in buying up to $39m of shares but Axcella has not revealed whether they did so. Formerly known as Pronutria Biosciences, Axcella is developing therapies that will use endogenous metabolic modulators to treat a range of conditions by effectively reprogramming a patient’s metabolism. Axcella’s three lead product candidates are all focused on the liver, and it will use most of the IPO proceeds to fund clinical studies as it looks to advance them into full trials. The rest has been earmarked for strengthening its AXA Development Platform.
IndiaMart, an India-based e-commerce platform backed by chipmaker Intel, listed on the National Stock Exchange after raising Rs4.75bn ($69m) in its IPO. The company issued some 4.9 million shares priced at $13.40 each, the upper end of its targeted range of $13.35 to $13.40. Intel Capital, the corporate venturing arm of chip and semiconductor maker Intel, partially exited through the IPO, as did Amadeus Capital Partners and Quona Capital. Founded in 1996, IndiaMart has built a business-to-business online marketplace connecting more than 5.5 million suppliers with more than 83 million clients. Approximately two-thirds of the listings on the platform are for goods, while the remainder are for services.
Enterprise software developer Enghouse Systems acquired US-based video conferencing tool developer Vidyo for approximately $40m, enabling healthcare consortium Kaiser Permanente and networking equipment provider Juniper Networks to exit. Founded in 2005, Vidyo has created a software platform that allows companies to conduct real-time, video chats in high resolution from any device in a wide range of locations. It also enables developers to embed video communication capabilities into third-party applications and devices. The company has more than 1,700 customers, across the education, governmental, financial, field services and healthcare sectors. The acquisition is intended to expand Enghouse’s enterprise product range into areas such as media and content.
Funds
For the period between March 2019 and February 2020, corporate venturers investing in the consumer sector secured over $16.65bn in capital via 58 funding initiatives, which included 34 VC funds, 11 launched or refunded venturing units, seven accelerators, three incubators and three other initiatives.
On a calendar year-to-year basis, the number of funding initiatives in the consumer sector went up – from 36 in 2018 to 54 reported last year. Estimated capital also increased: it stood at $15.55bn by the end of last year, more than triple the $4.85bn from 2018 (though the $8.5bn TA XIII fund was an outlier).
Insurance firm Taiwan Life provided $20m for TA XIII, a vehicle closed at $8.5bn by growth-focused private equity firm TA Associates. The fund focuses on financial services, consumer goods, healthcare, business, services, technology, media and telecommunications companies, investing in North America and Western, Central and Eastern Europe. This was one of the several LP commitments to a VC fund that the insurance company made according to its regulatory filings.
SoftBank launched a $5bn Latin America-focused technology fund called the SoftBank Innovation Fund with a $2bn investment. The parent company’s $2bn contribution will function as the anchor investment, and it will act as its general partner while raising external capital. It has also formed a vehicle called SoftBank Latin America Local Hub to aid local portfolio companies to aid their growth. The unit will invest across Latin America and its target areas include e-commerce, healthcare, mobility, insurance and digital financial services. SoftBank formed a Latin America-focused fund, led by Marcelo Claure, who was appointed the parent company’s chief operating officer in May 2018.
Taiping Financial Holdings, a subsidiary of Chinese state-backed insurance firm Taiping, joined investment bank China International Capital Corporation’s CICC Capital unit to form a $1bn investment fund. TP-CICC GBA Investment Master Fund will invest in companies located in China’s Bay Area, which encompasses 11 metropolitan centres including Guangzhou, Shenzhen and Hong Kong, according to a company statement cited by DealStreetAsia. Areas in which the vehicle will invest include consumer, financial, healthcare and insurance technology providers as well as internet-focused startups.
Ping An Capital, a corporate venturing subsidiary of China-based insurance group Ping An, raised more than RMB5.5bn ($786m) for a consumer technology fund. The vehicle’s limited partners include another insurance firm, PKU Founder Life, as well as financial services firm Industrial and Commercial Bank of China, China Everbright’s CEL Fund-of-Fund, Peking University Education Foundation and China International Capital Corp’s CICC Capital unit. Ping An Capital operates as insurer’s primary equity investment vehicle, backing private and publicly-listed companies in the consumer, healthcare, modern services, energy and environment, and advanced manufacturing sectors. The group also oversees another corporate venture capital unit, Ping An Ventures, which was launched in 2012 and which makes early and growth-stage investments in venture-backed companies out of a RMB1bn fund.
Rabo Frontier Ventures, the corporate venture capital arm of financial services firm Rabobank, invested in a $500m fund that has been closed by UK-based VC firm Northzone. The vehicle’s other limited partners include unnamed contributors to Northzone’s earlier funds and undisclosed new investors. Northzone raised €1.5bn ($1.7bn) across nine funds since it was founded in 1996. Northzone IX is primarily concentrating on series A and B rounds but will also take part in a limited number of seed deals, targeting consumer and business-facing startups in areas like financial services, healthcare, education, mobility and construction.
Cathay Innovation, the venture capital arm of France-based private equity firm Cathay Capital, reached the €320m ($358m) first close of a €500m fund, securing capital from several corporate limited partners. LPs include hospitality chain Accor, airport operator ADP, biotech firm BioMérieux, diversified conglomerate Dassault, outdoor advertising company JCDecaux, luxury goods producer Kering, appliance maker SEB, tyre manufacturer Michelin, alcoholic beverage producer Pernod Ricard and automotive components supplier Valeo. French government-owned investment bank BPIfrance has also thrown its weight behind the fund. Cathay Innovation was founded in 2015 to invest in startups in Europe, North America and China, supporting companies through multiple rounds. The second fund is expected to maintain the firm’s focus on the digital transformation of industries from commerce and consumer technology to business-to-business services, healthcare, financial services and energy.
Insurance firm CV Starr and healthcare provider Mayo Clinic were among the limited partners for the $352m debut fund of venture capital firm Ince Capital Partners. Other LPs include charitable trust Dietrich Foundation, asset manager Commonfund, fund managers Unicorn Capital Partners and Axiom Asia Private Capital, investment firm Siguler Guff and endowments for Duke University, University of Pittsburgh and Carnegie Mellon University. Ince Capital Partners will back early-stage businesses in China with a focus on consumer-related technologies. The oversubscribed fund had a $250m original target. Founding partners and their friends put up $24m for the vehicle while the other $328m came from external investors.
Singapore-based venture capital firm Vertex Ventures closed its Vertex Growth Fund at $290m with backing from limited partners including computer touchpad manufacturer Elan Microelectronics. The fund surpassed its original $250m target and was also backed by Vertex’s state-owned parent firm, Temasek, as well as unnamed institutional investors, family offices and funds from Southeast Asia and Taiwan. Founded in 2015, Vertex now has a total of six independently-run VC funds spanning Southeast Asia, China, India the US and Israel. It has about $3bn in assets under management and has invested in more than 200 companies. The vehicle has a global remit but is focused on high-growth areas in specific markets, such as cybersecurity in Israel or consumer-related technologies in China and Southeast Asia.
Nestlé, the Switzerland-based food group, launched a 250m Swiss franc ($258m) sustainable packaging fund to invest in startups that concentrate on how to deal with global concerns around plastics, careers and financial welfare, and the climate and environment. It is part of a 2bn Swiss franc investment package to lead the shift from virgin plastics to food-grade recycled plastics, and to accelerate the development of innovative sustainable packaging solutions through sourcing up to 2 million metric tonnes of food-grade recycled plastics by 2025.
A host of corporate limited partners have contributed to two funds launched by Germany-based venture capital firm E.ventures that totalled $400m. The vehicles in question are a $225m fund that will invest in the US from an office in San Francisco, and a $175m Europe-oriented fund that will be based in Berlin. Existing backers including mail-order retailer Otto Group, supermarket chain Lidl, packaged food producer Dr Oetker and automotive manufacturer Porsche were joined by new LPs like brewery owner Bitburger, cleaning device provider Kärcher and shoe retailer Deichmann. Founded in 1999, E.ventures invests in consumer, financial and software-as-a-service technology developers, using proprietary technology to assess possible targets. It maintains offices in Europe and the US and has partners located in China, Japan and Brazil. The new funds will both look to provide between $1.5m and $10m for each deal in which they participate, seeking out companies from pre-series A to series B stage. E.ventures now has a total of $1.6bn under management.
University backing
In 2019 there were 17 rounds raised by university spinouts, a drop from the 23 registered in the previous year. The level of estimated total capital deployed in 2019 stood, however, at $228m, up from the $103m estimated for 2018.
Molekule, a US-based air purification system spinout from University of South Florida, completed a $58m series C round that included networking and communication product manufacturer Inventec Appliances Corp. Venture capital firm RPS Ventures led the round, while Foundry Group, Crosslink Capital, Founder’s Circle Capital, Uncork Capital and TransLink Capital also participated. Founded in 2014, Molekule is working on photo-electrochemical technology to disinfect and purify indoor air. The company claims the system is able to destroy pollutants such as viruses, bacteria and mould. It has released two products, one aimed at large rooms such as master bedrooms and one designed for small spaces like home offices and studio apartments. The technology builds on more than two decades of research by co-founder and chief science and technology adviser Yogi Goswami, a distinguished professor at University of South Florida.
Motif FoodWorks, a US-based food ingredient developer spun out of biotech producer Ginkgo Bioworks – a spinout of Massachusetts Institute of Technology – raised $27.5m in a funding round led by growth equity firm General Atlantic. CPT Capital, the venture capital arm of Jeremy Coller’s family office, also contributed to the round, which was disclosed at the same time as the company’s rebranding from Motif Ingredients. Motif supplies food producers with meat-free ingredients made up of fermented microbes that have been bioengineered using Gingko’s platform to achieve a specific taste. It aims to limit the greenhouse gas output of the food industry by encouraging the production of more foods that do not require livestock. The cash will help Motif broaden and speed up its development pipeline as it looks to form academic collaborations in several molecular food science areas. It also plans to deepen its research and development program and hire additional scientists and regulatory experts.
Australia-based wifi chip maker Morse Micro obtained A$23.8m ($17m) of funding from a consortium backed by multi-university venture fund Uniseed. Csiro Innovation Fund, the venture fund established by research institute Commonwealth Scientific and Industrial Research Organisation, also participated alongside the Australian government-backed Clean Energy Innovation Fund. Venture firms Blackbird Ventures and Right Click Capital, investment fund Skip Capital and individual investor Ray Stata filled out the round. Founded in 2016, Morse Micro develops and manufactures wifi chips with greater transmission range and energy efficiency than standard models to help support internet-of-things (IoT) devices.
People
Reese Schroeder, managing director of Tyson Ventures, meat producer Tyson Foods’ corporate venture capital arm, joined insurance firm Allstate’s Strategic Ventures unit as an investor. Schroeder was replaced by Erin VanLanduit, who joined from consumer goods producer SC Johnson where she had spent more than two years as director of business development for new ventures. Tyson Ventures had hired Schroeder in 2017 after his 13-year stint as managing director at communications equipment provider Motorola Solutions’ corporate venturing unit, Motorola Solutions Venture Capital. Schroeder was included in Global Corporate Venturing’s Powerlist seven times between 2012 and 2019. Formed in 2015, Allstate Strategic Ventures invests in early-stage developers of technologies relevant to its corporate parent. Its portfolio includes textual analytics software provider Amenity Analytics.
Alibaba made chief financial officer Maggie Wu head of its strategic acquisitions and investments unit, Alibaba Innovation Ventures. Wu replaced Joe Tsai, co-founder and executive vice-president of Alibaba, who will continue to provide support for the company’s strategic investment operations. Wu joined the company in 2007 as chief financial officer of its business-to-business e-commerce platform. The decision marked the first major reshuffle since Alibaba co-founder and chairman Jack Ma announced in September 2018 that he would step down from the latter position within a year, to be replaced by CEO Daniel Zhang.
Gabriela Ruggeri, managing partner at accelerator Overboost, was brought on board as part of the founding team for Argentina-based corporate venture capital partnership Kamay Ventures. Kamay Ventures is investing on behalf of Argentina-headquartered food, agribusiness and packaging conglomerate Arcor and beverage producer Coca-Cola’s Argentine subsidiary, Coca-Cola Argentina. Ruggeri told Global Corporate Venturing: “[Kamay Ventures] is the first open corporate venture capital fund in the region where two big corporations have joined together as investors.” Ruggeri featured on GCV’s 2016 Rising Stars list and will lead Kamay Ventures with fellow managing partner Antonio Peña, founder of Overboost. Arcor president Luis Pagani said Overboost would run Kamay Ventures as a trust fund. The unit will operate from Buenos Aires but will also invest in startups from other countries in the region.
India-based online marketplace operator Flipkart launched a corporate venture capital fund to invest in local early-stage startups operating in sectors such as e-commerce and financial technology. The size of the fund was reportedly between $80m and $100m. The company aims to build an e-commerce ecosystem that will allow it to tap into the next wave of domestic consumers to come online in the coming years, once barriers such as access and affordability are tackled. The fund will be headed by Emily McNeal, Flipkart’s chief financial officer. McNeal said: “We are proud of the fact that as a homegrown company, Flipkart’s innovations have helped create much of the ecosystem on which the Indian e-commerce industry has thrived over the past decade, be it in supply chain and logistics, after sales and support, or technology.
JD.com hired Jason Ningfeng Hu as head of strategic investment, which will involve managing investments in China and overseas. He also became a vice-president, and his strategic role will involve managing investments in China and overseas. The appointment came as JD.com explored offline opportunities, especially in logistics and advertising, having led a $142m round for public advertising network XinChao Media. France-based private equity firm Cathay Capital hired Hu in 2015 and he stayed as managing partner for two years before taking becoming chairman at CapHill Investments in 2017. Hu had previously spent 10 years as managing director at asset management firm CDH Investments. He identified deals in sectors including consumer products, real estate, mining, manufacturing and pharmaceutical, and his investments included logistics firms Deppon and Yimidida.
Garan Goodman, managing director at Germany-based retailer Metro’s accelerator, joined Stryber to develop the Switzerland-based firm’s corporate venturing building program as an associate partner. At Stryber, Goodman will work with companies, such as Migros, in the DACH (Germany, Austria and Switzerland) region to develop new business models and products. The Metro Target Retail Accelerator was renamed Xcel and has had a later-stage focus, unlike many similar programs. It also aims to enable sales and cross-border development for portfolio companies. Goodman said this would also be the plan for Stryber. He added: “My eight companies, one of which [Sezzle] had an IPO, collectively have a $0.4bn valuation and eight pilots booked.”
Australia-based beverage bottling service provider Coca-Cola Amatil (CCA) promoted Alix Rimington to head of its innovation and technology investment division, Amatil X. CCA hired Rimington in early 2015 as general manager of public affairs and communications before naming her an executive in its group leadership team the year after. Rimington had worked for telecoms firm Telstra for a decade from 2003 where she was group manager for corporate affairs across divisions including corporate venturing arm Telstra Ventures during her last two years. She co-founded Amatil X with Natalie Collins, head of Xcelerate, CCA’s six-month accelerator scheme in Australia and New Zealand, in April 2018. The company appointed Rimington head of disruptive innovation and new ventures and named Collins head of emerging ventures nine months later.
Tom Mastrobuoni left his chief financial officer role at Tyson Ventures, US-based meat product supplier Tyson Foods’ corporate venturing arm, to join venture capital firm Big Idea Ventures (BIV). Mastrobuoni had joined Tyson Ventures in 2017 and the unit’s deals since then have included investments in alternative meat producer Beyond Meat, food supply chain monitoring service FoodLogiQ and shellfish substitute developer New Wave Foods. BIV appointed Mastrobuoni as a venture partner to lead the firm’s second fund, the objective of which is to disrupt the food industry. Mastrobuoni’s move came in the wake of the departure of Tyson Ventures head Reese Schroeder.
US-headquartered pharmacy chain CVS Health promoted its corporate development and venture investing team’s senior director, Gregor Kevrekian, to executive director. Kevrekian was a senior director at medical insurance provider Aetna for almost three years, moving to the same position at CVS when it acquired Aetna for $78bn in November 2018. His role at Aetna involved leading mergers and acquisitions, divestitures and joint venture deals, and conducting early-stage investments through its corporate venturing unit, Aetna Ventures. Deals overseen by Kevrekian at Aetna Ventures included a $36.6m round for behavioural health platform developer AbleTo in 2017 and series A, B and C rounds for cybersecurity software developer CyberGRX.
Vipin Agarwal left his position as senior director for India at Fosun RZ Capital, a corporate venturing vehicle for conglomerate Fosun International. Agarwal was in the job for 20 months, during which time he led 11 early and growth-stage deals, taking board seats with nine portfolio companies including online parenting network operator Mylo and human resources software producer Kredily. A separate report by VCCircle suggested Agarwal was looking to launch his own venture capital fund soon, though firm details of his plans were not revealed. Agarwal’s departure came as China-based Fosun RZ Capital ramped up efforts to grow its team of managing directors and analysts with a focus on the technology, media and telecommunications sectors. Before joining the unit in January 2018, Agarwal had founded and then spent three years as chief executive of OnlineTyari, the creator of an online platform that helps jobseekers to prepare for language tests required by employers.
Ernest Fung left his position as Hong Kong-based senior director and head of international corporate development at Nasdaq-listed JD.com. Fung joined the China-headquartered firm in 2014 and focused on mergers and acquisitions and venture deals for startups developing e-commerce, financial, logistics and retail technologies. Prior to Fung’s departure, JD.com participated in a $120m series A round for connected vehicle technology developer Mogu Zhixing, and co-led the $1bn first tranche of Indonesia-based on-demand ride platform Go-Jek’s series F round. Fung was a GCV Rising Star in 2018 and 2019 and was included in GCV’s 2018 Powerlist. He was a director of technology, media and telecoms investment banking at financial services firm Citigroup for a decade before joining JD.com.
GCV Analytics’ definition of the consumer sector encompasses e-commerce platforms, food and beverages and related technologies and services, fashion and apparel, hygiene, beauty and fitness, consumer electronics and other physical consumer products.