The following is a snapshot of the data we have collected on investment activity over the past three months. To verify reported deals, we contact about 300 corporate investors each quarter – these comprise roughly 18% of the global CVCs we cover, but account for most of the deals that are made public.
Amid the Covid-19 pandemic, a nearly global lockdown and an economic downturn in sight, it would be a crass understatement to call the first quarter an eventful start to the year.
In this first quarter, GCV Analytics tracked 768 funding rounds involving corporate venturers, representing a nearly 5% decrease from the 811 rounds recorded in Q1 2019. The estimated total investment dollars stood at $24.16bn, down 32% from the $37.1bn recorded during the same period last year.
The US hosted the largest number of funding rounds (313), while Japan came in second with 118 deals, India third with 55 deals and China fourth with 44 deals.
Compared with the previous quarter, there was a slight increase in deal count, from 768. Estimated total investment, plummeted by about 43% from $42.3bn.
Emerging enterprises from the IT, health, business services and fintech sectors proved the most attractive for corporate venturers, accounting for at least 87 deals each. The top funding rounds by size, however, were raised mostly by companies from the transport and IT sectors.
The most active corporate investors, in turn, came from the financial services, IT, media and health sectors.
The leading investors by number of deals were diversified internet conglomerate Alphabet, telecoms firm SoftBank and electronics manufacturer Samsung. The list of corporate venturers involved in the largest deals by size was headed also by Alphabet, internet company Tencent and automotive retailer AutoNation.
Most of the corporate investors taking minority stakes during the first quarter were investors that had done at least one previous deal before (74%). However, out of every four (26%) of corporates was disclosing its first minority stake deal in this quarter. Since 2018, there appears to have been a trend of newcomers to venturing – whether with a specific unit or not – comprising roughly a fifth to a fourth of all corporate investors. In previous years the proportion of first-time corporate investors was consistently lower than 20%. We are yet to see if this trend will continue during a downturn.
Deals
Most of the funding from the biggest rounds reported in the first quarter went to emerging enterprises from transport and IT sectors. Two of the top 10 rounds stood above $1bn.
Self-driving car developer Waymo raised its first external funding in a round backed by several corporates. Alphabet, from which it had spun off, was among the backers that committed $2.25bn. Other backers were automotive component manufacturer Magna International and car retailer AutoNation, the latter investing $50m. Venture firms Silver Lake, Canada Pension Plan Investment Board and the Mubadala Investment Company also participated. Founded in 2009 as part of Alphabet and spun off in 2016, Waymo has developed a unified autonomous vehicle which aims to combine internally developed technology in areas like cameras and lidar sensors as well as versions of traditional automotive systems covering functions such as brakes and steering.
Internet group Tencent co-led a $1bn series G round for China-based online education platform developer Yuanfudao with investment management firm Hillhouse Capital. Private equity firm Boyu Capital and VC group IDG Capital also took part in the round. The funding was reportedly secured at a $7.8bn valuation. Spun off from social media platform Fenbi in 2014, Yuanfudao runs an online education platform which claims to have attracted 400 million registered users. The company offers online courses in addition to homework plans, covering primary and secondary school age groups.
Singapore-headquartered on-demand ride provider Grab secured $856m in funding from IT services provider TIS Intec’s TIS subsidiary and financial services firm Mitsubishi UFJ Financial Group (MUFG). MUFG provided $706m while TIS invested $150m. News of the round came as The Information reported Grab is in talks to merge with Southeast Asia’s other large ride hailing service, Gojek, in a deal that would value the joint company at $23bn. The former runs an on-demand transport service spanning 339 cities across eight Southeast Asian countries, offering food and package delivery, as well as payment services, lending, wealth management and insurance through the Grab Financial Group subsidiary it launched in 2018.
Automotive manufacturer Toyota Motor Corporation led a $590m series C round for US-based airborne taxi developer Joby Aviation with an investment reportedly sized at $394m. The round also featured Toyota’s strategic investment vehicle, Toyota AI Ventures, as well as Intel Capital and JetBlue Technology Ventures, investing on behalf of Intel and JetBlue respectively. Asset manager Sparx Group, investment firm Capricorn Investment Group, VC firm AME Cloud Ventures, investment management firm Baillie Gifford and family office Global Oryx filled out the round’s participants. Joby is working on a five-seat vertical take-off and landing vehicle that will be able to carry passengers over short distances in urban areas. It will be electric-powered and is expected to be able to travel some 240 kilometres on a single charge.
US-based data analysis software provider Snowflake secured $479m in a series G round co-led by Salesforce’s corporate venturing arm, Salesforce Ventures, and investment firm Dragoneer. Salesforce invested through a strategic partnership that will allow Snowflake’s users, which include Capital One, JetBlue, Sainsbury’s and Adobe, to access Salesforce data automatically on the platform. The round was backed by Altimeter Capital, Redpoint Ventures, Sequoia Capital, Iconiq Capital, Madrona Venture Group and Sutter Hill Ventures. Founded in 2012, Snowflake has created a cloud-based platform that allows users to search for data from both their own internal applications and cloud services providers. It also enables users to create their own data exchange, allowing them to securely share data with others.
Exits
GCV Analytics tracked 62 corporate-related exits during the first quarter of 2020, including 41 acquisitions, 13 initial public offerings (IPOs), five mergers and two stake sales, among other transactions.
Top exiting corporates this quarter included Alphabet, cloud enterprise software provider Salesforce and SoftBank which had at least three exits each.
The total estimated amount of exited capital in Q1 2019 was $19.75bn, higher than the $18.76bn in Q1 of the previous year and also higher than the figure from the last quarter of 2019 ($10.81bn). Four of the top reported exits stood above the $1bn mark, with a heavy weight of the announced acquisitions of Credit Karma and Plaid in the fintech space.
Financial software provider Intuit agreed to buy US-based credit management platform developer Credit Karma for $7.1bn, allowing Alphabet to exit. Intuit is best known for tax preparation software platform TurboTax and the potential acquisition would be the largest in its history. Credit Karma is set to maintain its independence as an Intuit subsidiary after the deal closes. The transaction involves a mixture of cash and shares and the price is nearly double the $4bn valuation at which Silver Lake made a $500m secondary investment in the company in early 2018. It includes almost $1bn in equity awards that will be issued over the next three years. Credit Karma has created an online platform with more than 100 million members who can get free access to their credit scores and online identity status in addition to filing their taxes and finding credit card and consumer loan deals.
Visa agreed to acquire one of its portfolio companies, US-based financial data network operator Plaid, in a $5.3bn transaction that will allow fellow payment services companies Mastercard and American Express as well as financial services firm Citi to exit. The software supports some 2,600 fintech developers, to which Visa plans to expand its services and access through the transaction, broadening its reach across the financial services space. Founded in 2013, Plaid has built technology that enables users to transfer their data to third-party financial technology platforms. When a customer opens an account with a finance management platform, for example, Plaid’s software allows them to link their bank account to the app.
Salesforce agreed to acquire one of its portfolio companies, US-based customer relationship management (CRM) software provider Vlocity, for $1.33bn in cash. The transaction will include the company assuming unvested equity awards held by Vlocity’s employees, and the price was described as net of the value of shares currently owned by Salesforce. The acquisition is expected to close in 2021 and professional services firm Accenture and insurance provider New York Life will also exit through the deal. Founded in 2014, Vlocity has created a range of CRM apps that fit on top of the Salesforce platform but which are tailored for specific industries such as communications, media and entertainment, energy and utilities, healthcare and insurance, in addition to government work.
CapitalG, Alphabet’s growth equity arm, agreed to provide $100m as part of a $1.1bn acquisition of France-based cybersecurity software provider Armis by growth equity firm Insight Partners. Insight Partners will put up the majority of the cash for the transaction, with “rollover” from undisclosed existing investors in the company. Armis produces security software for enterprises operating internet-of-things or unmanaged devices, such as mobile devices, smart televisions or full-scale industrial or building systems. VC fund Iris Capital and assorted angel investors had provided approximately $1.1m for Armis in 2017 before the company added $6.7m from VC firm Elaïa Partners and unnamed existing backers.
Virtual care provider Teladoc Health agreed to acquire US-based telehealth services provider InTouch Health for $600m in a deal allowing domestic robotics technology producer iRobot to exit. The transaction will involve Teladoc paying $150m in cash for the company together with $450m in shares. InTouch had raised about $93m in funding pre-acquisition, according to press releases and securities filings. Founded in 2002, InTouch combines a cloud network with dedicated telehealth technology that allows healthcare systems to diversify their care. It has partnerships in place with about 450 care providers worldwide and expects to increase full-year revenue about 35%.
Funding initiatives
Corporate venturers supported a total of 63 fundraising initiatives in the first quarter of 2020, down from 71 such initiatives reported during the same period in 2019 and comparable with the 63 reported in 2018. However, the estimated total capital raised, $8.97bn, was 14% lower than last year’s Q1 figure of $10.45bn.
The initiatives in question included 36 announced, open and closed VC funds with corporate limited partners (LPs), 15 newly launched corporate venturing units and eight accelerators, among others.
Microsoft set up a $1bn fund that could invest in “carbon reduction, capture and removal technologies,” amid a broader commitment to clean up the software company’s emissions by 2050. It is one of the largest funding commitments ever to the development of methods of sucking carbon dioxide out of the air, an area that includes startups such as Silicon Kingdom, Carbon Engineering, Climeworks and Global Thermostat. The late Microsoft co-founder Paul Allen created Seattle’s Allen Institute for Artificial Intelligence, which has set up a $10m pre-seed fund for its incubator program. The AI2 Incubator fund, which is run by Bryan Hale and Jacob Colker, counts VCl investors including Madrona Venture Group, Two Sigma Ventures, Sequoia Capital and Kleiner Perkins among its backers.
The insurance firm Taiping partnered China International Capital Corporation on a vehicle that will invest in companies situated in China’s Bay Area. It is joining investment bank China International Capital Corporation’s CICC Capital unit to form a $1bn investment fund. TP-CICC GBA Investment Master Fund which encompasses 11 metropolitan centres including Guangzhou, Shenzhen and Hong Kong. Areas of focus for the fund include financial, healthcare, consumer and insurance technology providers as well as internet-focused startups. Taiping has been a sporadic corporate venturing investor but its portfolio includes smart electric vehicle manufacturer Lixiang Automotive, sports event management platform Alisports and financial services platform JD Finance, which is also backed by CICC. CICC has already formed partnerships with several homegrown corporates. It was one of the limited partners in a $786m technology fund launched by another insurer, Ping An, and formed a wealth management technology venture with internet group Tencent in September 2019.
UPMC Enterprises, the investment and innovation arm of healthcare provider University of Pittsburgh Medical Center (UPMC), announced its plans to invest $1bn in the development of drugs, diagnostics and devices by 2024. The figure includes a $200m partnership with University of Pittsburgh, announced in early 2018, to establish the Immune Transplant and Therapy Center. The hub will focus on the development of immunotherapies for a wide range of diseases. UPMC is closely affiliated with University of Pittsburgh’s Schools of the Health Sciences but has grown into a large non-profit healthcare and insurance provider that operates 40 hospitals employing 4,900 doctors and 89,000 staff. UPMC Enterprises invests externally and internally and has established five companies over the past two years. UPMC Enterprises will invest the $1bn commitment globally, while focusing on deals that benefit scientific and commercial work already being conducted in the Pittsburgh ecosystem. The vehicle typically focuses on immunotherapies for cancer, transplantation and age-related conditions, as well as retinal and respiratory diseases, autoimmune conditions and neuroinflammation.
Japan-based financial services firm SBI intends to raise up to ¥100bn ($920m) for its next VC fund. The vehicle was dubbed the 4+5 Fund due to its expected focus on technologies in the industry 4.0 space, where sensors and the IoT inform traditional hard industries, and Society 5.0, Japan’s vision for a society that uses technology to solve new problems. SBI has emerged as one of Japan’s most notable corporate venturers. Although many of the country’s largest financial services firms actively participate in the local startup space, it has made a concerted effort to make strategic investments in fintech developers such as Ripple and CurrencyCloud. The 4+5 Fund will invest in developers of technologies and products across the 5G, IoT, robotics and digital healthcare sectors. SBI intends to reach a first close by the end of next month and begin investing at that point.
Netherlands-based life sciences investment firm LSP closed a $600m fund, having raised capital from backers including pharmaceutical firms Bristol Myers Squibb and Otsuka Pharmaceutical. LSP 6, which the firm claims is the largest life sciences VC fund raised in Europe, also features unnamed insurance firms, pension funds, wealth managers, family offices and state-owned funds among its limited partners. Founded in 1987, LSP operates out of offices in the Netherlands, Germany and the US and invests in private and publicly listed companies. Its recent deals include investments in oncology drug developer ImCheck Therapeutics and patient management platform developer Endotronix. The $600m figure represents LSP 6’s hard cap. LSP’s original target was $450m and, combined with its $300m Health Economics Fund and its $200m public fund and mandates, it now has $1.1bn across its investment activities.
US-based VC firm Canapi Ventures launched its first fund, having raised $545m in capital from limited partners including several financial services firms. The firm’s LPs are made up of more than 35 banks and strategic investors and incorporate 23 of the 100 largest banks in the US by total asset size, as well as trade boards including American Bankers Association and Independent Community Bankers Association. Canapi Ventures will invest in early to growth-stage financial technology developers, providing them with distribution leverage through its LPs. Its advisers include Canapi Advisors, a wholly-owned subsidiary of banking group Live Oak Bancshares. The close came after the firm began investing. It took part in a $31m series B round for construction-lending platform operator Built Technologies that closed in April 2019.
Two Chinese state-owned companies – diversified conglomerate Yuexiu Group and insurer People’s Insurance Company of China – formed a RMB3bn ($424m) industry investment fund. The firms are collaborating on a series of fund partnerships targeted at China’s Greater Bay Area, which includes the cities of Guangzhou, Zhongshan and Shenzhen and special administrative regions Hong Kong and Macau, that will collectively top $1.4bn of investment. Yuexiu’s asset management subsidiary, Yuexiu Industrial Fund, will manage the fund, which is expected to be followed by US dollar and renminbi-denominated joint fund-of-fund initiatives which will back “strategically important” companies in the area.
China-based internet and gaming group Beijing Kunlun Technology established a RMB3bn ($424m) VC fund with investment manager Beijing Huayu Tianhong. The two are the cornerstone investors for Kunlun (Beijing) Internet Intelligent Industry Investment Fund and will each provide RMB1bn. A Kunlun subsidiary known as Xinyu Shijie Wuji Investment Management is chipping in RMB10m and will be general partner for the vehicle. Founded in 2008, Kunlun specialises in mobile and web browser-based games but its subsidiaries include Opera, the mobile browser it acquired in 2016. The company bought gay hook-up app Grindr the same year and agreed a $608m deal to sell it earlier this month, representing a four-times return. The fund is targeting developers of internet and artificial intelligence technology but Kunlun has not disclosed details of its geographical focus, how much it will invest per deal or at which stage.
Switzerland-based food group Nestlé will launch a 250m Swiss franc ($258.4m) sustainable packaging venture fund to invest in startups that focus on these areas. 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 tonnes of food-grade recycled plastics by 2025.
EV Growth, the Singapore-based VC partnership between internet company Yahoo Japan, conglomerate Sinar Mas and VC firm East Ventures, closed its first fund at $250m. The vehicle’s limited partners include undisclosed family offices and Asian sovereign wealth funds, according to EV Growth, and Singaporean state-owned Temasek. The $250m figure represents the fund’s hard cap and significantly surpassed its initial target of $150m. EV Growth was launched in March 2018 and had raised from LPs including telecoms and internet group SoftBank, alternative asset manager Indies Capital and growth equity firm Pavilion Capital. The fund has invested more than half of its capital, across 20 investments including e-commerce marketplace Tokopedia and travel booking platform Traveloka.