While investment activity levels are lower than last year and summer months tend be “slower”, the overall trend appears to be broadly upward, suggesting a recovery from the covid-19 pandemic shock earlier this year.
The number of corporate-backed deals in July and August stood at 506. In July, there were 257 – down 6% from the 274 in the same month last year – and 249 in August, down 11% from last year’s 281. The total investment value was $14.14bn in July and $6.7bn in August – roughly comparable with last year’s. Both months saw fewer deals than June this year (303).
The US came first in the number of corporate-backed deals, hosting 207 rounds, while Japan was second with 78 and China third with 53.
The leading corporate investors by number of deals were internet conglomerate Alphabet, utility company Constellation Energy and semiconductor manufacturer Intel. In terms of involvement in the largest deals, Alphabet topped the list along with e-commerce, cloud services and consumer device group Amazon and internet technology group Tencent.
There were 51 corporate-backed funding initiatives in July and August. The July figure (27) suggested a 29% drop compared with July 2019, which had 38. The August figure (24) was 26% higher than the same month last year (19). Capital initiatives reached $14bn in July and $4.55bn in August, considerably more than the same months last year.
The trends probably reflect that corporate venturers are opening up to new funding models that include external limited partners and, to a degree, a race to attract some of the liquidity with which central banks have flooded financial markets in response to the pandemic.
Emerging businesses from the health, IT, services and financial sectors led in raising the largest number of rounds in these two months. The most active corporate venturers came from the financial, IT, health and services sectors.
Deals
Internet technology provider Google invested $4.5bn in Jio Platforms, the digital services spinoff of diversified India-based conglomerate Reliance Industries. Google, part of Alphabet, took a 7.7% stake and announced a collaboration on the development of technology including an affordable entry-level smartphone. Alphabet has also announced plans to invest $10bn in India in the next five to seven years.
Jio operates a mobile network and broadband service, as well as about a dozen proprietary apps. It aims to expand into online retail, digital payments, education and healthcare, building an ecosystem modelled on that of China-based e-commerce firm Alibaba.
US-based electric truck developer Rivian completed a $2.5bn financing round that included Amazon. The round was led by funds and accounts advised by investment manager T Rowe Price and also featured financial services and investment group Fidelity Management and Research, among others. Rivian is working on a plug-in electric truck and an electric sports utility vehicle R1S that will both use a flexible skateboard chassis it has developed.
The company struck a partnership agreement with existing investor Amazon in September 2019 to jointly create an electric delivery van and manufacture 100,000 of the vehicles for its use. Amazon’s participation in the round followed an agreement last month to acquire autonomous vehicle developer Zoox for a reported $1.3bn.
MissFresh operates an e-commerce platform that delivers groceries to customers in as little as an hour, sourcing items from more than 1,500 small warehouse scattered across China. The company had more than 25 million monthly active users as of mid-2019.MissFresh, the China-based online supermarket backed by Tencent and consumer electronics producer Lenovo, completed a $495m financing round. China International Capital Corporation led the round, which included fellow investment bank Goldman Sachs’ asset management arm as well as financial services firm Industrial and Commercial Bank of China, Tiger Global Management and Abu Dhabi Capital. The round valued the company at more than $3bn.
Kuayue Express, a China-based delivery services provider backed by logistics property developer GLP, agreed to sell a controlling interest to JD Logistics, a subsidiary of e-commerce group JD.com, for RMB3bn ($432m). JD Logistics will acquire both existing and newly issued shares in the Kuayue Express.Founded in 2007, the comapny has built an integrated logistics network with services ranging from same-day delivery and intra-city shipping to cold-chain transportation for fresh produce. It oversees 13 freight planes and 17,000 trucks that operate across China.
China-based electric vehicle (EV) producer Xiaopeng Motors raised an estimated $300m from investors including Alibaba to increase its series C-plus round to $800m just ahead of its flotation.
Qatar’s sovereign wealth fund, Qatar Investment Authority, was also an investor.
Founded in 2014 and also known as Xpeng, Xiaopeng Motors sells smart EVs equipped with artificial intelligence and autonomous driving functionality. It has sold close to 20,000 models of its compact sports utility vehicle, G3, according to Reuters.
US-based oncology diagnostics technology developer Freenome completed a $270m series C round featuring pharmaceutical firms Roche and Novartis, healthcare provider Kaiser Permanente and Alphabet.
Bain Capital Life Sciences and Perceptive Advisors co-led the round, which also included investment and financial services group Fidelity, among others. Alphabet, Kaiser Permanente and Roche participated through respective corporate venturing units GV, Kaiser Permanente Ventures and Roche Venture Fund.
Freenome has developed a system that can detect cancer with a single blood draw using multi-omics technology that combines multiple forms of biological analysis. It has a screening test for colorectal cancer in clinical trials and one that will detect precancerous lesions.
Consumer electronics and media group Sony Corporation invested $250m in US-based game developer Epic Games at a reported valuation of nearly $17.9bn. Sony is also seeking to expand collaboration between the companies. It recently unveiled the first slate of games for its forthcoming game console, the PlayStation 5, which is due to launch by the end of 2020. Epic has created a series of games based on its multiplayer first-person shooting game engine, Unreal Engine. The most popular is Fortnite, which has generated north of $4bn of revenue by the end of last year.
Pharmacy operator Walgreens Boots Alliance (WBA) formed a $1bn strategic partnership agreement with US-based primary care provider VillageMD that included an initial investment of $250m. The $1bn figure consisted of an undisclosed mix of equity and convertible debt financing that will be provided over the next three years. The $250m equity investment represents the first instalment and WBA will own a 30% stake in VillageMD once the debt has been converted into equity.
Founded in 2013, VillageMD runs a nationwide network of primary care services providers called Village Medical. It has partnered more than 2,800 doctors with some 600,000 patients. The partnership will enable WBA to offer full-service doctor offices at its pharmacies.
US-based farming data analytics platform provider Farmer’s Business Network (FBN) closed a $250m series F round that included GV. Investment manager BlackRock led the round through unnamed funds and accounts. The transaction reportedly valued FBN at $1.75bn. The compay has built a farmer-to-farmer networking platform that enables independent growers to pool information on topics including the prices and performances of seeds and herbicides. The company runs an e-commerce service selling seeds, crop protection and biologicals, and will use part of funding to expand that service.
Traveloka, an Indonesia-based online travel booking platform backed by e-commerce group JD.com and travel services provider Expedia, raised $250m in equity financing. The round was led by an undisclosed financial institution that some sources identified as Qatar Investment Authority, the country’s sovereign wealth fund. Existing shareholders also contributed to the round, though only EV Growth was named. Founded in 2012, Traveloka enables consumers to book flights, bus and train journeys, accommodation, meals and attractions. Users can also take out insurance and a travel credit card. Traveloka is active in Australia, Indonesia, Malaysia, Thailand, Vietnam, the Philippines and Singapore.
Exits
GCV Analytics tracked 67 exits involving corporate venturers as either acquirers or exiting investors during the summer months – 34 in July and 33 in August. The transactions included 35 acquisitions, 29 initial public offerings (IPOs), one merger and two other transactions.
The exit count figure was comparable to June, which recorded 33 exits. The total estimated exited capital decreased to $4.18bn in July but bounced back to $7.53bn in August, still 15% lower than June’s $8.85bn. During the same months of 2019, the exit count was considerably lower: 25 and 24 in addition to the estimated total capital.
KE Holdings, the China-based online estate agent also known as Beike, went public in a $2.12bn IPO in which Tencent invested $160m. The offering consisted of 106 million American depositary shares (ADSs), each equating to three ordinary shares, issued on the New York Stock Exchange priced at $20.00 each. The price stood above the $17 to $19 range the company had set earlier, valuing it at about $22.6bn. Tencent bought 8 million ADSs while hedge fund manager Hillhouse Capital paid $100m for 5 million ADSs and venture capital firm Sequoia Capital purchasing 3.5 million for $70m.
KE Holdings was formed in 2001 as real estate brokerage Lianjia before adding Beike as an online and offline platform that manages real estate transactions. The combined platform provides access to 260 real estate brokerage brands and had 39 million monthly active users as of June.
Xpeng, the China-based electric vehicle manufacturer backed by corporates Alibaba, UCar, Xiaomi, Duowan and Foxconn, went public in an IPO sized at approximately $1.5bn. The offering consisted of 99.7 million ADSs, each equating to two common shares, issued on the New York Stock Exchange priced at $15.00 each. The company had planned to issue 85 million ADSs priced between $11 and $13 each. The IPO price gave it a market capitalisation of about $21.3bn. Alibaba had expressed interest in buying $200m of shares in the offering and consumer electronics producer Xiaomi $50m but neither confirmed they had done so. Xpeng produces smart EVs that use its proprietary autonomous driving technology and in-car operating system. It has released a sports utility vehicle and sports sedan model but made a $113m net loss in the first six months of this year from $142m in revenue.
Li Auto, a China-based electric vehicle (EV) producer backed by corporates Meituan Dianping, Shougang, Bytedance, InTime, Taiping, Ping An and Leo Group, priced its shares at $11.50 to raise $1.1bn in its IPO. The company issued 95 million American Depositary Shares (ADSs), representing 190 million ordinary shares. Shares opened at $15.50 on the first day of trading and reached a high of $17.50, before closing at $16.46. The company listed on the Nasdaq Global Select Market using the ticker symbol LI.
In addition to the initial public offering, mobile services portal Meituan Dianping and digital media company Bytedance committed to purchasing $330m and $30m in a concurrent private placement. Founded as Chehejia and also known as CHJ Automotive and Lixiang, Li Auto produces smart sports utility EVs.
Edge computing platform provider Fastly agreed to purchase US-based web cybersecurity technology developer Signal Sciences in a $775m cash-and-stock transaction that will allow media company O’Reilly to exit. The deal was made up of $200m in cash and $575m in shares of Fastly, which has a current market capitalisation of roughly $9.7bn. The company had raised approximately $62m since being founded in 2014.
Signal Sciences is the creator of a programmable cybersecurity product designed to protect web applications. Its technology is used on more than 40,000 applications and its customers include Twilio, SendGrid and DoorDash. The company’s technology will enhance Secure at Edge, a product Fastly intends to launch that will help businesses securely pursue digital transformation.
China-based EV battery manufacturer Farasis Energy floated on the Shanghai Stock Exchange’s Star Market in a RMB3.4bn ($486m) IPO, providing an exit for carmaker Daimler. The company issued just over 214 million shares priced at RMB15.90 each, and its shares closed at RMB27.96 on their first day of trading. Farasis produces lithium-ion batteries for the transport sector and maintains research and development centres in the US and Germany as well as its home country. The proceeds from the offering will be used to expand the company’s manufacturing capacity. It generated about $350m in revenue in 2019 resulting in a net profit of approximately $18.7m, according to the IPO prospectus.
Relay Therapeutics, a US-based cancer drug developer backed by internet group SoftBank and Alphabet, went public in a $400m IPO. The company increased the number of shares in the offering from 14.7 million to 20 million and priced them at $20.00 each, above the IPO’s $16 to $18 range. The closing price on the first day of trading stood at $35.05 on the Nasdaq Global Market, valuing it above $3bn. Founded in 2016, Relay is using insights into protein motion to develop small molecule drugs intended to treat cancer by targeting proteins that were previously thought undruggable. Up to $155m of the IPO proceeds will go to a phase 1 clinical trial for one of its lead product candidates, RLY-4008, in small tumours as well as part of the phase 2/3 trials for the drug.
Oak Street Health, the US-based primary care provider backed by health system owner Humana, closed its IPO at approximately $377m. The company priced more than 15.6 million shares on the New York Stock Exchange at $21 each to raise $328m. Oak Street’s shares closed at $44.00, giving it a market capitalisation of about $10.6bn, before the underwriters bought more than 2.3 million more shares through the over-allotment option. Founded in 2012, Oak Street runs more than 50 primary care centres across the US for patients using government health insurance scheme Medicare. The extra share sales mean Humana’s stake will be cut from 5.7% to 5.2%.
China-based artificial intelligence chipmaker Cambricon Technologies priced a RMB2.58bn ($368m) IPO giving exits to Alibaba, consumer electronics producer Lenovo, AI-technology provider iFlytek and robotics technology provider Tuling Century. The offering comprised 40.1 million shares issued on the Shanghai Stock Exchange’s Star Market at a price of RMB64.39 each. The allocation makes up about 10% of Cambricon’s shares, according to the IPO prospectus. Cambricon provides AI processors for use in mobile devices and servers. One of its largest customers had traditionally been electronics manufacturer Huawei, though the latter company began making its own AI chips in 2019.
Food delivery service Delivery Hero bought InstaShop, a United Arab Emirates-based online grocery delivery platform backed by corporates Jabbar Internet Group and Souq, for about $360m. The transaction valued InstaShop at $360m and consists of $270m in cash that has been provided upfront, along with additional payments dependent on the service hitting growth milestones post-acquisition. Founded in 2015, InstaShop runs an on-demand grocery delivery service across the United Arab Emirates, Egypt, Qatar, Bahrain and Lebanon. It has partnerships in place with some 1,500 vendors and brings in goods in as little as 45 minutes. The company will operate under its existing brand as an independent subsidiary of Delivery Hero, which is now present in 44 countries.
Lemonade, the US-based online insurance provider backed by corporate investors Alphabet, SoftBank, Allianz and XL Catlin, went public in a $319m IPO. The offering consisted of 11 million shares priced at $29.00 each that will be issued on the New York Stock Exchange. The company had initially set a range of $23 to $26 for the IPO before increasing that to $26 to $28. One of Lemonade’s shareholders, investment manager Baillie Gifford, expressed interest in buying up to $100m of shares in the offering but has not confirmed whether it had done so. The IPO price values the company at more than $1.9bn. Founded in 2015, Lemonade offers property and casualty insurance through an online platform that uses bots instead of human brokers, using artificial intelligence and behavioural economics to combat fraud. The company is present in the US, UK and Germany, and it more than doubled revenue year on year to $26.2m in the first quarter of this year, though its net loss rose from $21.6m to $36.5m in the same period.
Note: Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.