In the first quarter of 2017, GCV Analytics tracked 563 funding rounds involving corporate venturers, a 7% increase over the 525 rounds recorded in Q1 2016. However, the estimated total investment slipped to $19.12bn, down 4% from $20.01bn last year.
The US hosted almost half these funding rounds (272), while China came in second with 50 deals, India third with 38, and the UK fourth with 36.
Comparing this quarter with the final quarter of 2016, the number of deals was incremental, rising from 530 rounds in Q4 2016, but investment jumped by 31%, from $14.53bn.
Emerging enterprises in the health, IT and financial services sectors proved the most attractive for corporate venturers, accounting for at least 80 deals each. The top funding rounds by size, however, were raised mostly by companies from other 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, research and media company International Data Group (IDG), chip and semiconductor manufacturers Qualcomm and Intel and software provider Microsoft. The list of corporate venturers involved in the largest deals by size was topped by internet company Tencent, Alphabet, telecoms company SoftBank and IDG.
Deals
Most of the funding from the biggest rounds reported in the third quarter went to emerging enterprises in the consumer, transport and financial services sectors. Four of the top 10 rounds were above $1bn.
China-based video-streaming platform iQiyi raised $1.53bn from investors including internet group Baidu and IDG Capital, the local venture capital affiliate of IDG. Baidu contributed $300m to the round, which also featured venture capital firm Sequoia Capital and hedge fund manager Hillhouse Capital, among others. Launched as Qiyi in 2010, iQiyi operates an online video platform that offers both a free and a premium subscription-based streaming service.
SoftBank announced its $1bn commitment to Singapore-based ride-hailing service Grab as part of a $1.5bn funding round. Founded in 2012 as Grab Taxi, Grab operates a diversified transport-on-demand platform combining taxi, carpooling and motorcycle options. Grab’s business operations have so far been concentrated in seven countries across Southeast Asia.
US-based short-term accommodation marketplace Airbnb raised a $1bn series F round which reportedly featured Alphabet. Airbnb did not reveal the identity of any of its investors in the round, which valued the company at $31bn, according to media reports. Airbnb operates an online and mobile platform that enables people to rent out properties for short periods of time.
India-based e-commerce company Flipkart closed a $1bn funding round featuring Microsoft, e-commerce firm eBay and Tencent. The funding was raised at a valuation of about $10bn, a steep drop from the $15.5bn valuation at which Flipkart closed its last round in 2015. Founded in 2007, Flipkart operates a diversified e-commerce marketplace that sells a variety of consumer goods. The company is fighting a rearguard action against domestic competitors like Snapdeal and Paytm E-Commerce as well as foreign players such as Amazon.
US-based oncology diagnostics company Grail raised a first close of a series B round at $900m with the backing of several corporates. Among the corporate investors were pharmaceutical companies Johnson & Johnson, Bristol-Myers Squibb, Celgene and Merck & Co, medical technology producer Varian Medical Systems, pharmaceuticals supplier McKesson, e-commerce company Amazon and Tencent. Founded in 2016, Grail has developed a blood test for early-stage detection of cancer.
Exits
GCV Analytics tracked 53 exits during the first quarter of 2017, including 48 acquisitions, eight IPOs, one merger and two business closures. The majority of these transactions took place in the US and Europe.
Exiting corporates this quarter include technology and internet companies such as Intel, IDG, Alibaba, Salesforce, SoftBank as well as financial services firms Fidelity and Wells Fargo. All reported at least three exits each.
The total exited capital in the first quarter was $7.51bn, a 25% drop from the $9.94bn posted in the same quarter last year. But the Q1 figure represents a slight increase from the $7.44bn recorded in the last quarter of 2016.
US-based visual media platform Snap floated on the New York Stock Exchange, raising $3.91bn after its underwriters exercised their option to buy an extra 30 million shares. Snap initially issued 145 million shares at $17 each. Snap’s existing backers then divested an additional 55 million shares. The flotation gave exits to Alibaba and internet companies Tencent and Yahoo. Media group NBCUniversal later announced it had invested $500m in Snap via the offering.
Enterprise software provider Hewlett Packard Enterprise (HPE) agreed to acquire US-based data management software producer Simplivity in a $650m cash deal, providing telecoms firm Swisscom with an exit. Simplivity has developed a platform that uses hyperconvergence – the consolidation of virtual and physical IT components into a single platform with centralised management – to help businesses simplify their data centre infrastructure while making it more secure. HPE intends to combine Simplivity’s software with its own technology.
Amazon agreed to buy United Arab Emirates-based online marketplace Souq.com for $650m. The transaction provided media and e-commerce firm Naspers with an exit. Souq currently operates the largest online marketplace in the Middle East by customer size, with more than 45 million users a month as of June 2016, according to the National newspaper.
Medical device manufacturer Boston Scientific agreed to acquire Switzerland-based heart valve replacement provider Symetis in a $435m all-cash deal. This gave an exit to pharmaceutical firm Novartis. Founded in 2001, Symetis develops and produces percutaneous heart valve replacement products.
US-based integration software producer MuleSoft closed a $221m IPO on the New York Stock Exchange. MuleSoft issued 13 million shares at $17 each, exceeding the $12 to $14 range it had set earlier. The IPO provided exits for backers such as Salesforce Ventures, the venturing unit of cloud service Salesforce, technology supplier Cisco and enterprise software producer ServiceNow. Founded in 2006, MuleSoft has built a software platform that helps businesses merge their various applications into a single network.
Funding initiatives
Corporate venturers supported a total of 83 fundraising initiatives in Q1 2017, up from 72 initiatives reported at the same time last year. The estimated total capital raised, $20.90bn, was more than five times last year’s Q1 figure of $3.92bn. The initiatives include 37 announced, open and closed VC funds, 22 new corporate venturing units, 14 corporate-backed accelerators and three corporate-backed incubators, among others.
While the number of initiatives recorded in the fourth quarter of 2016 was slightly lower at 79, the investment level was five times higher in Q4, at over $109.34bn. But this astronomical figure is largely due to the inclusion of the $100bn SoftBank Vision Fund, a technology investment vehicle that the telecoms and internet group announced last October. If this fund were excluded from the analysis, the total investment for Q4 2016 would have been just $9.34bn, or less than half the total capital raised in the first quarter of this year.
China’s premier Li Keqiang launched Sino-CEE Financial Holdings, an asset manager that will run a €10bn ($11bn) investment fund, at the fifth meeting of the heads of government of Central and Eastern European countries in Riga, Latvia, in January. The fund will initially focus on businesses in Central and Eastern Europe. Sectors targeted by the fund include high-tech manufacturing, consumer goods and infrastructure projects. Backed by the government, Sino-CEE Financial Holdings is also being supported by insurance provider China Life Insurance and conglomerate Fosun, though the details of their involvement remains unclear at the moment.
The Chinese government also established a RMB100bn ($14.5bn) fund to invest in the country’s internet sector. The China Internet Investment Fund had raised $4.35bn at the time of the announcement in January 2017. It will be overseen by state agencies the Cyberspace Administration of China and the Ministry of Finance, with the intention of boosting the nation’s online and internet businesses. Limited partners in the fund include financial services firm Industrial and Commercial Bank of China, which supplied $1.45bn, telecoms companies China Mobile and China Unicom, insurance provider China Post Insurance and Citic Guoan Group, part of investment firm Citic Group Corporation.
Germany-based e-commerce and online services holding company Rocket Internet closed its dedicated venture capital fund, Rocket Internet Capital Partners (RICP), at its hard cap of $1bn. Rocket Internet, which provided approximately $140m for the fund, claimed it was the largest internet-focused fund in Europe. It will target online companies in sectors including marketplaces, e-commerce, financial technology, software and travel services. The fund’s close follows a series of setbacks for Rocket Internet in 2016, when the company’s share price and the valuation of several of its global e-commerce businesses dropped significantly.
Property firm San Sheng Hong Ye contributed to China-based Suzhou Hongtu Big Data Venture Capital Fund, an initiative with an overall capital target of RMB5bn. The fund – formed jointly by private equity firm Shenzhen Capital Group and the municipal government of the Chinese city Suzhou – plans to raise an initial RMB500m. Suzhou Hongtu Big Data Venture Capital Fund will look to identify opportunities in areas including big data trading platforms, software-as-a-service, semiconductors, sensors and digital technologies. It is also hoping to partner industry funds and financial institutions to incubate big data technologies.
China-based electronics contract manufacturer Foxconn paid $600m for a 54.5% stake in investment fund SoftBank Asia Capital, previously wholly-owned by SoftBank. Foxconn said it hoped to merge SoftBank’s investment expertise with its own global presence as well as advanced manufacturing and technology services knowhow. The two corporates had previously partnered when Foxconn committed cash to the $100bn SoftBank Vision Fund.
US-based venture capital firm Pivotal BioVenture Partners closed its first fund at $300m, securing the capital from China-based property developer Nan Fung Group. Pivotal BioVenture Partners Fund I will make early-stage investments in biotechnology developers, and is focusing on those looking to advance innovative technology to the clinical stage with a view to creating transformative therapeutics.
Legend Capital, the venture capital firm formed and sponsored by China-based conglomerate Legend Holdings, raised $243m for its latest fund, according to a regulatory filing. LC Fund VII raised the capital from 23 limited partners according to the filing, and is targeting a final close of $375m. Legend Capital was formed by its parent company in 2001. It has since invested in more than 300 companies and exited about 90 through public listings and acquisitions.
China-based local services platform Meituan-Dianping formed a RMB3bn venture capital fund to invest in the consumer internet sector. Meituan-Dianping intends to raise an initial RMB1.5bn for the fund. In addition to providing capital itself, it is set to secure finance from Tencent and agribusiness New Hope Group. The firm also plans to secure commitments from other external investors. The fund will invest in companies operating in the retail, entertainment, food and beverage, hotel and tourism sectors to build an ecosystem around Meituan-Dianping’s offering.
US-based social media company Facebook announced that a group of investors, including several university entities, may invest up to $170m as part of its Telecoms Infrastructure Project. The initiative does not constitute a new fund, but it allows Facebook to obtain non-binding and in-principle commitments from partners to back telecoms infrastructure startups over the next three to five years.
Partners in the project include Oxford Sciences Innovation, the university venturing fund of Oxford University, Touchstone Innovations, the commercialisation firm spun out of Imperial College London, and IP Group, a commercialisation firm supported by several universities.
Germany-based industrial and consumer product manufacturer Henkel formed corporate venturing subsidiary Henkel Ventures, and plans to invest up to €150m via the unit. Henkel has so far invested €25m in its corporate venturing activities, supplying capital to barrier technology manufacturer Vitriflex and coating material producer DropWise as well as funds raised by VC firms Emerald Technology Ventures and Pangaea Ventures. Henkel Ventures will seek to invest at an early stage, preferably at series A, and will provide portfolio companies with access to its brands and global network.
Note: Quarterly data can fluctuate as additional data are reported after GCV goes to press
