GCV Analytics defines the financial services sector as encompassing payment technologies and cryptocurrencies, alternative lenders, personal finance and wealth management products and services, crowdfunding, social investing, financial analytics and insurance technologies, among other areas.
GCV reported 667 rounds involving corporate investors from the financial services sector for the period between October 2016 and September 2017. A significant portion of those (305) took place in the US, 84 were hosted in China, 50 in the UK, 36 in India and 29 in Japan.
Most of these commitments went to emerging enterprises from the same sector (190), with the remainder going to companies in IT (103), health (102) and services (77), among other sectors.
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds amounted to $42.71bn last year, up from the $26.78m in 2015, an almost 60% increase. The deal count also increased, rising by 5% from 577 deals in 2015 to 607 last year. This upward trend, which we have been seeing since 2014, may be sustained through the rest of 2017 – we had tracked 508 deals, worth an estimated $19.75bn, as of the end of September.
The 10 largest investments by corporate venturers from the financial services sector span a range of businesses.
The leading corporate investors from the financial services sector were US-based investment bank Goldman Sachs, China-based financial conglomerate Legend Holdings and financial firm Fidelity. China-based Alibaba-affiliated payment technology company Ant Financial took part in the largest rounds, along with Fidelity and Goldman Sachs.
Overall, there was steady and sustained growth of corporate investment in emerging fintech enterprises from 2015 to 2016 in terms of both deal count and total capital investment. According to GCV Analytics data, $11.18bn was invested over 203 rounds in 2016, almost double the 6.47bn invested over 172 deals in 2015.
The subsectors that have driven most of the growth of fintech since 2014 have been payment technologies and cryptocurrencies, personal finance and wealth management tools as well as alternative lenders. Emerging enterprises from these sub-sectors are currently disrupting financial services (see Corporate venturing in blockchain tech).
Deals
Financial services corporates invested in a number of large rounds, raised primarily by fintech, services, media and health companies. Two of the top rounds were above $1bn.
Ant Financial acquired a minority stake in Hong Kong-based financial services firm MassMutual Asia along with Yungfeng Capital, the family office of Alibaba’s founder Jack Ma, which acquired a 60% majority stake. The other 40% was acquired by Ant Financial and a host of other investors including media group Sina and Singapore government-backed acquirer City-Scapes. The total size of the transaction was $1.7bn, consisting of $1bn in cash and $700m in shares. MassMutual Asia manages general insurance as well as a Mandatory Provident Fund, a compulsory pension plan for Hong Kong residents.
Koubei, an on-demand services provider launched by China-based e-commerce firm Alibaba, raised $1.2bn from investors including private equity firm Silver Lake Management. China Investment Corporation (CIC), the country’s sovereign wealth fund, took part in the round, as did Primavera Capital Group and CDH Investments. The round valued Koubei at $8bn. Launched in June 2015 with $1bn of funding from Alibaba and Ant Financial, Koubei operates an online platform that incorporates services such as ride-ordering, restaurant booking, food delivery and event ticketing.
US-based health intelligence provider Outcome Health raised $600m from a consortium that included Goldman Sachs Investment Partners, the venturing subsidiary of Goldman Sachs, as well as CapitalG, the growth-stage corporate venturing division of diversified conglomerate Alphabet. The round valued the company at $5bn premoney. Founded in 2006, Outcome Health has developed a platform to deliver health information and intelligence during critical moments of care to help both medical professionals and patients to make better decisions.
Indonesia-based internet company Garena rebranded to Sea Ltd, disclosing $550m in new funding from investors including diversified conglomerate JG Summit Holdings and food supplier Uni-President Enterprises. The round also featured financial services group Cathay Financial, among other investors. Founded in 2009, Sea operates a diversified internet business that includes an e-commerce platform called Shopee, online video streaming, chat, mobile gaming and a financial services platform known as AirPay.
Premia Holdings, a Bermuda-registered property and casualty (P&C) insurance and reinsurance startup, raised $510m from investors including an affiliate of insurance and reinsurance provider Arch Capital Group. The company’s other founding backers include private equity firm Kelso & Company and its co-investors, as well as undisclosed senior Arch Capital members, institutional investors and Premia’s management team. Premia will provide specialist P&C runoff insurance services to businesses around the world.
China-based medical imaging equipment developer United Imaging Healthcare raised RMB3.3bn ($505m) in a series A round co-led by insurance provider China Life Insurance. Founded in 2011, United Imaging is working on imaging devices that use computerised tomography, magnetic resonance imaging and digital radiography. It has also developed a full-body positron emission tomography (Pet) scanner to track the body’s internal metabolic processes.
Deliveroo, a UK-based online food ordering platform backed by communications equipment manufacturer Nokia, received £285m ($384m) in new funding. Financial services group Fidelity and investment firm T Rowe Price co-led the round, which valued Deliveroo at $2bn. Founded in 2012, Deliveroo enables consumers to order food from local outlets through a mobile app and website. The food is delivered by bicycle and motorcycle couriers.
Hive Box, a China-based, corporate-backed logistics services provider, received RMB2.5bn in a series A round led by alternative asset management firm CDH Investments. The round also featured state-owned financial institution China Development Bank, which participated through its China Development Bank Capital investment arm, among other investors. Hive Box was set up in 2015 by logistics facilities provider GLP and courier companies SF Express, STO Express, ZTO Express and Yunda Express.
US-based fitness company Peloton completed a $325m series E round that included mass media group Comcast NBCUniversal and Fidelity Investments, a subsidiary of Fidelity. Founded in 2012, Peloton operates a home fitness offering that combines its custom-made exercise bike with an app-based subscription service that provides video access to live classes and performance-tracking metrics.
Payment services firm Mastercard invested in US-based payment services automation software provider AvidXchange as part of a $300m financing round. The round also featured pension fund manager Caisse de Dépôt et Placement du Québec, which provided $100m of the funding, Singaporean state-owned investment firm Temasek and Peter Thiel, a co-founder of online payment technology producer PayPal. Founded in 2000, AvidXchange supplies technology that automates invoice and payment processes for some 5,500 corporate clients operating in industries such as financial services, real estate, energy and construction.
Emerging fintech-focused companies also received financial backing from corporate investors from other sectors.
Telecoms and internet group SoftBank invested $1.4bn in One97 Communications, the India-based e-commerce company that owns mobile payment platform Paytm. The round valued One97 at $7bn post-money. One97 operates a diversified e-commerce and online services business but it is now best known for Paytm, the mobile payment platform it launched in 2010, which enables users to buy phone credit, pay bills and buy insurance or book travel tickets.
Easy Life Financial Services, a spinout of aviation-focused conglomerate HNA Group, received RMB1.9bn in series B-plus funding from a consortium of investors. Investors included financial firm H Capital, among others. Easy Life, which was established in January 2016, provides a range of payment services catering to the tourism industry, including foreign currency exchange, traveller’s cheques, tax rebates and prepaid debit cards for international use.
Dianrong, a China-based online lending platform backed by industrial leasing company Bohai Leasing, raised $220m in a funding round led by Singapore’s sovereign wealth fund GIC. The round also featured CMIG Leasing, a subsidiary of investment holding firm China Minsheng Investment Group, among other investors. Dianrong runs a peer-to-peer lending marketplace for individuals and small and medium-sized businesses. It has 28 offices across China.
Ant Financial agreed to invest $200m in Kakao Pay Corp, a mobile finance subsidiary of South Korea-based internet company Kakao. The funding will be used to launch Kakao Pay as a separate entity to Kakao. It currently provides services that include online payment, bill payments and remittance to a customer base of more than 14 million. Ant is providing the funding as part of a strategic partnership. Kakao Pay is a mobile finance subsidiary of South Korea-based internet company Kakao. Kakao Pay will distribute Ant’s services in its home country.
Payoneer, a US-based cross-border payments platform operator backed by insurance group Ping An, reached the first close of a $180m financing round led by growth equity firm Technology Crossover Ventures. Private equity group Susquehanna Growth Equity also participated in the funding, having initially invested in Payoneer as part of a $25m series D round in early 2014. Founded in 2005, Payoneer has built a digital platform that enables users to make quick cross-border payments. It also provides a mass payout service through which businesses can transfer money to many beneficiaries at the same time.
Sumitomo Mitsui Card Company, a credit card branch of financial services conglomerate Sumitomo Mitsui Financial Group, invested an undisclosed amount in US-based mobile payment technology provider Stripe, which provides technology that helps online merchants and service providers, including Twitter, Kickstarter, Shopify, Salesforce and Lyft, accept and process payments. Stripe was founded in 2011.
China-based brokerage firm Futu Securities raised $145.5m in series C funding from a consortium led by internet company Tencent. Venture capital firms Matrix Partners China and Sequoia Capital China also took part in the round, which valued the company at more than $1bn according to Futu founder Li Hua, though he did not reveal its precise valuation. Founded in 2012, Futu Securities operates an online stock-trading platform for invest in US and Hong Kong-listed companies.
Exits
Corporate venturers from the financial sector completed 53 exits between October 2016 and September this year, including 34 acquisitions, 13 initial public offerings (IPO) and three mergers.
On a calendar year-to-year basis, GCV Analytics tracked 57 exits in 2016, a sharp and significant increase from the 42 transactions recorded in 2015. The exited capital, however, surged to $13.85bn last year, up from $8.55bn in 2015.
There were four reported transactions in which financial services corporate venturers either exited or acquired a business.
US-based visual media platform Snap closed its IPO at $3.91bn, after the IPO’s underwriters took up the option to buy an extra 30 million shares. Snap floated, issuing 145 million shares priced at $17 each, which were joined by 55 million shares divested by existing backers to raise an initial $3.4bn, giving exits to investors including Fidelity, Alibaba and internet companies Tencent and Yahoo. NBCUniversal subsequently revealed that it invested $500m in Snap through the offering, giving it a stake of about 2.1%. Snap is best known for the Snapchat platform but its IPO filing indicates its long-term plans involve expanding into an all-purpose visual media company that will also delve into hardware.
The $93bn SoftBank Vision Fund made a $500m investment in China-based online insurance provider ZhongAn through its forthcoming IPO. Founded in 2013 by Ant Financial, internet group Tencent and Ping An, ZhongAn runs an online property and casualty insurance platform.
Enterprise software provider Sage Group agreed to acquire US-based financial management software provider Intacct in an $850m deal that will enable payment services provider American Express and professional services firm Deloitte to exit. Founded in 1999, Intacct has built a cloud-based platform for enterprises that incorporates cash, inventory, contract and vendor management as well as accounting, purchasing, financial consolidation, revenue recognition, subscription billing, financial reporting and project and fund accounting.
Waimai, a food delivery service launched by China-based internet company Baidu, was acquired by Rajax, the operator of food delivery company Ele.me, giving an exit to financial firm Hina Group and media company Baidu, which will continue to own a small stake. The transaction reportedly valued Waimai at approximately $800m, though the company was estimated to be worth as much as $2.5bn last year.
Berry Genomics, a China-based prenatal genetic testing company backed by Legend Holdings, completed a reverse merger with Shenzhen-listed automotive parts manufacturer Chengdu Tianxing Instrument and Meter. The transaction valued Berry Genomics at RMB4.3bn, down from its 2015 valuation of RMB10bn. Founded in 2010, Berry Genomics offers non-invasive prenatal genetic testing and diagnostics such as DNA sequencing for disease screening.
E-commerce and cloud computing group Amazon agreed to acquire United Arab Emirates-based online marketplace Souq.com for $650m, giving an exit to media and e-commerce firm Naspers, finance firm Standard Chartered and International Finance Corporation, the private investment arm of the World Bank. Founded in 2005, Souq operates the largest online marketplace in the Middle East by customer size.
IT services provider Wipro Systems agreed to acquire US-based cloud technology producer Appirio in a $500m deal, providing an exit to cloud software firm Salesforce and Fidelity Management & Research, an investment advisory branch of Fidelity. Appirio offers consultancy services and diagnostic tools to help businesses understand how best to deploy cloud computing technology, and provides technology that enables businesses to build custom cloud and mobile applications. It also operates an online crowdsourcing marketplace for designers, developers and data scientists, called Topcoder.
Food and beverage producer Nestlé agreed to acquire a majority stake in Blue Bottle Coffee, the coffee roaster and retailer backed by internet technology group Alphabet. Nestlé declined to provide details of the deal, but the Financial Times reported it was set to pay up to $500m for a 68% stake. In addition to Alphabet, other investors that are potentially exiting are Morgan Stanley Investment Management, True Ventures, Index Ventures and various angels. Blue Bottle was founded in 2002.
There were also exits from emerging fintech enterprises involving corporate investors from other sectors.
SoftBank invested $500m in China-based online insurance platform ZhongAn Online Property & Casualty Insurance as part of its $1.5bn IPO. ZhongAn issued approximately 199 million new shares on the Hong Kong Stock Exchange at HK$59.70 ($7.64) each, at the top of the HK$53.70 to HK$59.70 range it had set. SoftBank acquired a stake of just under 5%. The offering, the largest for a fintech provider ever to take place in Hong Kong, is also the first in any country by an insurance technology producer. ZhongAn’s online platform provides specialised insurance packages.
Transportation ordering platform Grab acquired Indonesia-based online payment platform Kudo for more than $100m, giving exits to media firms Emtek, Singapore Press Holdings and Gree. Kudo has built an online platform that processes payments for its customers, allowing unbanked users to make or receive payments for goods such as tickets, food, consumer goods, mobile credit or insurance.
Electronic payments company Ingenico agreed to acquire India-based payments processing firm TechProcess for Rs6bn ($88.6m), providing an exit to technology producer Nokia’s investment unit, Nokia Growth Partners. Founded in 2000, Techprocess operates two payments services – electronic bill payments platform Billjunction and mobile payments gateway service Paynimo, aimed at consumers and merchants.
Game developer Nexon paid $80m for a 65.2% stake in Korbit, a South Korea-based cryptocurrency exchange backed by SoftBank. The valuation of Korbit was reported to be approximately $120m. Korbit operates an online platform that enables users to trade in cryptocurrencies such as Bitcoin, Ethereum and Ripple. It stores the majority of deposits in digital wallets unconnected to the internet to prevent cyberattacks.
Iheima, a China-based incubator and media business, completed a RMB182m IPO. The flotation provided an exit to outdoor accessories manufacturer Toread Holdings and internet company Youyou. The company issued 17 million shares at RMB10.75 each. Founded in 2011, Iheima offers a full range of services for startups, such as entrepreneurship coaching, public relations promotion and capital raising.
Financial software provider Addepar acquired AltX, a US-based developer of a machine-learning platform for hedge fund investments, for an undisclosed sum, giving an exit to financial services firm Wells Fargo. AltX has built a platform that uses machine learning to analyse data on alternative investments and match it to a content database. Its engineering and data science teams will join Addepar while the executive team will oversee the transition.
Funds
Between October last year and September 2017, corporate venturers and corporate-backed VC firms investing in the financial services realm secured over $5bn in capital through 59 funding initiatives, which included 26 corporate-backed VC funds, 16 new venturing units, nine accelerators and two incubators.
On a calendar year-to-year basis, there were more funding initiatives last year – up from 34 in 2015 to 49 in 2016 – while total capital raised went down from $5.44bn to $1.61bn last year. However, both the number of initiatives and the total investment value appear to be rebounding this year, as by the end of September, Global Corporate Venturing had reported 49 initiatives, worth an estimated $3.96bn.
Germany-based e-commerce and online services holding company Rocket Internet closed at $1bn its dedicated venture capital fund Rocket Internet Capital Partners (RICP). The final close represented RICP’s hard cap, and Rocket Internet claimed it is the largest internet-focused fund in Europe. RICP will target online companies in sectors including financial technology, marketplaces, e-commerce, software and travel services. Rocket Internet itself provided approximately $140m for the fund, which will participate in early and growth-stage deals, acting as a co-investor with Rocket Internet and investing alongside it in a four-to-one ratio.
Ping An launched the $1bn Ping An Global Voyager Fund to invest in financial and healthcare technology startups. The $1bn figure represents Global Voyager Fund’s initial size, and Ping An, which has a customer base of more than 138 million, said in a statement it intended to become an “internationally leading technology investment pioneer”. The fund is Ping An’s second dedicated corporate venturing unit, following the establishment of its Ping An Ventures subsidiary in 2012, and the company has been an active venture capital investor.
Insurance firm China Life and internet company Baidu announced a RMB7bn private equity fund partnership, citing a Hong Kong Stock Exchange filing by China Life. The move followed a statement after a cabinet meeting last year led by state council premier Li Keqiang that state-owned companies, including insurers like China Taiping and China Life, would be allowed to set up venture funds and “insurance companies will be encouraged to invest in startups”. China Life will put up as much as RMB5.6bn of the fund’s capital, while Baidu will provide up to RMB1.4bn. Baidu Fund Partnership will target mid and late-stage investments in internet-focused companies, including mobile internet, artificial intelligence and online finance technology, with a “significant association” with China.
Telecoms firm Saudi Telecom formed $500m corporate venturing fund STV that it expects to begin investing by the fourth quarter of 2017. The Saudi Arabia-based company has since late 2011 invested in IT, telecoms, media and entertainment companies through independently managed venture capital fund STC Ventures. The new fund will also be managed independently and will target companies developing artificial intelligence, virtual reality, banking, logistics and digital health technology and services. It aims to invest roughly $100m a year over the next four to five years.
Vertex Ventures, the VC arm of Singapore state-owned investment firm Temasek, raised over $150m for its third fund aimed at Southeast Asia and India. The fundraising effort included a commitment from Thailand-based financial services firm Kasikornbank, the first time Vertex has sought investment outside Temasek. The $150m figure represents the fund’s target, but Vertex said it would close the fund at the end of the year. It is expected to focus on fintech startups, providing between $3m and $5m at series A stage and using Kasikornbank’s expertise and network.
Germany-based venture capital firm Project A closed a €140m ($148m) early-stage fund with contributions from several domestic corporates. Retailer Otto Group, broadcaster ProSiebenSat.1, diversified holding company Franz Haniel & Cie, games and toy maker Ravensburger, food producer Dr Oetker and publishers Axel Springer and Gruner & Jahr are all limited partners in the fund. EU financing agency the European Investment Fund is a cornerstone investor in the fund, which also received contributions from assorted private investors. Project A targets the fintech, human resources, insurance technology, property technology and industry 4.0 sectors. It aims expand its focus to include digital health, business-to-business and vertically integrated consumer brands.
US-based microfinance non-profit organisation Accion launched a $141m financial technology and services investment fund with contributions from limited partners including insurance groups Axa, MetLife and Prudential, as well as from payment services firm Mastercard. Accion Frontier Inclusion Fund will invest in startups developing technology that can help expand the range and quality of financial services available to those currently underserved, a figure the organisation estimates at above 3 billion. The fund will in particular look to investments in sub-Saharan Africa, Latin America and Asia, where it will prioritise India and Southeast Asia.
France-based investment firm BlackFin Capital Partners achieved a first close of its Tech Fund 1, having secured more than €100m with the support of several insurance companies. The insurers, which included Vaudoise Assurances Group, Groupama Group, Sogecap, Natixis Assurances and Swiss Life. They were joined by France’s public investment bank BPIfrance, which contributed directly and through its MultiCap Croissance fund, and unnamed financial services firms and family offices. The fund has a target size of more than €150m and will identify opportunities in the financial sector, including pure-play fintech, insurance technology and regulation technology.
China-based venture capital firm Yi Capital closed a first fund at RMB800m after securing home appliance manufacturer Joyoung as a limited partner. Joyoung was joined by national industrial guidance fund Zhongjin Qiyuan and Citic Industrial Fund of Funds, part of alternative investment management firm Citic, as well as additional publicly-listed companies and state-owned guidance funds. Founded in 2014, Yi is looking to back industrial internet startups that will participate in the accommodation, transport and financial services industries as well as those providing other traditionally offline services.
The Russia-China Investment Fund, backed by sovereign wealth funds Russian Direct Investment Fund and China Investment Corporation, partnered TUS Holdings, the enterprise arm of Tsinghua University’s Science Park, in the $100m Russia-China Venture Fund, which aims to boost scientific and technological cooperation between the nations, focusing on sectors such as fintech, big data, cloud, biotech and biomedicine, new materials and clean energy.
People
Vanessa Colella, who had been Citi Ventures’ global head of venture investing and strategic growth initiatives since 2013, replaced Deborah Hopkins as chief innovation officer at US-listed bank Citigroup and as CEO of Citi Ventures. A Massachusetts Institute of Technology and Columbia University graduate, Colella had worn a number of hats before coming to Citi. When she was named a GCV Rising Star, she said: “Over the course of my career, I have been a partner at McKinsey, entrepreneur-in-residence at US Venture Partners, senior vice-president of insights at Yahoo, a seventh and eighth-grade science teacher and an author of a book on agent-based modelling.”
CSAA Insurance Group, a US-based insurer, hired Debbie Brackeen as its chief strategy and innovation officer. Brackeen was the global head of innovation at US-listed bank Citigroup, where she launched its global accelerator network. She has more than 25 years’ experience at tech companies such as Apple, Sun, Cadence Design Systems, Lutris Technologies, Synchron Networks and eBay.
Victor Pascucci left reinsurer Munich Re, where he was a partner in its corporate venturing division, to join US-based venture capital firm Lightbank as managing partner. Pascucci joined Munich Re in June 2016 from financial services firm USAA where, as head of corporate development, he ran its $330m strategic VC initiative. Prior to being hired by Lightbank, Pascucci on the board of one of its portfolio companies, online insurance claims platform Snapsheet, overseeing USAA’s investment in 2012.
Financial services firm Business Development Bank of Canada (BDC) hired Michelle Scarborough as managing director for strategic investments and its Women in Tech fund. The initiative will include startup-to-corporate “collision days”, access to accelerator-run corporate programs, VC fund-to-corporate interactions and best practice training in managing a corporate venture fund. The strategy was launched at Canada’s first ever Corporate Innovation Summit, which was presented by the state-owned bank’s investment unit, BDC Capital, and Global Corporate Venturing (GCV) in collaboration with Business Council of Canada, a non-profit for corporate CEOs.
US-based private equity firm Sorenson Capital officially launched a venture capital arm, Sorenson Ventures, headed by Ken Elefant, a former managing director at corporate venturing unit Intel Capital. Elefant had been at Intel Capital, the corporate venture capital arm of semiconductor technology provider Intel, since 2011 and headed the software and security group at the unit. He came to Intel from VC firm Opus Capital, where he was a founding general partner.
Rumi Morales stepped down as head of CME Ventures, the strategic investment vehicle for US-based exchange operator CME Group. Morales was the unit’s executive director. She was previously an executive director in the company’s international corporate development and finance division. Senior director Brandon Gath is also leaving the unit. He joined CME Ventures at the same time as Morales in late 2013, having previously spent four years in corporate development and finance for CME.
Jeff Allen, Mastercard’s vice-president for strategic investments, became principal for strategic business development at e-commerce firm Amazon. Allen joined Mastercard in August 2009 from investment bank Sagent Advisors and was a thought-leader in the industry.
American Family Ventures, the strategic investment arm of US-based insurance firm American Family, appointed Drew Aldrich as principal. Aldrich moved from Axa Strategic Ventures, the corporate venturing vehicle of insurer Axa, where he was a senior associate for just over two years. He had been a director of France-headquartered Axa’s US subsidiary, Axa Equitable, since 2012.
Ruth Foxe Blader moved from Allianz Ventures, the corporate venturing vehicle formed by insurance group Allianz, to UK-based investment and advisory firm Anthemis where she was appointed director of investments. Blader had been at Allianz since 2012 and oversaw early-stage investments in the financial technology sector. She had also been engagement director of the firm’s accelerator initiative, Allianz Digital Accelerator, which she helped launch.
