Technological advances in the IT sector today extend far beyond the realms of the sector itself, having significant spill-over effects across a wide range of industries undergoing digitisation.
One of the fundamental characteristics of the increasingly digitised world is the generation of large amounts of data. Big data, as this phenomenon is dubbed, is becoming ever more ubiquitous. A 2017 study by the Dresner Advisory Services found that big data adoption in businesses had reached 53% in 2017 for all companies surveyed, up from 17% in 2015, where reporting, dashboards, advanced visualisation “self-service” and data warehousing were the top five technologies in business intelligence. According to the report, data warehouse optimisation were the top use cases for big data, followed by customer and social media analysis, along with predictive maintenance.
Artificial intelligence (AI), machine learning and deep learning have been also among the hottest buzzwords in the world of innovation over the past few years. AI is the broader term, referring to any involvement of a machine performing tasks characteristic of human intelligence – from recognising objects and images through speaking languages to problem-solving. Machine learning is one way to achieve AI by having a machine learn to perform a task without having being explicitly programmed to do it. Deep learning is one of the approaches to machine learning, inspired by the functioning of neural networks in the human brain.
The hype around those terms has been anything but a passing fad. The McKinsey Global Institute estimated that AI-driven entrepreneurial activities attracted between $26bn and $39bn of investment during 2016, most of it coming from digital natives like e-commerce company Amazon or internet companies Baidu and Google. This finding is consistent with what Global Corporate Venturing has been reporting across various industries where AI is being adopted.
Most interesting and controversial are the questions raised about the impact of AI on the economy. There are also some who feel alarmed by the possibility of AI equivalent to or greater than human intelligence taking over in the long run. The world, however, is perhaps still far from such an Asimovian robot-dominated stage of development. AI as a means to augment human productivity may well turn out to be a positive force in the coming decades. A PwC report – The macroeconomic impact of AI – estimated that AI could account for an additional 14% of expected global GDP growth by 2030, through AI-enhanced services and products, on the consumer side, and a labour force armed with AI tools that will drive up productivity.
While AI-empowered products and services may be beneficial for the consumer, a major societal concern about AI remains job losses. The PwC report estimated that 326 million jobs would “come to depend on and be heavily impacted by AI” by 2030. Most of these were likely to be low-skilled positions. Skilled jobs, on the other hand, would “be more positively impacted, supporting a bias towards skilled labour”, the report stated.
Aside from destruction of jobs, the unceasing digitisation of the world brings threats addressed by another important subsector of the IT industry – cybersecurity. This market has gained momentum due to increased adoption of digital technologies across a wide range of industries as well as the greater use of internet-connected mobile technologies by consumers.
Cybersecurity technology faces the never-ending task of protecting users and enterprises from malicious attacks. As analyst Steve Duplessie, founder of Enterprise Strategy Group, put it: “Cybersecurity is a magnificent market because the problem can never be solved entirely. Fix one hole, the bad guys find another. It is a ping-pong match for hackers.”
It is not simply the increased use of Internet on mobile devices that may lead to serious security vulnerabilities. It is also the internet of things (IoT) that is likely to present such problems. A Poneman Institute survey found that 94% of security leaders thought IoT constituted a security concern that could result in “a catastrophic incident”, as cited in the Cybersecurity Market Outlook: 2018 Industry Trends and Insights report.
Today’s digital world, with its burgeoning data and connectivity, would be unthinkable without cloud technology and cloud infrastructure. Many data-driven and data-dependent businesses have either moved operations completely to the cloud or reduced their operational expenses with private data centres. In fact, a McKinsey analysis – IT as a service: from build to consume – from 2016 predicted that cloud providers would make up nearly 80% of shipped server and storage capacity by the end of this year.
Cloud technologies and data are inextricably linked to the rise of the IoT, which some have already dubbed the “fourth industrial revolution”. While IoT may mean smarter homes and cities to consumers, most of the value it is expected to bring is likely to stay within the realm of business-to-business applications. According to the 2017 Enterprise IoT Executive Survey, conducted by McKinsey, 96% of companies anticipated IoT spending increases over the next three years and planned to dedicate a quarter of IT budgets to IoT-related capabilities. The same study also concluded that the growth of enterprise IoT would drive demand for the compute-and-storage infrastructure as well as IoT-specific solutions. The latter creates a virtuous cycle for emerging businesses in this area.
While business operations are migrated to the cloud, individual consumers are now also moving to a new digital reality, enabled by virtual reality (VR) and augmented reality (AR) technologies. A report on VR and AR devices by global analyst company CCS Insight predicted that 22 million VR and AR headsets and glasses will be sold in 2018, with fivefold growth prospects to 121 million units by 2022, largely due to expected sales of smartphone-enabled VR headsets. Despite the wide range of applications for VR tech, the report cites gaming as the primary reason for sales of VR devices, noting that this is unlikely to change. In the case of AR glasses, in spite of limited adoption by businesses to date, the report predicts a much wider deployment in coming years.
While wide adoption of AR glasses technologies at the enterprise level may not yet have materialised, what businesses never cease to purchase is software. The Global Enterprise Software Market and Forecast to 2022 – an Orbis Research report – said the enterprise software market would grow to more than $500bn over the next four years, with customer relationship management, enterprise resource planning, business intelligence and supply chain management being the leading application segments. The report also identifies the top three areas for enterprise software – banking and securities, communications and media, and manufacturing and natural resources. GCV has recorded numerous cases of telecoms companies, such as SoftBank, investing in such emerging companies.
Chips and semiconductors enable sufficient computing power for all these developments. According to a report by researcher Technavio – Global Flip Chip Market 2018-2022 – the market for electronic chips is expected to grow at a compound annual growth rate of 6.22% between 2018 and 2022, fuelled mostly by inceasing demand for high-functionality devices. In particular, the surging use of semiconductors in automobiles for infotainment and navigation systems, in both autonomous and connected car projects, was found to account for a significant part of this growth. GCV has recorded a rise of corporate-backed investments in connected and autonomous vehicle technologies.
For the period June 2017 to May 2018, we reported 553 venturing rounds involving corporate investors from the IT sector. Most (297) took place in the US, while 98 were hosted by China and 28 by India.
A large number of those commitments (196) went to emerging enterprises from the same sector, with the remainder going to a few companies developing technologies tangentially related – 67 deals in media (gaming, social media, digital advertising and adtech as well as AR & VR content), 58 in health (pharmaceuticals, medical devices, healthcare IT and administration) and services (mostly, business services, human resources management and edtech), among others.
The chart showing the co-investments of IT corporates illustrates that the sector’s incumbents have often invested together in a variety of software businesses (DocuSign, BlueStacks) as well as radio frequency matching networks developers (Reno Sub Systems) and AI applications (Unbabel), among others.
On a calendar year-on-year basis total capital raised in corporate-backed investment rounds dropped 10% from $34.58bn in 2016 to $31.11bn in 2017. The deal count fell 6% from 556 deals in 2016 to 523 in 2017.
The 10 largest investments by corporate venturers from the IT sector were spread across other industries.
The leading corporate investors from the IT sector were diversified digital conglomerate Alphabet, internet company Tencent and semiconductor manufacturer Intel. The list of IT corporates committing capital in the largest rounds was topped also by Tencent and Alphabet, along with research company International Data Group.
The most active corporate venture investors in the emerging IT companies were again Intel and Alphabet along with enterprise cloud software provider Salesforce, electronic manufacturers Samsung and Dell. The presence of industrial conglomerate Robert Bosch, and telecoms firms SoftBank and NTT Docomo in this list is unsurprising, as they aim for diverse holdings in their portfolios and emerging IT technologies are strategically important to their businesses.
The rising IT businesses in the portfolio of these non-traditional investors were varied, encompassing anything from hardware and electronics to AR technology, AI to enterprise software, as the diagram of co-investments in such companies illustrates.
Overall, corporate investment in emerging IT-focused enterprises went down from 2016 to 2017 in terms of both deal volume, while estimated total dollar went up slightly. According to our data, $13.38bn were invested over 428 rounds in 2017, compared to the $9.84bn invested over 383 deals in 2016.
Deals
IT sector corporates invested in a number of large rounds, raised by a range of enterprises, primarily from other sectors, such as transport, consumer and services. Eight of the top 10 rounds were above $1bn. Most of them featured Tencent as an investor.
Tencent led a $4bn round for China-based online services provider Meituan-Dianping, which valued the latter at $30bn. Travel services provider Priceline Group also participated in the round, as did IDG Capital, a subsidiary of International Data Group. Meituan-Dianping runs a local services and e-commerce platform that processes about 21 million orders a day, for items such as food, event tickets and flights, connecting 280 million customers annually with a network of some 5 million local businesses.
China-based online group buying platform Pinduoduo closed a $3bn funding round led by Tencent. Venture capital firm Sequoia Capital reportedly also participated in the round, which valued Pinduoduo at $15bn. Founded in 2015, Pin-duoduo operates an e-commerce offering that allows users to utilise social media platforms such as messaging service WeChat to share details of products they want to buy, and to form purchasing groups to secure discounts of up to 90%. The platform offers products across a wide range of categories, such as food, cosmetics and babycare.
JD Logistics, the logistics spinoff of China-based e-commerce firm JD.com, agreed funding from investors including Tencent and insurer China Life for a round that closed at $2.5bn. JD Logistics was formed by its parent company in 2017 out of a logistics operation it had been running for a decade. It has seven fulfilment centres and more than 400 warehouses, which it claims represents the largest fulfilment infrastructure of any China-based e-commerce firm. The company’s services cover delivery in addition to cold chain logistics, business-to-business items, cross-border delivery and a crowdsourced service.
China-based trucking services marketplace Manbang Group raised $1.9bn in a round featuring Tencent along with subsidiaries of Alphabet and SoftBank. The round reportedly valued the company at $6.5bn. Alphabet’s investment came through its CapitalG unit while SoftBank took part through the SoftBank Vision Fund. Formerly known as Full Truck Alliance Group, Manbang runs an online platform where customers looking to ship goods can contact truckers with surplus space in their vehicles. It was formed by the November 2017 merger of rivals Huochebang and Yunmanman. The company’s platform uses artificial intelligence to help forge connections based on routes and space.
China-based Ant Financial, a financial affiliate of e-commerce firm Alibaba, acquired a minority stake in Hong Kong-based financial services firm MassMutual Asia along with Yungfeng Capital, the family office investment firm of Alibaba founder Jack Ma, which acquired a 60% stake. The other 40% was acquired by Ant Financial and a host of other investors, including media group Sina. The total size of the transaction was $1.7bn – $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.
India-based on-demand ride-provider Ola raised $1.1bn in a funding round led by Tencent. SoftBank also participated in the round, as did undisclosed US-based investors. Ola is in talks with additional parties in a bid to add another $1bn, taking the size of the round above $2bn. Founded in 2011 as Olacabs, Ola has built an app-based ride-hailing service offering various categories from luxury cars and taxis to auto rickshaws and shuttle buses. The company operates in 110 Indian cities.
China-based smart electric vehicle developer Nio secured more than $1bn in a round led by Tencent. The round, which valued the company at about $5bn, included hedge fund Lone Pine Capital, among other investors. Founded as NextEV, Nio is working on an electric autonomous car equipped with a personalised digital assistant that it aims to bring to market by 2020. It has already created a supercar called the EP9, which is said to be the fastest electric vehicle in the world.
Tencent led a $1bn round for China-based social media app Kuaishou. The transaction valued the company at $18bn. The round’s other investors included venture capital firm Sequoia Capital China. Kuaishou’s mobile app enables users to upload and share photos and videos as well as livestream videos to their followers, who can reward them with virtual gifts. The company has 100 million active users but aims to triple that figure.
China-based robotics technology producer UBtech Robotics closed a $400m series C round led by Tencent. The deal reportedly valued UBtech at about $4bn. Founded in 2012, UBtech produces family-friendly humanoid robots for a range of applications. Its products include educational kits for children to build and program their own robot, in addition to a services robot that provides information in hotels and airports.
Tencent and asset manager Phoenix Capital co-led a RMB1.5bn ($227m) series C round for China-based online game-streaming platform Douyu TV. The round included private equity firm Shenzhen Capital Group and the Chinese state-backed National SME Development Fund. Founded in 2013, Douyu runs an online platform for livestreaming gaming exploits, operating similarly to US-based Twitch.
There were other interesting deals in emerging IT-focused businesses that received financial backing from corporate investors from other sectors.
China-based AI technology provider SenseTime closed a series C-plus round at $620m. The round featured Qualcomm Ventures, the corporate venture capital subsidiary of the mobile semiconductor technology producer. Investment and financial services group Fidelity International also participated in the round, which reportedly valued SenseTime at more than $4.5bn. SenseTime supplies computer vision and deep learning technology based on its supercomputing platform, powering functions such as facial and textual character recognition, video analysis and autonomous driving software. This round came shortly after Alibaba had led a $600m series C round for SenseTime. Retail group Suning and Singaporean government-owned investment firm Temasek also participated in that round, which the company claimed to be the largest raised by an AI technology developer.
US-based AR technology producer Magic Leap raised $502m in a series D round featuring Alphabet, Alibaba and media company Grupo Globo. Temasek led the round. Founded in 2011, Magic Leap has operated mostly in stealth mode, though details that have emerged suggest it is developing an AR headset that superimposes virtual objects on physical surroundings.
Megvii, a China-based facial recognition technology developer also known as Face-plus-plus, secured about $460m in a round featuring diversified conglomerate SK Group and contract electronics manufacturer Foxconn. The round also featured Ant Financial. Megvii supplies facial scanning and recognition technology to electronics and internet companies including Ant Financial, and its systems draw on identification files the Chinese government holds on its citizens.
South Korea-based internet company Kakao partnered private equity group TPG to launch subsidiary Kakao Mobility with ₩500bn ($437m) in funding. TPG led the round, though other investors were not identified. Kakao Mobility will operate a range of the firm’s existing brands, including ride-sharing app Kakao Driver, taxi service Kakao Taxi and navigation app Kakao Navi. The spinout is expected to introduce additional products, such as a parking service. The company plans to introduce a corporate version of Kakao Taxi and will integrate automatic payment through payment processing platform Kakao Pay.
New Leshi Smart Home, an affiliate of China-based consumer electronics producer LeEco, raised RMB3bn from investors including several corporates. Tencent, retailer Suning, real estate developer Sunac China and JD.com provided about $318m of the funding and the rest came from convertible note financing. Formerly known as Leshi Zhixin Electronic Technology, New Leshi Smart Home produces smart internet-connected televisions under the brand name LeTV Super TV.
Kingsoft Cloud, a China-based cloud storage services provider spun out from office software producer Kingsoft, raised $300m in a series D round that included its parent company. Kingsoft provided $150m of the funding while private equity firm Liyue Investment invested $100m and investment group China Minsheng supplied $50m. Founded in 2012, Kingsoft Cloud provides data storage services in China and North America, operating data centres and supplying network infrastructure services to enterprises.
US-based data warehousing software provider Snowflake Computing completed a $263m growth round, featuring Capital One Growth Ventures, a corporate venture capital vehicle for financial services provider Capital One. The round was closed at a $1.5bn pre-money valuation. Snowflake has created a cloud-based data warehousing software product that can store and rapidly analyse large amounts of data in a single place. It runs on the Amazon Web Services platform and is scalable so more data, users and workloads can always be added.
US-based motion sensor developer Orbbec raised more than $200m in a series D round, led by Ant Financial. The round included diversified conglomerate Fosun, which invested through its Fosun RZ Capital unit. Orbbec develops 3D motion sensors for products such as mobile devices, robotics and smart home devices to facilitate local geospatial mapping as well as face, body and gesture recognition.
Exits
Corporate venturers from the IT sector completed 86 exits between June last year and May this year, including 60 acquisitions, 19 initial public offerings (IPOs), four mergers and three other transactions. On a calendar year-on-year basis, there was a considerable drop to 69 exits in 2017, down from the 95 tracked in 2016. The estimated exited capital also decreased drastically to $8.82bn in 2017, down from the $21.36bn in 2016 – a 59% fall.
Big-box retailer Walmart agreed to pay $16bn for a 77% stake in India-based e-commerce marketplace Flipkart, giving several corporates billion-dollar exits, including software producer Microsoft and Tencent, both of which retain shares in the company. The purchase was the largest M&A transaction in the venture capital space since Facebook’s $19bn acquisition of WhatsApp in early 2014. The SoftBank Vision Fund scored the biggest exit in the deal, receiving just over $4bn, having paid $2.5bn for a stake of about 20% in August 2017. E-commerce and media company Naspers, an investor in Flipkart since 2012, sold its 11.2% stake for $2.2bn, which it said represented a 32% internal rate of return. Founded in 2007 as a book specialist, Flipkart has built a diversified e-commerce platform that sells products in more than 80 categories.
Local services platform Meituan-Dianping agreed to buy China-based bike-rental service Mobike for $2.7bn. The transaction was reportedly brokered by Pony Ma, chief executive of Tencent, which also owns a stake in Meituan-Dianping. Earlier investors in Mobike included Foxconn and media group Bertelsmann. Founded in 2015, Mobike operates an app-based, dockless bike-sharing service that has attracted hundreds of millions of registered users. The company entered its 200th market in January 2018 when it launched a service in Paris.
Online payment platform PayPal agreed to acquire Sweden-based mobile payment technology developer iZettle for $2.2bn, allowing a host of corporate investors to exit – Intel, which invested through its venturing subsidiary Intel Capital, payment companies Mastercard and American Express as well as financial services firm Santander. Founded in 2010, iZettle offers a compact card reader that enables small businesses to accept contactless and mobile payments, as well as software allowing them to take payments using smartphones, and e-commerce tools helping users create and run an online store.
Pharmaceutical firm Roche agreed to acquire cancer research technology provider and portfolio company Flatiron Health, paying $1.9bn for the remainder of the company’s shares. Roche already owned a 12.6% stake, implying the company was valued at about $2.15bn. GV, the early-stage corporate venturing unit of Alphabet, exited. Founded in 2012, Flatiron has developed electronic health record software configured for oncology research, as well as technology that can manage and develop cancer research data.
SoftBank invested $500m in China-based online insurance platform ZhongAn Online Property and Casualty Insurance as part of the latter’s $1.5bn IPO. ZhongAn issued about 199 million 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%. Tencent, insurance firm Ping An and Ant Financial exited. ZhongAn’s online platform provides more than 300 specialised insurance packages, its most popular being the option to append insurance to e-commerce purchases to cover the cost of returning the goods.
Human resources firm Recruit agreed to acquire online recruitment and employment assessment platform Glassdoor for $1.2bn, giving CapitalG, Alphabet’s growth equity arm, an exit. Glassdoor has built an online platform for employees to leave anonymous feedback on the companies for which they work while also accessing new positions. The company had 59 million monthly active users and reviews of more than 770,000 businesses by the beginning of this year.
Dropbox, a US-based file-storage platform backed by Salesforce, closed its IPO at $869m after its underwriters took up the IPO’s overallotment option. The company issued an initial 26.8 million shares at $21 each, adding to almost 9.2 million shares sold by existing investors, while Salesforce paid $100m for nearly 4.8 million shares through a private placement. Investors bought a further 5.4 million shares at the IPO price. Dropbox has built a cloud-based data storage and collaboration platform with more than 500 million registered users. It recorded a $112m loss in 2017 from more than $1.1bn in revenue, and had raised about $600m in pre-IPO funding.
Yixin Group, a China-based e-commerce marketplace operator spun out of automotive transaction services provider BitAuto, raised HK$6.77bn in an IPO. The company, with Tencent, Baidu and JD.com as investors, issued almost 879 million shares on the Hong Kong Stock Exchange priced at the top of the IPO’s HK$6.60 to HK$7.70 range. Its stock opened at HK$10 and briefly reached HK$10.18 before closing at HK$8.12, giving it a market cap of about $6.54bn. Yixin runs an online marketplace for vehicles and a financial services operation providing leasing and financing for car purchases.
Pivotal Software, a US-based software development services provider spun out of software producer EMC, closed its IPO at just over $638m, after underwriters bought 5.5 million additional shares. The IPO consisted initially of 33.1 million shares at $15 each, in addition to almost 3.9 million shares sold by industrial technology and appliance manufacturer General Electric. Pivotal supplies software development technology and expertise to clients looking to create customised applications.
US-based digital signature technology provider DocuSign floated in a $629m IPO in which Alphabet and mass media group Comcast sold shares. The shares were priced at $29, above the $24 to $26 range the company had set earlier, giving DocuSign a market capitalisation of more than $4.4bn. The company issued just over 16 million shares on the Nasdaq Global Select Market, yielding almost $466m. Existing shareholders sold almost $164m of shares in the offering. DocuSign has developed an e-signature platform it claims has hundreds of millions of users, including some 370,000 businesses.
GCV also reported exits from emerging IT-related enterprises that involved corporate investors from other sectors.
Intel, industrial manufacturer Siemens and software provider Red Hat exited US-based software management technology provider Black Duck Software, which agreed to an acquisition by electronic design software producer Synopsys for $565m. Black Duck provides technology that automates the process of securing and managing open-source software by identifying the software code and finding security or licence compliance issues.
Weebly, a US-based website-creation platform backed by Tencent, agreed to an acquisition by payment processing firm Square for $365m in a mix of cash and shares. Square will integrate Weebly’s offering into its suite of products and will use the company’s international customer base to accelerate its overseas expansion. Founded in 2007, Weebly operates an online platform enabling users to build and host websites as well as e-commerce stores.
Enterprise software provider SAP acquired US-based customer management platform Gigya in a deal that enabled Intel, software provider Adobe and media group Advance Publications to exit. Founded in 2006, Gigya has developed a customer identity management platform that helps businesses register customers, manage their details and maintain relationships with them, with the option to provide them with specialised services.
Cybersecurity software producer Symantec acquired Israel-based mobile threat detection platform Skycure for a reported $250m, allowing insurance firm New York Life to exit. Skycure has created an AI and machine learning-equipped software platform that combines crowdsourced threat intelligence with device and server-based analysis to predict and combat cyberthreats to mobile devices. The technology will be incorporated into Symantec’s enterprise and consumer mobility products.
Red Hat agreed to acquire US-based IT infrastructure automation software producer CoreOS for $250m, giving exits to Intel and Alphabet. Red Hat will integrate the acquisition with its open-source automation system Kubernetes and container-based offering. Founded in 2013, CoreOS has developed open-source software that helps automate functions for cloud infrastructure such as installing software updates, updating and patching servers as well as tackling issues such as machine failures or networking outages.
MongoDB, a US-based database software producer backed by several corporate investors – Intel, Dell, Red Hat and Salesforce – raised $192m when it floated on the Nasdaq Global Market. The company priced 8 million shares at $24 each, well above the $18 to $20 range it had set earlier, valuing the company at $1.17bn. MongoDB has a subscription-based database software platform with more than 4,300 customers.
Funds
Between June 2017 and May 2018, corporate venturers and corporate-backed VC firms investing in the IT sector secured over $8.45bn in capital via 81 funding initiatives, which included 53 corporate-backed VC funds, nine newly-launched venturing units, eight accelerators, three incubators and eight other initiatives.
On a calendar year-to-year basis, funding initiatives registered a considerable decrease in number– from 144 in 2016 down to 102 last year. Total estimated capital also went down from $122bn in 2016 (including the $97.5bn SoftBank Vision Fund) to $25.7bn in 2017.
China Life and Baidu announced a RB7bn ($1.05bn) private equity fund partnership. China Life put up as much as RMB5.6bn of the capital for the fund, dubbed the Baidu Fund Partnership, while Baidu provided up to RMB1.4bn. The two China-based corporates will each invest 30% of those figures initially. The Baidu Fund Partnership will target mid and late-stage investments in internet-focused companies, including mobile internet, artificial intelligence and online finance technology companies, with a “significant association” with China.
China-based consumer electronics producer Xiaomi announced its intention to invest up to $1bn in 100 India-based startups over the next five years. Xiaomi joined forces with its venture capital affiliate Shunwei Capital, as it seeks to build an ecosystem of mobile apps around its smartphones. Its investments will focus on manufacturing, entertainment content, fintech and hyperlocal services such as phone repairs. The corporate, which entered India in 2014, hopes the investments will help create more loyalty among Indian users who, research has indicated, have been driven by a wish to own the most up-to-date, popular devices, regardless of brand.
Baidu has formed a $500m growth-stage fund called Changcheng Investment Partners to back internet and artificial intelligence (AI) technology developers. The $500m figure represents the fund’s first phase, though the firm did not reveal any plans for a final close, nor whether Baidu is providing the entirety of the capital. Li Xinzhe, Baidu’s former chief financial officer, will run the fund as chief executive.
Baidu Ventures, the corporate venturing subsidiary of Baidu, closed its second renminbi-denominated fund after raising almost RMB2bn ($318m). In addition to capital from Baidu itself, the fund has secured commitments from external limited partners. Although their identities have not been disclosed, they include industrial firms and a government-owned entity. Baidu Ventures focuses on artificial intelligence and big data technology developers, generally investing between seed and series B stage in China and the US.
China-based venture capital firm AlphaX Partners closed its first fund at RMB2bn ($313m) with backing from software producer Qihoo 360, lending platform CreditEase and outdoor advertising agency Focus Media. Startup services provider Zero2IPO Group and government guidance fund CICC were also among the fund’s limited partners. The fund is dual dollar and renminbi-denominated, and its LPs also include undisclosed institutional investors from Europe and the US as well as Chinese entrepreneurs. Founded in 2016, AlphaX targets domestically-based, high-growth companies developing technologies in the online, consumer, enterprise software, artificial intelligence, sports and culture sectors.
France-based venture capital firm Ring Capital launched with €140m ($172m) of capital, supplied by food producer Danone and insurance provider AG2R La Mondiale, among other investors. Financial services firm Bred and state-owned investment bank BPifrance are also among Ring Capital’s LPs. Ring Capital will make growth-stage investments in Europe-based digital and internet technology companies, providing between €1m and €15m for investments that can either be stake purchases or made as part of larger funding rounds sized between €3m and €30m.
Qihoo 360 Technology partnered the municipal government-owned Beijing Cultural Center Fund to set up a RMB1bn ($156m) investment fund. The fund will target early and growth-stage companies in the internet and cultural sectors, including businesses focusing on the areas of entertainment and new media information. The Beijing Cultural Center Fund was set up in 2012 to bolster the city of Beijing’s creative and cultural industries by providing a wide range of financing options such as guarantees and micro-loans.
Singapore-based integrated engineering and industrial product manufacturer ST Engineering launched a corporate venturing subsidiary, called ST Engineering Ventures, armed with $150m in funding. ST produces a range of aerospace, defence, electronics and marine products. The unit will seek opportunities in sectors relevant to ST’s long-term growth, such as robotics, autonomous technology, data analytics and cybersecurity, and will initially operate out of offices in Singapore, Israel and the US.
Germany-based venture capital firm Capnamic Ventures reached a €115m ($130m) final close for its latest fund, securing contributions from several corporate limited partners. The LPs include networking equipment producer Cisco, insurance provider Axa Germany, media companies including Rheinische Post Media Group as well as financial services group Sparkassen. The fund also secured capital from wealth manager Formuesforvaltning, the multilateral European Investment Fund and development banks KfW and NRW.Bank. Capnamic Ventures invests in business-to-business, digital infrastructure and digital transformation technology startups operating in German speaking regions.
Salesforce Ventures, the corporate venturing arm of Salesforce, launched a $100m vehicle called Canada Trailblazer Fund that will focus on cloud services startups. The news followed a commitment by Salesforce to invest $2bn in Canada over the next five years. The fund will provide between €500,000 and €3m per first investment, with extra capital reserved for follow-on rounds.
People
Nikesh Arora left SoftBank, where he had spearheaded its corporate venturing strategy as company president and chief operating officer in 2016, to become CEO and chairman of cybersecurity company Palo Alto Networks. Arora replaced long-time CEO Mark McLaughlin, who will become vice chairman of Palo Alto Networks. Arora joined SoftBank in late 2014 from Google where he had served as chief business officer, and directed SoftBank to lean more towards larger investments, notably in his home country of India.
Gareth Keane, an investment manager at Qualcomm Ventures left to join venture capital firm Promus Ventures. Keane had been at Qualcomm Ventures for nearly six years having joined in 2012 after Texas Instruments’ acquisition of National Semiconductor the year before. He is leaving following a shake-up of Qualcomm Ventures’ Americas teams.
Erik Jorgensen left Intel Capital to become managing director of Macquarie Capital’s European principal investment business. Macquarie Capital is the corporate advisory, capital markets and principal investment arm of Australia-based investment and banking firm Macquarie Group. Reporting to Hugh Briggs, a senior managing director and head of Macquarie Capital’s principal investment business in Europe, Jorgensen will focus on investments in infrastructure technology (infratech), covering areas such as energy and renewables, utilities, transportation, smart cities and grids, batteries and other energy storage technologies.
Dong-Su Kim, one of Samsung’s most experienced corporate venturers in the US, joined electronics producer LG to set up a new venture fund. As general manager of Samsung Ventures America, Kim had led deals for Samsung in more than 20 companies, including Pure Storage and Netlist, which were floated on the New York and Nasdaq stock exchanges respectively.
Frédéric Rombaut, formerly managing director of corporate venturing funds for Cisco and Qualcomm, joined UK-based venture capital firm Seraphim Capital as general partner. A previous GCV Rising Star, Rombaut was managing director of Cisco Investment International. He left in early 2016 to focus more on personal investments through his FR Development vehicle, with Jon Koplin replacing him as UK-based managing director of Cisco Investments.
George Ugras left his position as head of US-listed computing technology provider IBM’s corporate venturing unit, IBM Ventures, and is looking to launch a venture capital fund. Ugras replaced Claudia Fan Munce as head of IBM Ventures two years ago.
Avid Larizadeh Duggan left her general partner role at GV for an executive role at music publisher and royalty collection service Kobalt. She is now Kobalt’s chief strategy and business officer and an executive vice-president. Duggan joined GV in 2014, from Boticca, the luxury fashion e-commerce platform she co-founded in 2010 and where she was chief operating officer. She was an associate at VC firm Accel between 2006 and 2009.
Aymerik Renard, formerly a director at disk drive producer Western Digital’s corporate venturing subsidiary, Western Digital Capital, joined US-based venture capital firm Hardware Club as a general partner. Hardware Club makes investments in US, Europe, Asia and Israel-based consumer, industrial and enterprise-focused startups at seed and series A stage. Renard was a director at SanDisk Ventures, the corporate venturing arm of data storage technology provider SanDisk, from early 2014 before joining Western Digital Capital in 2016 after its parent company acquired SanDisk.
Alex Lin, formerly head of ecosystem development at Singapore government innovation agency SGInnovate, joined integrated engineering group ST Engineering. Lin will head corporate venturing unit ST Engineering Ventures, which is deploying $150m of funds. The division is expected to invest in sectors relevant to the corporate’s long-term growth, such as autonomous driving, cybersecurity, data analytics and robotics.
Yusuf Bashir, managing director of corporate venturing unit Infosys Innovation Fund, left the fund and its parent company. Infosys hired Bashir in March 2015 to run the $500m fund, which invests in software developers based in India, the US, Europe and Israel. Although a reason for Bashir’s departure was not given, he reportedly made the move within days of the resignation of Ritika Suri, executive vice-president of corporate development and ventures, to whom he reported.
Pratik Bose, formerly director for VC and private equity investments, M&A and strategy at Cisco Corporate Development, joined the Indian Angel Network. Bose will be the network’s managing partner in charge of its maiden fund, an early-stage sector-agnostic vehicle that finished a first close at Rs1.75bn ($27.2m). Bose was a director at Cisco for just under 10 years, having taken the position in August 2007.
Karthee Madasamy, managing director at Qualcomm Ventures based in Bangalore, India, left to set up a venture capital fund in the US. He was replaced by Varsha Tagare as head of Qualcomm Ventures India and its $50m fund. Tagare joined Qualcomm Ventures in February 2013 after five years as a director at corporate venturing peer Intel Capital in India.
Jessica Verrilli has left social media company Twitter to return to GV. Verrilli first joined Twitter in 2009, rising through the ranks to become director of corporate development and strategy in 2014. She then joined GV, but returned to Twitter within six months. She left Twitter again in December last year. Verrilli will be GV’s only female investing partner, concentrating on consumer technology with an interest in emerging technologies such as cryptocurrencies.
Sebastian Schüller moved from a position working with startups at internet technology provider Google to an investment manager role at Capnamic Ventures. Schüller worked with Germany-based technology startups as a digital growth strategist at Google for almost 18 months, having previously worked at Capnamic from 2014 to 2016.
Timur Davis left Samsung Ventures to become principal at Canapi, a financial technology-focused investment arm of banking group Live Oak Bancshares. Davis will oversee work on investment and incubation strategies that further Canapi’s ambitions to innovate in banking. Davis had been a senior investment manager at Samsung Ventures since 2015, leading eight deals worth a combined $19m in sectors including AI, big data, e-commerce and digital health.
Intel Capital hired Chiara Sommer as an investment director. Sommer comes from High-Tech Gründerfonds (HTGF), the German state-mandated venture capital firm that has dozens domestic corporates as limited partners. There she was a senior investment director. Before joining HTGF at the start of 2014, Sommer was founder and CEO of expertise network service Pickagenius.
Pankaj Mitra, a founding team member at Infosys Ventures, became a US-based director at Cisco. Mitra will focus on investments and mergers and acquisitions for Cisco in India, the former through its corporate venture capital arm, Cisco Investments. Before joining Infosys in 2015, Mitra spent two years as senior manager for new products at cloud technology producer VMware, developing its hosted cloud services and subscription-based business lines.
Laurence “Lo” Toney, a partner at GV announced his intention to leave the unit once he has finished raising a separate fund. The US-based fund in question, Plexo Capital, will back venture capital funds with women or underrepresented ethnic minorities as limited partners. It also plans to make direct investments in portfolio companies of funds to which it has provided capital.
Yimin “Peter” Fang, senior director of corporate investment and mergers and acquisitions at Baidu, rejoined former colleague Kai-Fu Lee at venture capital firm Sinovation Ventures. Fang joined Baidu in 2014 after a few months at financial services group Fidelity’s Asian corporate venturing unit, Fidelity Growth Partners Asia. Fang worked under US-based internet technology provider Google’s first China president, Kai-Fu Lee, as an investment director at Innovation Works, a China-based investment firm since rebranded as Sinovation, from 2011 to 2014.
Astasia Myers left Cisco Investments to join US-based venture capital firm Redpoint Ventures as an associate. During her time at Cisco Investments, Myers focused on cloud infrastructure, and was involved in investments and M&A deals. Prior to Cisco, she spent two years as an equity research analyst at financial services firm Robert W Baird.
GCV Analytics defines the IT sector as encompassing general artificial intelligence applications, big data and analytics, virtual and augmented reality technologies, semiconductors and microchips, cybersecurity, enterprise and other software as well as other IT businesses.
University and government backing for IT businesses
Over the past 12 months, there were many commitments to university spinouts in the IT sector reported by our sister publication, Global University Venturing. In 2017, we covered 71 such deals, comparable to the 73 reported in 2016. The level of estimated total capital deployed in such rounds, however, decreased slightly to $1.03bn, from $1.06bn in 2016.
China-based AI chipset developer Cambricon Technologies raised $100m in a series A round featuring CAS Investment, the investment arm of the Chinese Academy of Sciences (CAS). The round was led by SDIC Chuangye Investment Management, part of the Chinese government’s State Development & Investment Corp, and included Alibaba and Lenovo Capital, among others. Founded in 2016 by Prof Chen Tianshi as a spinout from the Institute Of Computing Technology at CAS, the company has created a processor called Cambricon-AI that brings deep learning to commercially produced electronics.
Petuum, a US-based machine learning spinout from Carnegie Mellon University (CMU), closed a series B round at $93m, led by an unnamed subsidiary of telecoms group SoftBank. Petuum was spun out from CMU’s machine learning department in 2016 by Eric Xing, Qirong Ho and Ning Li. The company has developed an operating system that AI intelligence developers collate data from varied sources, such as electronic health records or social media. The platform is intended to allow easy integration with hardware, for example data farms or IoT technology.
Darktrace, a UK-based cybersecurity software developer based on research by a group of mathematicians at University of Cambridge, raised $75m in a series D round. The transaction was led by venture capital firm Insight Venture Partners, while VC firm TenEleven Ventures and investment firms Summit Partners and KKR also participated. Darktrace was reportedly valued at $825m. Darktrace has created an enterprise cybersecurity platform it calls Enterprise Immune System that is equipped with machine learning algorithms.
Government investments in IT enterprises, reported by our sister publication Global Government Venturing, registered an uptick. Last year, governments and government-backed investors participated in 134 rounds, up from the 118 tracked in 2016. The total estimated capital in those rounds was $2.54bn, up from the $1.08bn in 2016.
Koch Disruptive Technologies, a corporate venturing subsidiary of manufacturing and chemicals conglomerate Koch Industries, co-led a $125m series D round for US-based digital conversion technology provider Mesosphere. The round also featured the Qatar Investment Authority and enterprise technology producer and existing backer Hewlett Packard Enterprise. Founded in 2013, Mesosphere produces software for data centre operating systems that enables users to automate their hybrid cloud network infrastructures.
Canada-based Element AI secured $102m in the largest yet series A round for an AI technology developer, featuring BDC Capital, the investment arm of state-owned Business Development Bank of Canada. The round, which included undisclosed sovereign wealth funds, also featured Tencent, Hanwha Investment, Intel Capital, Microsoft Ventures and Nvidia GPU Ventures, respective subsidiaries of conglomerate Hanwha, Intel, Microsoft and graphics technology provider Nvidia. Element AI is developing AI technology for use by businesses in sectors such as cybersecurity, finance, manufacturing, robotics, logistics and transportation that will link to and enhance the insights from data.
US-based cybersecurity technology developer Claroty obtained $60m in a series B round, which was led by Singaporean state-owned investment firm Temasek. The round featured industrial automation company Rockwell Automation and Next47, the investment arm of industrial conglomerate Siemens, as well as multi-corporate venturing firm Aster Capital, among others. Founded in 2014, Claroty has developed a cybersecurity platform for remotely access and monitoring of industrial networks in sectors such as utilities, oil and gas, mining, real estate and food and beverage.
