Technological advances married with a quest for customer centricity were the defining characteristics of the consumer industry through 2018. These underlying traits are line with and a manifestation of broader trends in the consumer sector, which revolve around its digital transformation and shifting consumer preferences.
GCV’s last report on the consumer sector highlighted the importance of demand-side pressures on contents of products and packaging along with supply-side disruption with the digitisation of commerce and retail. These medium-term trends are likely to continue. The commitment to customer centricity – understanding consumer preferences and increasing one-on-one connections – is a corollary of the overall digitisation of the sector.
As consultancy Deloitte’s 2019 Consumer Products Industry Outlook report specifies, digitisation has become essential. “In the past, consumer product companies have not generally been associated with being at the forefront of implementation of cutting-edge technology. But as a growing number of consumers research, purchase and engage with brands digitally, it will likely become imperative for such companies to adopt newer technologies – or risk being outdated.”
The disruptive impact of digitisation is also evident in the supply chain of consumer sector businesses. Many businesses in the sector are opting for “a dynamic, interconnected system that can integrate consumer demand patterns and ecosystem partners conveniently”. The emerging digital supply chain networks add value by lowering transaction costs and latency as well as by innovating in production lines that are much closer and more connected to the customer.
The Deloitte report notes that interest in innovation has been reflected in the venture capital investments of incumbents. “Many consumer product majors are investing in venture capital funds focused on concepts that are driving food industry trends, such as supply chain technology and e-commerce.” The report also cites some of the trends in the food space, such as “rising demand for healthier foods and personalised nutrition, alternative proteins, shortening supply chains, reducing wasted calories by addressing unused food production and food waste, and improving agricultural yield”.
Consultancy McKinsey’s 2017 report – Trends that will shape the consumer industry – predicts that 1.4 billion people will join the global middle class, 85% in the Asia-Pacific region, with each person spending between $10 and $100 a day by 2020. These new members of the middle class are expected to drive further growth in e-commerce, whose potential appears to be shifting eastward. According to data provider Statista, commerce is projected to grow by nearly 71% in China by 2023 compared with roughly 46% in the US. Furthermore, according to data from e-commerce consultancy ShopifyPlus, e-commerce sales in Asia-Pacific increased 31.1% to $1.35 trillion in 2017, with China, at $340bn, the largest e-commerce market in the world, more than twice the size of the US.
E-commerce has disrupted retail business to the extent that some analysts speak of a “retail apocalypse”. There has been a number of bankruptcies among well-known brands and disappointing results from others. The share prices of major US bricks-and-mortar retailers such as Macy’s, JC Penney, Nordstrom and Kohl, plummeted early this year. In contrast, online sales grew 15.6% in 2018, according to the US Department of Commerce.
However, e-commerce sales constitute a relatively small portion of all retail sales – about 10% or so, according to estimates of the US Census Bureau.
Consumers have orientated toward more economical brands, dubbed a “shift to value”. A McKinsey research note on consumer packaged goods found “70% of US consumers are looking for ways to save money” and feel content with cheaper brands. The increased propensity to save money has taken a toll, anad could explain the continuing emphasis on customer-centric approaches that aim to understand consumers better and connect with them. This has led to a growth in investments in big data and internet-of-things applications, giving companies in-depth market research insights. A current microtrend Deloitte’s report mentions is a rise in branded pop-up stores, providing both a physical point of engagement with customers and a data collection point.
Nowhere has brand erosion been more evident than in fast-moving consumer goods (FMCG) . As so-called millennials are less likely to purchase big brands, there has been a shift of focus to small brands. According to market research company Nielsen, cited by McKinsey, US retailers are “giving small brands double their fair share of new listings” in an attempt to differentiate their proposition and drive up margins, as small brands tend to be positioned as premium. As a result, small brands capture “two to three times their fair share of growth while the largest brands remain flat or in slight decline.”
Small brands have also made a significant breakthrough in the health, beauty and wellness subsector. A McKinsey report – The new model for consumer goods – notes that in cosmetics, for example, small challenger brands “already represent 10% of the market and are growing four times faster than the rest”. One of the major drivers of such brands is digital user-generated content – the report claims 1.5 million beauty-related videos are posted on YouTube every month. Thus, emerging brands in this space are likely to enjoy interest from venture capital investors, including corporate venturers.
Aside from e-commerce and FMCG, there are notable trends in clothing and apparel, where digitisation has already been a key disruptor. The Business of Fashion and McKinsey – in their report The State of Fashion 2019 – predicts 2019 “will be a year of awakening” for an industry that has been surmounting challenges and whose turn it is to seek opportunities.
Digital engagement with customers is a given in the apparel industry. As the report notes: “Regardless of size and segment, players now need to be nimble, think digital-first, and achieve ever faster speed to market. They need to take an active stance on social issues, satisfy consumer demands for radical transparency and sustainability, and, most important, have the courage to self-disrupt their own identity and the sources of their old success to realise these changes and win new generations of customers.”
The report also claims that the fashion and apparel industry is still concentrated in the hands of relatively few players. “Polarisation continues to be a stark reality in fashion. Fully 97% of economic profits for the whole industry are earned by just 20 companies, most of them in the luxury segment. Long-term leaders include, among others, Inditex, LVMH and Nike, which have more than doubled their economic profit over the past 10 years.”
Not all regions and subsegments within fashion are of equal weight in terms of perceived growth prospects. According to the survey of industry executives for The State of Fashion 2019, optimism prevails mostly among executives from North America and those of luxury brands. “In all other regions and segments, executives are notably pessimistic, reflecting the potential challenges ahead,” notes the report.
For the period between March 2018 and February 2019, GCV reported 324 venturing rounds involving corporate investors from the consumer sector. A considerable number (112) took place in the US, while 69 were hosted in China, 33 in India and 15 in the UK.
Many of those commitments (111) went to emerging enterprises from the same sector (mostly food and beverages, e-commerce, and fashion and apparel) with the remainder going into companies developing other technologies in synergies with consumer sector incumbents – 48 deals in the services sector (accommodation and travel tech, logistics and supply chain services, and human resources tech), 37 in IT (primarily artificial intelligence, big data analytics and enterprise software) and 36 in financial services (mostly payment and insurance technology).
The network diagram, illustrating co-investments of consumer corporates, shows the variety of investment interests of the sector’s incumbents. The commitments range from ride-hailing (Go-Jek) and robots (Magazino) to e-commerce (Flipcart) but with a considerable weight on the food and beverage segment (Chef’d, Evolve BioSystems, MycoTechnology).
On a calendar year-on-year basis, total capital raised in corporate-backed rounds went up significantly from $17.13bn in 2017 to $44.05bn in 2018, a 157% surge. The deal count also grew, by 53% from 215 deals in 2017 to 330 by the end of 2018.
The 10 largest investments by corporate venturers from the consumer sector were not necessarily concentrated in the same industry.
The leading corporate investors from the consumer sector in terms of number of deals were e-commerce firms Alibaba, Amazon, Rakuten and JD.com. Consumer corporates committing capital in the largest rounds were also led by Alibaba, along with cigarette manufacturer Altria Group and JD.com.
The most active corporate venture investors in emerging consumer businesses were Alibaba, telecoms firm SoftBank and internet company Tencent.
Emerging consumer businesses in the portfolios of corporate venturers came from the food and beverage tech space (Miss Fresh, Zomato, Swiggy, MycoTechnology) as well as physical consumer goods (B8ta), health, wellness and beauty (Peloton Cycle), fashion and apparel (Mogujie), as illustrated by the network diagram of corporate co-investments.
Overall, corporate investments in emerging consumer-focused enterprises rose from 226 rounds in 2017 to 261 by the end of 2018, a 15% increase. Estimated total value more than doubled from $15.87bn in 2017 to $40.62bn last year.
Deals
Corporates from the consumer sector invested in large multimillion-dollar rounds, raised mostly by enterprises in the same sector as well as media, transport and business services. Six of the top 10 deals were above $1bn.
Altria Group paid $12.8bn for a 35% stake in e-cigarette maker Juul Labs, valuing the latter at $38bn. The transaction gave hedge fund manager and Juul investor Tiger Global Management a $1.6bn dividend and Juul’s employees reportedly received some $2bn through the deal. Juul was spun out of electronic vaporiser manufacturer Pax Labs in July 2017 to market an e-cigarette first released by its parent company two years earlier. The company produces its own cartridges and aims to replicate the experience of smoking cigarettes.
Ele.me and Koubei, the recently merged local services subsidiaries of Alibaba, raised $4bn at a $30bn valuation from investors including the SoftBank Vision Fund, Alibaba and its financial services affiliate Ant Financial, and private equity group Primavera Capital. The capital was provided to support the merger of Ele.me, the portfolio company Alibaba fully acquired in April 2018 at a $9.5bn valuation, and Koubei. The merged company will provide mobile users with a wide range of local services including retail, food delivery, travel and accommodation.
Alibaba agreed to invest $2bn in Singapore-based online marketplace Lazada, in which it already held an 83% share. It has not disclosed whether the new funding was used to buy the rest of the company’s stock. Lazada runs an e-commerce operation spanning Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam with more than 145,000 merchants selling items such as electronics, household goods, fashion, toys and appliances. The company had raised a total of more than $730m from investors including e-commerce holding group Rocket Internet and retailers Tengelmann and Tesco.
US-based short-form video production company NewTV closed an initial $1bn in funding from a consortium including a range of corporate investors, including media and entertainment groups 21st Century Fox, Walt Disney, Entertainment One, ITV, Lionsgate, Metro Goldwyn Mayer, NBCUniversal, Sony Pictures Entertainment, Viacom and Warner Media. Alibaba, mass media group Liberty Global and investment banking firms Goldman Sachs and JPMorgan Chase also participated. NewTV is developing an online platform with drama, comedy, documentaries and reality shows cut into 10 minute episodes made with budgets comparable to high-profile cable channels or streaming services like HBO or Netflix.
Indonesia-based e-commerce marketplace Tokopedia raised $1bn from investors including SoftBank, reportedly at a valuation of about $7bn. Founded in 2009, Tokopedia allows users to set up an online store. The company claims to offer items from more than 4 million merchants and to have more than 80 million monthly active users.
Indonesia-based on-demand ride provider Go-Jek secured about $1bn from investors including JD.com, corporate backers Tencent and internet conglomerate Alphabet at a $10bn post-money valuation. Tencent, JD.com and Alphabet co-led the funding, which represented the first close of Go-Jek’s series F round. They were joined by conglomerate Mitsubishi Corp and investment manager Provident Capital. Go-Jek reportedly had up to 25 million users as of mid-2018. It has moved into Singapore and is in discussions with Philippine regulators over an entry to that market.
E-commerce and media group Naspers invested $660m in India-based online food delivery platform Swiggy to lead its $1bn series H round. Local services platform Meituan Dianping and Tencent also took part in the round, along with DST Global, Coatue Management, Hillhouse Capital and Wellington Management. The round reportedly valued Swiggy at $3.3bn. The company runs an app-based service enabling users to order food from local restaurants for delivery in 58 Indian cities. The new funds will support the expansion of Swiggy’s machine learning and engineering teams.
US-based augmented reality technology developer Magic Leap closed a series D round at $963m. The round was initially backed by Alibaba, Alphabet and media company Grupo Globo that all contributed to the round’s $502m first tranche in 2017, a tranche that also featured Singaporean government-owned investment firm Temasek. Founded in 2011, Magic Leap develops an augmented reality headset together with a dedicated operating system. Magic Leap’s goggles superimpose animated computer graphics over a user’s vision of reality.
Alibaba made a RMB4.5bn ($717m) investment in Huitongda Network, a spinoff from China-based retail chain Jiangsu Five Star Appliances. Alibaba supplied the funding through a strategic partnership that will involve the companies collaborating on technology, logistics, warehousing and supply chains. The partnership will support growth in rural areas. Founded in 2010, Huitongda provides e-commerce and marketing services to a network of about 80,000 rural bricks-and-mortar retailers in 15,000 towns across 18 Chinese provinces.
US-based sustainable truck developer Rivian Automotive raised a $700m round, which was led by Amazon. Rivian had previously closed financing from diversified conglomerate Sumitomo and car distributor Abdul Latif Jameel. Details on previous funding rounds were not disclosed, although the company had reportedly raised over $1.5bn to date, including $200m in debt financing from financial services firm Standard Chartered Bank. Automotive manufacturer General Motors was also rumoured to be a potential investor or partner of the company but reportedly only remains in talks. Founded in 2009, Rivian is currently developing an all-electric pick-up truck and a sports utility vehicle, both expected to be commercially available in the US in late 2020 and subsequently in Europe.
There were interesting deals in emerging consumer-focused businesses backed by corporate investors from other sectors.
China-based online group buying platform Pinduoduo completed a $3bn funding round, which was led by Tencent, reportedly at a $15bn valuation. The round also featured venture capital firm Sequoia Capital. Tencent previously backed a $110m series B round in 2016. Founded in 2015, Pinduoduo runs an e-commerce offering allowing use of social media platforms to form purchasing groups to secure discounts. The platform offers products across a wide range of categories such as food, cosmetics and babycare and claims to have attracted about 300 million users.
SoftBank invested $2bn in South Korea-based e-commerce platform Coupang through the SoftBank Vision Fund at a valuation reported by Forbes to be $9bn. Coupang operates an online marketplace that offers more than 120 million products, 4 million of which are available for one-day delivery through Rocket, its end-to-end fulfilment system, which delivers about a million parcels daily. The company has more than doubled its revenue in the past two years and was expected to record a total of $5bn in sales last year, though Forbes reports its losses have risen significantly since 2014. The funding will support a strengthening of Coupang’s technology capabilities – cutting delivery times while introducing features such as an artificial intelligence-equipped product recommendation system and a one-touch payment option.
Media and e-commerce group Naspers led a $900m round for India-based online food delivery service Swiggy. The round reportedly consisted of roughly $600m in primary funding and $300m in secondary share purchases, and also included Tencent. Swiggy runs an online platform enabling users to order food from local restaurants for home delivery.
US-based home fitness service Peloton Interactive raised $550m in a series F round backed by media group Comcast NBCUniversal. The transaction reportedly valued the company at $4.15bn. The round was led by growth equity firm TCV with a $150m investment, and featured financial services and investment group Fidelity. Peloton sells exercise bikes with touchscreens, allowing customers to access live daily workout videos and on-demand fitness classes.
China-based online grocery delivery service Dada-JD Daojia raised $500m in a round that included a $320m investment by big-box retailer Walmart. JD.com supplied the rest. Walmart had invested $50m in Dada-JD Daojia in late 2016 as part of a cooperation agreement. Dada-JD Daojia comprises two companies – crowdsourced last-mile delivery service Dada and JD Daojia, which offers one-hour delivery of items ordered online from more than 100,000 partner retailers, including 200 Chinese branches of Walmart.
Naspers provided $500m for US-based e-commerce app developer Letgo. Naspers made the investment through online marketplace subsidiary OLX. Letgo has created an app that enables users to list, sell and buy secondhand goods, employing an artificial intelligence system that can set a category, title and price for each item based on a photo. It has been downloaded more than 100 million times and hosted some 400 million listings.
Exits
Corporate venturers from the consumer sector completed 30 exits between March 2018 and February 2019 – 14 acquisitions, 13 initial public offerings, two mergers and one other transaction.
Alibaba merged local services spinout Koubei and food delivery platform Ele.me with $3bn from investors including SoftBank. Koubei was spun off in 2015, and Ele.me acquired by Alibaba in May last year. The vehicle will be focused on Alibaba’s resources, such as Ant Financial’s mobile payment offerings and the corporate’s loyalty membership service, and will incorporate local services.
Local services platform Meituan-Dianping agreed to buy China-based bike rental service Mobike for $2.7bn. Several Chinese media reports had suggested Meituan-Dianping was going to pay $3.7bn, but information service Caixin disputed the figure. The transaction was reportedly being brokered by Pony Ma, chief executive of Tencent, which also owns a stake in Meituan-Dianping. Founded in 2015, Mobike operates an app-based dockless bike-sharing service that has attracted hundreds of millions of registered users. Previously, Mobike has attempted unsuccessfully to merge with rival Ofo.
Ant Financial agreed to invest $100m in Brazil-based financial technology provider Stone Co alongside an IPO that could reach $1.1bn. StoneCo set a share price range of $21 to $23 and aimed to issue 45.8 million class A common shares on the Nasdaq Global Select Market while investors were to divest a further 1.9 million shares. Ant Financial intended to provide the extra funding in the form of a private placement. Founded in 2012, StoneCo provides cloud-based technology that enables merchants to accept electronic payments. It has more than 200,000 active clients.
Nio, a China-based smart electric car developer backed by domestic corporates Tencent, Baidu, Lenovo and JD.com, raised about $1bn when it floated on the New York Stock Exchange. The IPO consisted of 160 million American depositary shares at $6.26 each, near the bottom of the $6.25 to $8.25 range the company had set. It valued Nio at $6.4bn. Founded in 2014 as NextEV before rebranding in July 2017, Nio is working on plug-in electric cars fitted with features including in-built artificial intelligence and autonomous driving systems. Nio’s first model was released in 2016, and it launched its first commercial model, a seven-seater sports utility vehicle, in 2017. It plans to introduce a five-seat version in the first half of next year.
Farfetch, a UK-based fashion e-commerce platform backed by media group Advance Publications and JD.com, went public in an IPO that raised about $885m. The company issued just over 33.6 million shares on the New York Stock Exchange while its shareholders sold an additional 10.6 million. The shares were priced at $20, above the IPO’s $17 to $19 range, giving it a market cap of about $5.8bn. Founded in 2008, Farfetch operates an online marketplace for luxury and high-end fashion items, selling pieces from almost 1,000 producers to 2.3 million customers worldwide.
Funding Circle, a UK-based peer-to-leer lending platform backed by e-commerce holding company Rocket Internet, went public in a £440m ($576m) IPO in its home country. The company issued $393m of new shares at £4.40 each, at the lower end of their £4.20 to £5.30 range, while its shareholders divested about $184m of shares. The offering valued Funding Circle at $1.97bn. Funding Circle runs a platform where small businesses can access debt financing from a pool of some 80,000 investors who use an online account.
Avnera, a US-based fabless semiconductor producer backed by a number of corporates, agreed to a $405m acquisition by semiconductor company Skyworks Solutions. Previous corporate backers of the company include semiconductor and chip maker Intel, electronics producer Panasonic, retail chain Best Buy, communications technology provider Polycom and audio equipment maker Onkyo. Skyworks will pay $405m upfront, along with up to $20m in additional capital if Avnera meets certain performance milestones within a year. Founded in 2004, Avnera designs analogue system-on-chips for consumer products. The technology will enhance Skyworks products in fields such as smart voice assistants and vehicle in-dash systems.
Maoyan Entertainment, a China-based online film ticketing platform backed by corporates Enlight Media, Tencent and Meituan Dianping, raised $250m in its IPO. The company floated at the foot of the HK$14.80 ($1.89) and HK$20.40 range it had set earlier, giving it a $2.2bn valuation, after issuing 132 million shares on the Hong Kong Stock Exchange. Formed in 2012 as a subsidiary of group buying platform Meituan, Maoyan runs an online cinema ticketing platform with 130 million monthly active users as of September 2018. The company is the exclusive film ticket vendor for Meituan Dianping, the local services platform formed by Meituan’s subsequent merger with Dianping.
Propeller Health, a US-based digital respiratory therapeutics developer backed by multiple corporate investors, agreed to a $225m acquisition by connected medical devices provider ResMed. Previous corporate backers of Propeller include health product supplier McKesson, drug delivery technology provider Aptar Pharma, manufactured goods producer 3M and pharmaceutical firms Hikma and GlaxoSmithKline, and pharmacy chain Walgreens. Founded in 2010, Propeller Health has created a system of small sensors attached to inhalers that track usage and offer feedback to patients through a mobile app. The platform is aimed at people with chronic respiratory diseases.
Babytree, a China-based social parenting media and e-commerce platform backed by corporates Alibaba, manfucturing group Fosun and education services provider TAL Education, raised $217m in its Hong Kong IPO. The company priced its shares at HK$6.80 ($0.90), settling at the bottom of a range that had HK$8.80 at the top. Babytree had hoped to secure up to $1bn at a valuation of $3bn to $5bn, but its valuation instead dipped to $1.5bn, down from $2.2bn earlier. Babytree operates an online community where parents share experiences, seek advice and find information such as a vaccination checklists and dietary guides for mothers. It also operates an e-commerce platform and video-sharing app WeTime.
Global Corporate Venturing also reported exits from emerging consumer-related enterprises that involved corporate investors from various sectors.
Retail group Walmart closed its $16bn acquisition of a 77% stake in India-based online marketplace Flipkart, enabling SoftBank and e-commerce company eBay to exit. Although some of its investors, including SoftBank and eBay, exited entirely, others like Tencent, software provider Microsoft and investment firm Tiger Global Management opted to retain stakes. The deal valued Flipkart at about $20.8bn, and the stake purchase was made alongside the provision of $2bn of equity funding. Flipkart’s platform lists more than 80 million products including electronics, appliances, clothing and home goods. It also owns fashion e-commerce subsidiaries Myntra and Jabong, and payment app PhonePe.
China-based consumer electronics producer Xiaomi, backed by mobile semiconductor maker Qualcomm, raised $4.72bn in its IPO. The company priced roughly 2.18 billion shares at the low end of the HK$17 to HK$22 range it had previously set. NGP Capital, the venture capital firm spun off from communications technology producer Nokia, was also an investor but with a small stake. The price valued Xiaomi at about $54bn and was to be floated on the Hong Kong Stock Exchange. Founded in 2010, Xiaomi designs and manufactures smartphones as well as other electronic devices. It made a RMB43.8bn net loss in 2017 from revenues of RMB115bn.
Home24, a Germany-based online home products retailer backed by e-commerce holding group Rocket Internet, raised €150m ($174m) in an IPO in its home country. The company priced just over 6.5 million shares at €23, near the top of the offering’s €19.50 to €24.50 range, giving it a market capitalisation of more than $690m. Home24 runs an online platform that sells furniture, lighting products or bedding to customers in Germany, France, Italy, the Netherlands, Austria, Switzerland, Belgium and Brazil on behalf of more than 500 producers.
Consumer electronics producer Samsung agreed to buy Israel-based portfolio company and smartphone camera technology producer Corephotonics for $155m, giving exits to several corporates, including memory card maker SanDisk, hard disk provider Western Digital, manufacturing services provider Foxconn, chipmaker MediaTek and telecoms equipment supplier CK Telecom. Corephotonics designs technology that helps mobile device users take professional-standard photographs, integrating capabilities such as optical zoom, low-light performance, depth features and optical image stabilisation.
Tapingo, a US-based student-focused food ordering platform backed by Qualcomm, agreed to an acquisition by food delivery service Grubhub for about $150m. Grubhub will integrate Tapingo’s service into its own offering. Tapingo has developed an app that allows university students to order and pick up food from local outlets. The app integrates with meal plans and point-of-sale systems on campus, and is available at more than 150 institutions in the US.
Funds
Between March 2018 and February 2019, corporate venturers and investors in the consumer sector secured over $2.67bn in capital via 19 funding initiatives, including 12 VC funds, five new or refunded venturing units, one incubator and one other initiative. On a calendar year-to-year basis, the number of funding initiatives in the consumer sector dropped to 36 in 2018 from 46 in 2017 and 49 in 2016. Total estimated capital also decreased to $4.85bn by the end of last year, down 74% from the $18.35bn in 2017.
China-based venture capital firm Fortune Venture Capital secured RMB4.63bn for its latest renminbi-denominated fund, from limited partners including property developer Century Golden Resources Group. Financial services firm Industrial and Commercial Bank was also among investors, as was Shenzhen Yunneng Fund, Kpeng Capital and the city of Shenzhen’s guidance fund. Founded in 2000, Fortune VC focuses on consumer goods and services, agricultural technology and cleantech as well as media and telecoms. The firm began raising money for the Shenzhen Fortune Chuangtong Equity Investment fund in 2017 and has so far invested about $190m in 30 companies.
Eight Roads Ventures, a venture capital branch of financial services group Fidelity, launched a $375m third fund aimed at Europe and Israel-based growth-stage companies. ERVE III will be sector-agnostic, but Eight Roads identified consumer, enterprises, financial technology and healthcare IT as areas of interest. The vehicle will be managed by its London office and is expected to make 15 to 20 investments of $10m to $30m. In addition to providing capital, Eight Roads also aims to help companies scale sales and marketing efforts, assisting with international expansion plans and creating a management hierarchy.
China-based venture capital firm AlphaX Partners closed its first fund at RMB2bn with backing from corporates Credit-Ease, Focus Media and Qihoo 360. In addition to online lending platform CreditEase, outdoor advertising firm Focus Media and cybersecurity software producer Qihoo 360, venture capital and startup services provider Zero2IPO Group and government guidance fund CICC are also among the fund’s limited partners. The fund is dual dollar and renminbi-denominated, and investors include undisclosed institutional investors from Europe and the US as well as Chinese entrepreneurs. Founded in 2016, AlphaX targets Chinese high-growth companies developing technologies in the online, consumer, enterprise software, artificial intelligence, sports and culture sectors.
Ride-sharing firm Grab launched investment arm Grab Ventures to invest in eight to 10 startups over the next two years. The company will also operate an accelerator program, Velocity, targeting growth-stage businesses, in addition to incubating new services from within Grab. Velocity will accept four to six companies per cohort. Grab has recruited Singaporean government agencies Info-communications Media Development Authority of Singapore and Enterprise SG as partners. The total capital earmarked for Grab Ventures is $250m. It will partner or invest in businesses working to solve food, mobility, logistics, fintech and other challenges.
Axa Venture Partners (AVP), the corporate venturing arm of France-headquartered insurance group Axa, raised $150m for the first close of its second early-stage fund. AVP Early Stage II already collected more capital than its predecessor, which closed at $110m in 2015 with commitments from undisclosed new and existing investors. The fund will target pre-revenue and early-revenue companies with a focus on consumer technologies, financial technology and digital health as well as enterprise software and services aimed at small and medium-sized enterprises. AVP Early Stage II will initially invest up to $6m in each startup and will offer business development opportunities to its portfolio companies. Formerly known as Axa Strategic Ventures before rebranding in April 2018, AVP now manages $600m in assets and has backed more than 40 companies. It invests through growth and early-stage funds as well as ASV Diversified, the $175m fund-of-funds scheme it launched in late 2017.
China-based media company and business services provider 36Kr launched a RMB1bn venture capital fund. 36Kr’s core business is its technology news platform, but it also provides financial data concerning startups and projects as well as hosting co-working spaces and offering fundraising services for startups. The fund will target consumer-focused companies, medical technology developers and those in the cultural product space. By the time of the announcement, the fund had made several investments.
Belgium-based nanoelectronics research institute Imec closed its early-stage and growth fund, Imec.xpand, at €117m with backing from a range of corporate limited partners, including electronics manufacturers Samsung and Philips, semiconductor technology producers Applied Materials and SK Hynix, insurance firms KBC and Belfius, and BNP Paribas Fortis and KPN Ventures, subsidiaries of financial services firm BNP Paribas and telecoms company KPN respectively. Imec itself contributed capital, as did the Flemish government and its investment vehicle PMV, state-owned regional development agency BOM, Belgian government-owned investment firm SFPI-FPIM and several unnamed universities and high-net-worth individuals. The fund will focus on technology startups where the research institute’s expertise and infrastructure can have an impact on their success.
China-based appliance manufacturing group Midea raised $104m for an investment fund with a targeted close of RMB1bn to RMB2bn. Guangdong Midea Smart Technology Industrial Investment Fund’s initial fundraising includes a $44m commitment from an unnamed wholly-owned investment arm of Midea. Other limited partners were not named. The fund will focus on areas such as intelligent manufacturing, smart home, retail and new energy. It will be managed by an asset management vehicle formed in June 2018. Founded in 1968, Midea has grown into a conglomerate with more than 200 subsidiaries covering consumer appliances, heating, ventilation and air-conditioning systems, supply chain logistics and robotics and industrial automation.
Singapore-based venture capital firm Golden Gate Ventures closed its third fund at $100m, having secured commitments from diversified conglomerate Hanwha, internet company Naver, property developer Mitsui Fudosan, Singapore state-owned investment firm Temasek, the government-backed Korea Venture Investment Corporation, financial holding company CTBC Group, investment banking firm Ion Pacific, startup hub Mistletoe, IDO Investments and EE Capital. Founded in 2011, Golden Gate concentrates on series A investments in Southeast Asian companies developing mobile and online-focused consumer offerings.
US-based packaged food producer Kraft Heinz launched strategic investment vehicle Evolv Ventures with up to $100m. The fund will be headed by Bill Pescatello as managing partner. He was hired from venture capital firm Lightbank, where he had been a partner since 2011. Evolv Ventures will target developers of e-commerce, logistics and supply chain technology as well as direct-to-consumer projects, Pescatello told Bloomberg. Its formation follows Kraft Heinz’s launch of accelerator Springboard.
People
Muriel Atias, formerly project director of M&A corporate finance for France-based cosmetics producer L’Oréal, joined its corporate venturing unit, Business Opportunities for L’Oréal Development (Bold). Bold hired Atias as a chief investment officer, and will take minority stakes in companies developing marketing, research and development, retail and supply chain-focused technologies. Atias held the project director role for nearly five years, managing turnover from L’Oréal’s real estate, industrial and R&D investments. She has also been director of financial operations for retail group Groupe Casino, overseeing its grocery store chain Franprix and discount store chain Leader Price.
Mel Gaceta, an experienced leader of corporate venturing units, joined Nasdaq-listed packaged food and beverage producer Mondelēz International to set up its new venture capital unit. Gaceta has nearly 20 years’ experience in corporate venturing under his belt, including more than 13 years at Motorola Ventures, a subsidiary of telecoms product maker Motorola. Gaceta was director of finance for Motorola Ventures from its November 2000 formation. In late 2004, he became an investment manager at Motorola Ventures, which evolved into Motorola Solutions Venture Capital after the split of its parent into Motorola Solutions and Motorola Mobility. He joined mobile network operator US Cellular at the end of 2013.
David Parfett, former head of airline operator Qantas’s Innovation and Ventures unit, joined Australia-based shopping centre operator Scentre Group as general manager of strategy and business development. Parfett had originally joined Qantas in 2011 as a senior manager of group strategy before being promoted to head of strategy and innovation in 2014 and eventually running the Innovation and Ventures team from late 2016. During two years in the role, Parfett helped Qantas form its innovation and ventures strategy, and set up corporate venturing unit Qantas Ventures in 2017 to make investments in early and growth-stage technology developers.
Bill Qian, formerly head of cross-border M&A at JD.com’s financial technology spinoff, JD Finance, was promoted to general manager of corporate ventures. Qian currently oversees investments in enterprise services, industrial internet-of-things and consumer internet technologies. Having joined JD in July 2015 as head of crowdfunding business strategy, Qian initially concentrated his efforts on equity crowdfunding as part of a year-long stint in which it raised more than RMB1.1bn for 89 startups.
US-based financial services firm TIAA promoted Raja Doddala, managing director of its business-to-business digital division, to head the financial technology strategy and development branch. Doddala joined TIAA in 2016 to head the digital team in the institutional financial services department, implementing self-service sales, mentoring new hires and managing storefront websites. Before joining TIAA, Doddala spent a decade at US-based convenience retail chain 7-Eleven, where he held various senior roles, co-founding its corporate venturing unit, 7-Ventures, in 2013 as senior director of services and new ventures.
Joe Kraus, a general partner at corporate venturing unit GV since 2009, left to become chief operating officer for US-based scooter and bicycle rental service Lime. Since taking his board seat, Kraus has helped the company hire a chief business officer, general counsel, head of engineering and head of operations and strategy. He will take over some of the day-to-day duties of Lime co-founder and CEO Toby Sun. Kraus will retain a venture partner position at GV, according to the unit’s website. He co-founded search engine provider Excite.com in 1993 as well as enterprise directory software developer JotSpot, which was acquired by Google in 2006 and converted into Google Sites.
Itxaso del Palacio, formerly a partner at software provider Microsoft’s corporate venture capital unit, M12, was appointed investment director at UK-based venture capital firm Notion Capital. Del Palacio joined M12, formerly Microsoft Ventures, in 2017, helping to launch its UK office in London and managing its business-to-business technology dealflow in Europe.
Kabir Misra, managing partner of SoftBank Capital, a corporate venturing subsidiary of SoftBank, left Indian e-commerce marketplace Snapdeal’s board of directors. SoftBank first invested in Snapdeal as part of a $500m funding round in 2015, and held a 33% stake and two of the company’s board seats as of April 2017, by which time it had provided $900m of the $1.7bn in venture capital it had raised. The corporate attempted to leverage a merger between Snapdeal and chief rival Flipkart. Misra reportedly played a big part in the talks.
University backing
GCV’s sister publication Global University Venturing reported various commitments to university spinouts in the consumer sector. By the end of 2018, 21 rounds had been raised by university spinouts, more than twice the 10 registered in the previous year. The level of estimated total capital deployed in 2018 was $100m, more than double the $49m in 2017.
US-based microbiome company Evolve BioSystems closed a $40m series C round that featured agribusinesses Tate and Lyle and Continental Grain, pharmaceutical firm Johnson & Johnson, dairy cooperative Arla Foods and food producer Campbell Soup. Philanthropic organisation Bill and Melinda Gates Foundation co-led the round with Horizons Ventures, the venture division of charity Li Ka Shing Foundation. Founded in 2011, Evolve is working on probiotics that establish, restore and maintain a healthy infant gut microbiome. The company was spun out from the Food for Health Institute at University of California Davis.
US-based healthy meals supplier Oh My Green raised $20m in a seed round backed by Stanford-StartX Fund, the venture capital arm of Stanford University-affiliated StartX accelerato. Initialized Capital, Powerplant Ventures, Talis Capital, ZhenFund and Backed VC also contributed to the funding round. Founded in 2014, Oh My Green curates healthy food products and kitchen equipment for businesses, selecting its range on the basis of a nutrition scale invented by Pamela Peeke, an assistant professor of medicine at University of Maryland.
3F Bio, a UK-based food protein spinout from University of Strathclyde, received £6.2m in a series A round backed by the university and the Scottish Investment Bank, part of government-owned development agency Scottish Enterprise. The round also featured angel network EOS Technology Investment Syndicate, venture capital fund Data Collective as well as private investors including Nick Elmslie and unspecified members of the 3F Bio management team. Founded in 2015, 3F Bio has developed a meat-free mycoprotein that can be used as a vegetarian foodstuff or to complement standard meat-based ingredients. The production process is designed to discharge little waste and retain three to 15 times as much protein as conventional farming methods.
GCV Analytics defines the consumer sector as encompassing e-commerce platforms, food and beverages and related technologies and services, fashion and apparel, hygiene, beauty and fitness, consumer electronics and other physical consumer products.