The consumer sector has had a dynamic year, marked by record-setting investment rounds, multimillion-dollar exits, new venturing units and numerous new funds. According to GCV Analytics, the top 100 corporate VCs in the sector accounted for over $19bn of deals. This is almost double the $9.8bn invested over the previous year.
China-based e-commerce giant Alibaba, which made headlines in 2014 with its record-setting $25bn US flotation, stays at the forefront with 18 major deals and the whopping $13bn of capital invested in aggregate in its deals (see profile). It is followed by the Japan-based e-commerce firm Rakuten, with 13 large deals and over $2bn committed to rising companies. Another Asia-based e-commerce, JD.com, ranks third with over $1.3bn invested by investment syndicates in 12 deals.
In terms of geographical distribution, North America and Asia accounted for the majority of deals in the consumer sector. With mass-digitisation, the investment focus of consumer VCs appears to be quite diverse. While sizeable amounts have been committed to consumer startups, investors took a considerable interest in transportation – mostly sharing economy ride-hailing platforms – media, healthcare and IT. The top three investors in emerging consumer companies were corporate VCs from the IT and technology sector – International Data Group, Qualcomm and Alphabet’s Google teams.
Deals
There was no shortage of multimillion and billion-dollar deals by corporate VCs in this sector over the past year. Most took place in North America and Asia. Many of the record-setting rounds went to transportation-sharing platforms based in China. Alibaba, the leading investor from the consumer sector took part in most of them.
In January this year, China-based local listings company China Internet Plus raised a record $3.3bn from undisclosed investors, according to Tech in Asia. The firm is backed by internet company Tencent and e-commerce group Alibaba, and came about from the merger of Meituan and Dianping in October last year, when it was valued at $15bn.
In September 2015, China-based ride-hailing service Didi Kuaidi confirmed a $3bn round backed by e-commerce group Alibaba, insurance firm Ping An and internet services company Tencent. Didi Kuaidi is a market leader in China. Its service covers 80 Chinese cities, whereas its nearest competitor, Uber China, is present in 15.
In July, Didi Kuaidi raised $2bn from investors including Ping An Ventures, as reported by Bloomberg. The round included Alibaba, Tencent, Singaporean state-backed fund Temasek, Coatue Management and Capital International Private Equity Funds. Didi Kuaidi raised the cash at a $15bn valuation.
However, astronomical amounts did not go to sharing-economy platforms only in Asia. In January, US-based ride-ordering service Lyft confirmed it was closing a $1bn round led by carmaker General Motors, which committed $500m for a strategic partnership. The round also featured e-commerce companies Alibaba and Rakuten, Didi Kuaidi and investment management firm Janus Capital Management. In March 2015, Lyft also raised $530m, at a $2.5bn valuation, from investors including Rakuten, which paid $300m for an 11.9% stake.
In February this year, US-based augmented reality technology developer Magic Leap raised $793.5m in a series C round led by Alibaba. Other investors included Google, Qualcomm Ventures, film studio Legendary Entertainment and Warner Bros. Magic Leap develops augmented reality technology called Mixed Reality Lightfield, which superimposes ultra-realistic moving light sculptures on real-life settings.
Last September, Alibaba and its affiliate Ant Financial invested about $680m in the India-based payment technology provider One97 Communications, to obtain a 40% stake, as the Economic Times reported. One97 is the owner of Paytm, an online payment services provider launched in 2008 as a mobile phone payment service.
In August, China-based online food delivery service Ele.me confirmed a $630m series F round featuring retail chain Hualian Group, according to Forbes. The round included Citic Private Equity, China Media Capital, Gopher Asset, Tencent, online marketplace JD.com and Sequoia Capital. Ele.me offers an online service enabling customers to order food deliveries from local restaurants. The service is available in 260 Chinese cities.
In August, India-based online marketplace Snapdeal raised $500m from e-commerce group Alibaba, contract manufacturer Foxconn and telecoms firm SoftBank, as Recode reported. The round increased Snapdeal’s total funding to over $1.5bn.
Last month, travel booking service Expedia paid $270m for a 20% stake in Argentina-based online travel agency Decolar.com. Decolar also operates under the brand Despegar and covers 21 markets including Spain, the US, and Latin America.
In November, Weying, a China-based operator of mobile ticketing service Wepiao, confirmed a RMB1.5bn ($235m) series C round featuring Tencent and conglomerate Dalian Wanda Group. The round, originally reported by local news outlets, was led by Beijing Cultural Assets Chinese Anci Films & Television Fund, and featured agribusiness New Hope Group, Citics Prosperity Fund, GGV Capital, Southern Capital, Gopher Asset Management, Noah Private Wealth Management and INLY.
In November, e-commerce firm JD.com was set to invest $150m in China-based arts and entertainment-focused social media Douban as part of a strategic partnership agreement, China Money Network reported. Founded in 2005, Douban’s social network allows users to post content and reviews related to films, books, music and local events. It launched an attendant e-commerce platform in September in conjunction with JD and other online retailers like Alibaba and Amazon.
Exits, IPOs and mergers
In October, two of China’s largest privately-held companies, online listings and reviews service Dianping and group buying platform Meituan, agreed to a merger, valued at $15bn, according to Xinhua. They jointly raised over $2.6bn from investors including Tencent, Alibaba, conglomerates Wanda and Fosun, and smartphone maker Xiaomi. The new company was called China Internet Plus.
However, in January this year, e-commerce firm Alibaba agreed to sell its stake in China Internet Plus, around 7%, for roughly $900m, according to Wall Street Journal. This took place shortly after the company had raised $3.3bn. Alibaba was reportedly looking to divest so it could focus on its Koubei platform, in which it had invested over $1bn throughout 2015.
In April 2015, e-commerce company Rakuten announced that it was set to acquire US-based online media network Popsugar in a $580m deal, as reported by TechCrunch. Popsugar runs a celebrity-oriented online news site with 41 million unique visitors each month.
In September, e-commerce company Amazon agreed to acquire US-based multiscreen video technology provider Elemental Technologies, giving exits to several corporate investors, including Telstra, BSkyB, Citrix and Disney-affiliated Steamboat Ventures. The price was undisclosed, but according to other sources Amazon would pay over $500m in cash. The acquisition was made through Amazon Web Services.
In November, fashion and watch producer Fossil Group agreed to acquire US-based wearable technology manufacturer Misfit for $260m, giving an exit to investors like Xiaomi, JD.com, Coca-Cola and O’Reilly Media. Fossil intends to incorporate Misfit’s wearable technology into its watch brands.
In November, US-based payment services provider Square, backed by Starbucks and Visa, raised $243m in an IPO priced significantly below its range. The company issued 27 million shares at $9 each, below the $11 to $13 range it had set earlier.
In August, digital publisher Axel Springer exited Austria-based fitness data app provider Runtastic, when it was acquired by apparel producer Adidas for €220m ($239m). Runtastic has built a suite of fitness and tracking apps for runners and cyclists and has 70 million registered users.
In July, US-based pharmaceutical company Seres Therapeutics closed its IPO at $153.8m, after underwriters Goldman Sachs, Bank of America Merrill Lynch, Leerink Partners and Canaccord Genuity exercised an option to buy additional shares. Seres, backed by food and nutritional product manufacturer Nestlé and healthcare research company Mayo Clinic, initially raised $134m when it issued 7.4 million shares at $18 each. Seres is developing treatments for bacterial infections and its lead product is a therapy for colon infection.
In May, China-based e-commerce services provider Baozun went public in the US, raising $110m despite floating on Nasdaq below its $12 to $14 range. Baozun, which is backed by Alibaba and SoftBank, issued 11 million shares at $10m each.
The same month, advertising technology company AppNexus acquired US-based revenue management company Yieldex in a cash and share deal, reported by Wall Street Journal to be worth $100m. It provided exits to investors including Hearst Interactive Media and Amazon. Yieldex develops a product suite around publisher forecasting, pricing and direct-sales analytics tools.
People
In March 2015, Corina Kuiper, formerly the senior director of new business development and venturing for health and consumer products maker Philips, co-founded venture capital support organisation Innovation Family, offering interim management, hands-on support, coaching and training workshops to both corporates and startups.
Joey Dai left his position as general manager of CyberAgent Ventures China, a corporate venturing subsidiary of Japan-based internet company CyberAgent, to set up a new fund, as The Bridge reported in July. Dai is looking to raise approximately $30m for his new venture capital firm, Gravity Venture Capital, which will focus on offline-to-online Japan-based startups such as e-commerce and sharing economy businesses and internet-of-things technologies.
It August, it was reported that Meredith Schwarz had left General Mills Ventures, the corporate venturing arm of the consumer food producer, to be a vice-president at private equity firm Encore Consumer Capital. Schwarz helped to launch General Mills Ventures 11 years ago, after five years as an associate at financial services company JPMorgan Chase. Encore focuses on investments in consumer products companies and closed its third fund in June 2015 at $260m. Schwarz will oversee deal origination and execution, and portfolio company oversight.
In November, it was reported that India-based e-commerce platform Flipkart was seeking a new head of corporate development to replace Nishant Verman, who is now chief of staff for Mukesh Bansal, head of Flipkart’s commerce platform.
In August, Natalie Hwang joined Simon Venture Group, the venturing unit of Simon Property Group, as an investment principal. Hwang was previously a vice-president at Blackstone Group (see interview).
Funds
In March last year, US-based wearable technology provider Pebble pledged $1m to a fund for startups developing and commercialising smart straps for its smartwatch, as TechCrunch reported. Pebble had raised $19.5m on Kickstarter for its second-generation Pebble Time smartwatch a month before. The watch is compatible with Apple’s iPhone and Android smartphones.
Also in March, Alibaba became a limited partner in cybersecurity and storage-focused venture capital firm Jerusalem Venture Partners’ seventh fund with a $15m investment, according to Wall Street Journal. Alibaba’s investment was reportedly centred on an interest in new data storage and network technologies to reduce its data centre costs.
In May, Ant Financial Services Group, Alibaba’s financial services affiliate, launched its RMB1bn Co-Win Fund venture capital fund, as reported by China Money Network. The fund is to focus on internet finance companies and related industries.
In June, CyberAgent Ventures launched a $50m fund to support early-stage companies in Southeast Asia, as Tech in Asia reported. The fund is particularly interested in Indonesia-based startups, and will invest at seed, series A and series B stage. It will provide funding to educational technology, real estate, automotive listings platforms and fintech startups.
Also in June last year, Felix Capital Partners, a UK-based venture capital firm, raised $120m for its technology fund from a consortium including consumer goods company Unilever and fashion retailer Galeries Lafayette, according to Bloomberg. Felix also raised capital from undisclosed institutional investors. The fund will seek to invest between $2m and $5m per round, though it does not rule out investments of up to $10m.
In July, US-based consumer product crowdfunding company CircleUp closed a $22m fund to invest in brands that list themselves on its platform, as TechCrunch reported. Founded in 2005, CircleUp operates a crowdfunding service matching entrepreneurs with accredited investors and charging 5% of the money raised.
The same month, Alibaba unveiled a RMB1bn fund at its software developers’ conference in Hangzhou that is to invest in mobile internet startups. Alibaba will fund startups developing mobile apps that provide access to on-demand local services. Ant Financial Services Group will provide an additional $160m to the startups as low-interest loans. The early-stage investment will be supplied as part of Alibaba’s new Shengyi 1.0 initiative, which includes regular training workshops for developers.
In July, audiobook publisher Audible and financial services provider Prudential Financial made anchor investments in venture capital fund Newark Venture Partners, Wall Street Journal reported. Newark Venture Fund is focusing on investing in startups based in Newark, New Jersey, and aims to raise $50m in capital.
In August, Germany-based e-commerce group Rocket Internet announced that it was raising a €1bn growth equity fund, as reported by WirtschaftsWoche. Rocket Internet’s co-founder and CEO, Oliver Samwer, is the fund’s sole general partner, according to Deutsche Startups.
In September, China-based textile product manufacturer Luolai Home Textile committed capital to Gobi Yingzhi II, a $94m fund of venture capital firm Gobi Partners, according to TechCrunch. Yingzhi II will focus on seed, pre-series A and series A rounds, and intends to make about 45 deals at an average size of $1.6m. Its investment focus will encompass startups across sectors such as software, cloud computing, financial technology, telematics, smart hardware, online-to-offline services and online travel booking.
The same month, Alibaba launched a sports technology group in conjunction with online media company Sina Corporation and Yunfeng Capital, a private equity firm founded by Alibaba chairman Jack Ma. The unit has not revealed how much of its activity will involve investments in startups but the presence of Yunfeng in the consortium suggests there will be at least some funding.
Japan-based e-commerce firm Beenos invested $5m in Beenext, a $60m fund launched by the company’s founder Teruhide Sato, according to Tech in Asia in September. The fund will operate out of Singapore and focus on startups based in Japan, India, Southeast Asia and the US, developing technology for the internet and mobile sectors.
In October, Bloomberg reported that Malaysia-based conglomerate Genting and South Korea-based e-commerce and TV shopping network operator GS Home Shopping would back the Southeast Asia Fund of US-based venture capital firm 500 Startups, which had doubled the fund’s target to $20m.
In October, Netherlands-based trading conglomerate Louis Dreyfus Holding and private equity firm Bamboo Finance jointly launched a $50m impact investment fund, Nisaba, to provide capital to agribusiness startups in sub-Saharan Africa. Louis Dreyfus will commit $10m. Nisaba will particularly seek companies that incorporate social, environmental and financial returns.
In October, Germany-based growth equity firm Acton Capital Partners closed its fund Heureka II at $200m after securing publishing group Hubert Burda Media as a limited partner. The fund follows the $185m Heureka I, which provided funding for companies in the consumer internet sector. Targeted subsectors include online marketplaces, e-commerce, e-services, digital media and software-as-a-service. Heureka II will continue its predecessor’s geographical focus, investing mainly in Europe with some cash going to North America.
In October 2015, the UK and Netherlands-based consumer goods conglomerate Unilever announced it would bring its Unilever Foundry programme to the US. The initiative will aim to give startups access to the conglomerate’s various brands to pilot new products and services, receive mentoring from marketing staff and apply for funding from its corporate venturing unit, Unilever Ventures.
In November 2015, Japan-based e-commerce firm Rakuten launched a $100m strategic corporate venturing fund to target investments in early to mid-stage financial technology companies. The Rakuten FinTech Fund will look to invest in startups and growth-stage companies in the US and Europe with strategic relevance. The strategic element of the unit will fuel development of Rakuten subsidiaries such as Rakuten Card, Rakuten Securities, Rakuten Bank and Rakuten Life Insurance, all of which its portfolio companies will be able to access.
In the same month, Japan-based beauty and weight loss products manufacturer Sunnyhealth partnered Fenox Venture Capital to set up a fund to invest in startups worldwide and help them enter the Japanese market. The size of the fund has not been disclosed, but it is known that the fund will focus on companies across the healthcare, healthcare IT and software sectors.
In November 2015, Alibaba committed over $435m to two non-profit funds for entrepreneurs developing technology based on the firm’s ecosystem. Both the NT$10bn ($307m) Taiwan Entrepreneurs Fund and the HK$1bn ($129m) Entrepreneurs Fund for Hong Kong will finance startup, growth and expansion-stage companies looking to leverage Alibaba’s e-commerce, logistics, mobile, cloud computing and financial services platforms.
In December 2015, investment firm 360 Capital Partners launched a €35m seed fund backed by a consortium including insurance provider Maif, consumer goods conglomerate Groupe Rocher and medical device manufacturer Thuasne. 360 Square will invest between €300,000 and €1m each in startups and has already selected its first commitments. 360 Capital Partners was founded in 1997 and now has more than €300m under management in six funds.
In January this year, Rakuten Ventures launched a ¥10bn ($85m) fund that will invest in startups in its home country. Rakuten Ventures Japan Fund will target early and growth-stage companies, particularly those with high growth potential, unique technologies and business models. It also aims to find startups that can synergise with its parent company’s technology and services.
The same month, Germany-based Rocket Internet finished raising $420m for its new fund, which included a $50m investment of its own. Rocket Internet incubates its own e-commerce offerings but also makes VC investments. Rocket Internet Capital Partners Fund will invest in the same businesses as its parent company but will enable Rocket Internet to commit more capital to later-stage investments.
New venturing units
In August 2015, US-based alcoholic beverage producer Constellation Brands formed a corporate venturing unit, Constellation Ventures, to invest in innovative concepts and new categories within the alcohol industry. Constellation Ventures also made its first investment, providing an undisclosed amount to Crafthouse Cocktails, a US-based producer of pre-mixed, spirit-based cocktails.
In October, General Mills launched a corporate venturing arm, dubbed 301, which will seek startups in the food sector that have shown early success and established a significant brand. The investment unit grew out of the 301 incubator within General Mills, launched in 2012.
In January 2016, India-based retail and real estate group Primarc set up corporate venturing unit Primarc iVenture to invest in startups, as reported by the Economic Times. Primarc iVenture is to invest between $7,500 and $22,500 in startups at angel stage, and between $37,000 and $150,000 at a more advanced stage. The fund will target startups based in the Indian state of West Bengal.
Also in January, France-based luxury goods producer LVMH joined forces with buyout firm Catterton and investment firm Groupe Arnault, both already backed by LVMH, to launch consumer-focused private equity firm L Catterton. The firm aims to reach $12bn in assets once all its six funds are closed. The funds will focus on buyouts and growth investments in the consumer sector, as well as commercial real estate. It will be 60% owned by Catterton, with the remaining 40% held by LVMH and Groupe Arnault.
At the start of this year, Courtside Ventures, a US-based sports-focused venture capital fund, was launched with $35m of capital supplied by limited partners including marketing firm WPP. The fund will target startups developing sports and media technology that could be used across a range of other markets. It will invest at seed and series A stage, both in the US and internationally.
In January, South Africa-based internet company Silvertree Internet Holdings pledged to invest $10m in online companies through its Silvertree Capital investment subsidiary to increase the size of its owner-operator portfolio.
In February, food product manufacturer Campbell Soup launched $125m venture capital fund Acre Venture Partners to invest in food-related startups. Acre will be funded solely by Campbell but operate independently. Campbell is responding to economic and demographic shifts, such as a declining middle class in the US and an increasing demand for fresh food.
The consumer sector experienced dynamic changes that led to a considerable increase in investments, reflected in record-setting billion-dollar deals. The processes behind all this have much to do with digitalisation and the increasing convergence of e-commerce with other sectors. We have also seen a significant number of new funds, a growing interest in new accelerators and incubators as well as seven new corporate venturing arms that have appeared over the past 12 months. This is indicative of the vitality and potential of the consumer sector. u
New incubators and accelerators
In addition to setting up new funds and venturing arms, corporate VCs came forward to help incubators and accelerators provide opportunities for enterprises in the early stage of development.
In June 2015, Alibaba agreed to invest RMB1.2bn ($194m) in China Business News, a finance-focused subsidiary of China-based media conglomerate Shanghai Media Group, as part of a strategic agreement. Alibaba acquired a 30% stake through the deal, and it announced its intention to launch an incubator in partnership with China Business News. The incubator will fund media startups, according to Wall Street Journal.
In June, US-based incubator InnoSpring closed its InnoSpring Seed Fund II at $5m, following investments from Legend Capital and Legend Star. SoftBank China Capital and IDG Capital Partners also contributed. InnoSpring focuses on mobile-first startups working on consumer technology, enterprise software, fintech and healthcare technology. The incubator will help startups expand from China into the US and vice versa.
In July, UK-based bookmaker William Hill launched the WHLabs accelerator in partnership with investment fund L Mark. The accelerator is to develop technology for the gambling and gaming industries. It will offer eight startups a place on a 12-week course. Each startup will receive a £25,000 ($39,000) and a chance to receive up to £150,000 in additional funding.
In October, AliCloud, a subsidiary of Alibaba, and the Taiwan-based manufacturing services provider Foxconn jointly launched an incubator called Taofu Chengzhen, according to Technode. Taofu Chengzhen will invest in small, medium and micro-sized enterprises.
In the same month, US-based retail chain Target announced plans to launch an accelerator program in partnership with startup accelerator Techstars, which will be funding developers of retail technology. The accelerator will be based in Minneapolis. It will provide funding and mentoring to startups working on a range of retail technology, including supply chain technology, data analytics and new forms of integrating digital and in-store promotions.
In January this year, Johnson & Johnson Health and Wellness Solutions, a subsidiary of healthcare and consumer products conglomerate Johnson & Johnson, teamed up with accelerator Plug and Play Tech Centre to launch an accelerator initiative targeting the wellness industry. It will consist of a three-month program for early-stage startups, focusing on a range of areas including nutrition, physical activity, stress, sleep, alcohol and help to stop smoking.
In February, MassChallenge, a US-based startup accelerator backed by partners including food product manufacturers Nestlé, Givaudan and Bühler, expanded into Europe with the launch of a Switzerland-based program. MassChallenge is inviting startups from Switzerland, across Europe and the rest of the world to enter the competition. It expects to accept around 50 to 100 early-stage startups from any industry, anywhere in the world, and provide up to Sfr1m ($1m) in funding.
