The world has started the new year with the hope it can fight off the coronavirus pandemic thanks to the rollout of vaccines – some from corporate backed startups. As the world recovers, an economic improvement seems on the cards and there are early positive signs as investment activity in corporate venturing has increased.
According to GCV Analytics, the number of corporate-backed deals from around the world was 274 in February, only 6% lower than the 292 rounds from the same month last year. Investment value, however, stood at nearly $10.85bn in total estimated capital –up 42% from the $7.63bn in February 2020.
The US came first in the number of corporate-backed deals, hosting 97 rounds, while Japan was second with 47 and India third with 30.
The leading corporate investors by number of deals were diversified internet conglomerate Alphabet, enterprise software producer and internet firm Tencent. In terms of involvement in the largest, Tencent, Alphabet and real estate developer China Evergrande Group were at the top of the list.
GCV Analytics reported 37 corporate-backed funding initiatives in February, including VC funds, new venturing units, incubators, accelerators and other. This figure is more than the double the one from February 2020, which registered 16 initiatives. The estimated capital raised in those initiatives amounted to $3.04bn, considerably higher (up 106%) than the $1.47bn raised during the same month last year.
Deals
Emerging businesses from the health, IT, financial, services and industrial sectors led in raising the largest number of rounds in February 2021. The most active corporate venturers came from the financial, IT, health and media sectors.
China-based community buying platform developer Xingsheng Youxuan has secured approximately $2bn in a funding round featuring Tencent and real estate developer China Evergrande Group. Sequoia Capital China led the round, which also featured FountainVest Partners, Primavera Capital Group, KKR and Temasek. It valued Xingsheng at $6bn pre-money.
Xingsheng Youxuan runs an e-commerce business that allows local communities to club together to purchase items in bulk. The company processes more than 8 million daily orders and covers more than 30,000 towns across China.
US-based data analytics software developer Databricks secured $1bn in a series G round featuring Microsoft, Alphabet, e-commerce group Amazon and Salesforce. The round was led by investment firm Franklin Templeton and included investment and financial services group Fidelity, among other investors. Amazon, Alphabet and Salesforce participated through Amazon Web Services (AWS), CapitalG and Salesforce Ventures respectively, and the round valued Databricks at $28bn, up from $6.2bn in its last round, a $400m series F in late 2019.
Databricks has created a data management platform that can handle all structured, semi-structured and unstructured data for enterprise-scale analytics. The technology is based on Apache Spark, the open-source analytics software developed at University of California, Berkeley, by some of Databricks’ co-founders, including chief executive Ali Ghodsi, who is an adjunct professor at the university.
Yuanxin Technology, the China-based developer of a telemedicine platform, closed a RMB$3bn ($466m) series E round co-led by Tencent. Venture capital firm Sequoia China co-led the round, which also featured VC firm Qiming Venture Partners, investment bank Citic Securities and CICC Capital, a subsidiary of investment banking firm China International Capital Corporation.
Founded in 2015, Yuanxin has created a mobile app called Miaoshou Doctor that enables users to access a network of 1.3 million doctors for online consultations outside normal work hours, in addition to paying for prescription medicine and buying health insurance. The company has about 7 million daily active users and also manages online portals for some 200 Chinese hospitals across 80 cities.
Zomato, an India-based food delivery app operator that counts corporates Ant Group, Info Edge and Delivery Hero as investors, secured $250m at a $5.4bn valuation, according to a stock exchange filing. Investment and financial services group Fidelity Management and Research contributed $55m to the round, which featured $20m from Bow Wave Capital Management, an investment firm that targets companies affiliated with or backed by financial services provider Ant Group and its parent, e-commerce firm Alibaba.
Zomato was founded in 2008 as a restaurant review and discovery platform but has since added on-demand food delivery to its services. The company is reportedly considering an IPO during the first half of 2021.
US-based autonomous truck technology developer Plus closed a $200m round, co-led by automotive components producer Wanxiang through its Wanxiang International Investment unit. Investment bank Guotai Junan International and investment banking group Citic’s CPE subsidiary co-led the round with existing backers including Full Truck Alliance, the trucking services marketplace also known as Manbang Group.
Formerly known as Plus.ai, Plus is developing a self-driving system designed for use with trucks, and working with original equipment manufacturers, fleet managers and shipping companies to fine-tune its technology.
US-based sales management software provider Highspot secured $200m at a $2.3bn valuation in a series E round that included management consulting firm Bain & Company and Salesforce. The latter invested through corporate venturing unit Salesforce Ventures.
Highspot has built an artificial intelligence (AI) and data-enhanced platform that helps sales representatives manage customer relations, leads and accounts. The money will be used to improve the company’s products, increase its presence in France and the Asia-Pacific region, boost its partner network and support the sales community.
US-based email optimisation technology developer SparkPost received $180m from financial services firm PNC Bank and private equity firms LLR Partners and NewSpring Capital. Founded in 2014, SparkPost has built a data-enhanced software platform that enables users to send business emails to their target audience that comply with cybersecurity requirements. The company claims the tool is responsible for distributing almost 40% of the world’s marketing emails, on behalf of corporate customers including Adobe, Booking.com, Rakuten, The New York Times and Zillow. It will use the cash to accelerate growth, support research and development efforts and boost its sales.
US-based data backup platform operator OwnBackup secured approximately $168m in a series D round co-led by Salesforce Ventures. Growth equity firm Insight Partners and VC firm Sapphire Ventures co-led the round, which included Innovation Endeavors, Oryzn Capital and Vertex Ventures. It valued the company at $1.4bn, and it said the round brought its overall funding to about $268m since it was founded in 2015.
OwnBackup has built a software tool that enables enterprise customers to manage and store data on cloud-based platforms such as Salesforce, helping protect data from corruption and loss, meet regulatory compliance requirements and offer cybersecurity services. The cash will be used to expand its business internationally and improve its technology.
US-based sports media company Pocket Outdoor Media completed a $150m series B round featuring Zone 5 Ventures, the VC firm funded by bicycle component producer Specialized Bicycle. Sequoia Heritage, the community investment platform formed by VC firm Sequoia Capital, led the round, which included Jazz Ventures and Next Ventures. Founded in 2017, Pocket Outdoor provides a diversified media offering focused on active lifestyles and adventure sports that spans web, print, social media and video content as well as podcasting. It has rebranded as Outside and bought or agreed to acquire adventure media company Outside Integrated Media, adventure sports producer Outside TV, event registration software developer AthleteReg, cycling magazine publisher Peloton and mapping app developer Gaia GPS.
China-based medical diagnostics technology provider WuXi Diagnostics closed a $150m series B round featuring scientific instrument producer Thermo Fisher Scientific. ABC International Holdings, a subsidiary of financial services firm Agricultural Bank of China, also took part in the round, as did CCBI Tech Venture, a vehicle for financial services firm China Construction Bank. The round was filled out by healthcare investment firm Shiyu Capital, healthcare fund Sunland Capital and private equity firm YF Capital, while investment bank CEC Capital was the financial adviser.
WuXi Diagnostics has developed a technology platform that uses big data and AI algorithms to create diagnostics products or services or help customers accelerate their research and development activities. The company had already formed a collaboration agreement with Thermo Fisher and medical research and care provider Mayo Clinic that focuses on covid-19.
Exits
GCV Analytics tracked 43 exits involving corporate venturers as either acquirers or exiting investors in February. The transactions included 15 acquisitions, 12 initial public offerings (IPOs), 15 other transactions, mostly reverse mergers with special purpose acquisition companies (Spacs) and one merger.
The exit count figure was more than double that of February 2020 (19). The total estimated exited capital stood at $18.04bn, up 76% from $10.2bn recorded in the same month last year and nearly double the estimated $9.38n in January this year.
China-based video streaming platform developer Kuaishou Technology raised $5.4bn in an IPO on the Hong Kong Stock Exchange that scored exits for internet groups Tencent and Baidu. The company issued about 365 million shares priced at HK$115 ($14.83) each. Its shares surged to HK$338m at the start of trading and closed at HK$300.00, giving it a market cap of roughly $160bn.
Investment and financial services group Fidelity bought $270m of shares in the IPO while Capital Group purchased $500m, Invesco $270m and Morgan Stanley Investment Management $125m according to Nikkei. The Japanese newspaper also named GIC, Abu Dhabi Investment Authority, Canada Pension Plan Investment Board and Boyu Capital as buying investors.
Kuaishou has built a short-form social video app with more than 300 million daily active users. Its chief rival, Douyin, is better known internationally as TikTok.
Lucid Motors, a US-based luxury electric vehicle provider backed by diversified conglomerate Mitsui, agreed to execute a reverse merger with SPAC Churchill Capital Corporation IV. The deal involves a combined equity value of almost $11.8bn and the company will be listed on the New York Stock Exchange, after Churchill’s flotation in a $1.8bn IPO in July. Saudi Arabia’s Public Investment Fund anchored a $2.5bn private investment in public equity (PIPE) financing for the company at an initial pro-forma equity valuation of approximately $24bn.
The PIPE includes investment and financial services group Fidelity, Franklin Templeton, Neuberger Berman, Wellington Management, Winslow Capital Management and funds and accounts managed by BlackRock. Lucid has been developing a luxury sedan dubbed the Lucid Air that is slated for later this year. It also expects to launch a luxury sports utility vehicle dubbed Gravity in 2023. It also plans to offer its technology to third parties.
Online dating platform Match Group agreed to buy South Korea-based online communication technology provider Hyperconnect for approximately $1.73bn, which would allow telecoms and internet group SoftBank to exit. Founded in 2014, Hyperconnect operates a one-on-one video and audio chatting app called Azar that has been downloaded more than 540 million times, and Hakuna Live, a group livestreaming app featuring augmented reality avatars that has been downloaded more than 23 million times. The company generated more than $200m in revenue over the course of 2020 and claims to have become already profitable.
ReNew Power, an India-based renewable energy provider backed by energy utilities Chubu Electric Power and Tokyo Electric Power, agreed to a reverse merger with SPAC RMG Acquisition Corporation II. Funds and accounts managed by BlackRock, BNP Paribas Energy Transition Fund, Sylebra Capital, TT International Asset Management, TT Environmental Solutions Fund, Zimmer Partners and private investor Chamath Palihapitiya have committed $855m of PIPE. With $345m already held by RMG, ReNew Power will have access to $1.2bn in gross proceeds following the merger. The transaction values the combined business at $8bn.
Founded in 2011, ReNew operates more than 100 utility-scale solar power plants and wind farms across nine Indian states. It has also expanded into related areas, such as energy storage. The company will use proceeds to expand its power generation capacity and reduce its debt.
Vayner/RSE, the VC firm backed by creative agency VaynerMedia, will exit US-based alcohol delivery service Drizly, which will be acquired by ride hailing service Uber for $1.1bn. Drizly operates an e-commerce platform that offers beer wine and spirits to customers in 1,400 towns and cities through partnerships with local shops, allowing users to schedule delivery. It will operate as a subsidiary of Uber once the transaction closes. Uber already delivers food through its Uber Eats subsidiary, and has moved into areas such as groceries and prescription medicine as coronavirus restrictions have made those services more feasible.
Joby Aviation, a US-based air taxi developer backed by chipmaker Intel, airline JetBlue, automaker Toyota and ride hailing service provider Uber, agreed a reverse merger with SPAC Reinvent Technology Partners. Baupost Group, funds and accounts managed by BlackRock, Fidelity and Baillie Gifford have anchored a $835m private investment in public equity, while Uber will convert $75m of bonds into equity. The merged business will trade on the New York Stock Exchange. Founded in 2009, Joby is developing vertical take-off and landing aircraft to take passengers to their destinations by air. The company has conducted more than a thousand test flights and intends to launch its service in 2024. Proceeds will allow Joby to begin its commercial flights by getting regulatory approvals and opening manufacturing sites.
Genomic testing technology developer Veracyte agreed to buy Decipher Biosciences, a US-based peer backed by pharmaceutical group Merck & Co and healthcare provider UnitedHealth Group, for $600m. The deal will entail Veracyte paying roughly 40% in cash and the remainder in stock consideration, subject to purchase price adjustments.
Decipher was founded in 2008 as GenomeDx Biosciences, and has built genomic diagnostics products that primarily identify prostate and bladder cancers. Veracyte is working on similar diagnostics tools focusing on breast, lung, thyroid cancers and idiopathic pulmonary fibrosis, a chronic lung disease caused by scarring of lung tissues.
US-based stem cell medicine developer Sana Biotechnology raised almost $588m in an enlarged IPO representing an exit for GV, a subsidiary of Alphabet. The company issued 23.5 million shares on the Nasdaq Global Select Market, up from a planned 15 million, priced at $25.00 each, above the $20 to $23 range it had set. The IPO price valued Sana Bio at $4.9bn and its shares surged 40% on the first day of trading to close at $35.10, giving it a market cap above $6.4bn. This was the largest IPO ever for a preclinical biotech company, according to Axios.
Sana Bio is developing cell therapies that are capable of evading the body’s own immune system to avoid undesired immune responses. The company will put $190m of the IPO proceeds into development of its in vivo cell engineering platform and related candidates, $190m toward its ex vivo cell engineering platform and related assets, $80m to expanding its manufacturing capabilities and $40m to research and development.
23andMe, the US-based genetic testing service backed by Alphabet, WuXi AppTec, pharmaceuticals Johnson & Johnson, GlaxoSmithKline (GSK), Roche and Illumina, agreed a reverse merger with a SPAC. VG Acquisition Corp, which is sponsored by conglomerate Virgin Group, floated on the New York Stock Exchange in a $480m initial public offering in October 2020, and the merged business will take its listing on the exchange.
The transaction will value the company at $3.5bn and will be supported by $500m in financing from Virgin founder Richard Branson, 23andMe co-founder and chief executive Anne Wojcicki, funds managed by investment and financial services group Fidelity, Altimeter Capital, Casdin Capital and Foresite Capital. Founded in 2006, 23andMe provides home testing kits that customers send back in order to get information on genealogy and their potential genetic susceptibility to diseases.
Markforged, a US-based industrial 3D printer manufacturer backed by corporates software developer Microsoft, automaker Porsche and industrial conglomerate Siemens, agreed to undertake a reverse merger with special purpose acquisition company One to list on the New York Stock Exchange. Porsche Automobil Holding and M12, vehicles for Porsche and Microsoft, have committed to a $210m private investment in public equity led by Baron Capital Group.
With the money already held by One, Markforged will have access to $425m in gross proceeds. The combined business will be valued at $2.1bn and will trade under the ticker symbol MKFG once the transaction concludes this summer. Founded in 2013, Markforged has developed an artificial intelligence-powered additive manufacturing platform. It will use proceeds to drive business growth, launch additional products and introduce more proprietary materials.
Note: Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.