GCV Analytics tracked 1,952 deals worth an estimated $83.59bn of total capital raised. While the deal count is a slight decrease on the 2015 figure, when we tracked 2052 deals, the total dollar value of corporate-backed VC rounds is a new high compared with the $76.34bn in 2015. Furthermore, the total capital involved in 2016 is almost double the estimated $42.95bn of 2014. We are yet to see whether this impressive growth will be sustained through 2017 and beyond.
More than half of the tracked deals took place in the US (1,043). Other noteworthy innovation geographies were China (194), India (93), the UK (81), Germany (58), Japan (53) and Israel (51). Although East Asia still lags behind the US in deal count, the tremendous VC capital with corporate participation was almost invariably fuelled and driven by behemoth multibillion-dollar investment rounds in China-based companies.
Emerging enterprises in four sectors raised the largest number of rounds – IT with 546 deals, health with 319, consumer with 218 and services with 209. These figures do not necessarily always coincide with the areas and sectors that raised most capital or drew most attention in the media. Last year was the year when the battle on the ride-hailing field in Asia between Uber and local players came to an end. It was also the year when buzzwords like “virtual and augmented reality”, “the internet of things”, “last-mile delivery”, “fintech”, and “autonomous driving” became a more present part of the business lexicon.
Looking at 2016 on a quarterly basis, we observe that Q1, Q3 and Q4 registered almost the same level of investment activity in terms of deal count, while Q2 was notably slower. However, Q2 was record-setting in terms of the total estimated capital involved , with a whopping $31bn invested over its 415 rounds.
The top corporate investors of 2016 were four US-based players: pharmaceutical company Johnson & Johnson, internet conglomerate Alphabet (Google), semiconductor manufacturer Intel as well as technology research and media group International Data Group (IDG) – with 63, 61, 60 and 50 deals, respectively. The top three investors involved in the largest deals, however, were all China-based: e-commerce platform Alibaba with $16.2bn, internet company Tencent with $14.71bn and insurance company China Life, which took part in deals worth $12.06bn. Unsurprisingly, an array of US and China-based corporate investors were leading ones in almost every sector worldwide: Alphabet, IDG, Tencent, Alibaba, Intel, Salesforce, Qualcomm, Goldman Sachs, General Electric (GE) and SoftBank.
Deals
GCV Analytics tracked record-breaking large deals through 2016, often surpassing $1bn. Most conspicuous among them was the presence of ride-hailing platforms in the transport sector, as well as online payment platforms in the financial services sector.
China-based ride-hailing service Didi Chuxing closed the largest-yet financing round by a private venture capital-backed company by raising $7.3bn in debt and equity. The $4.5bn equity portion of the round included $1bn from electronics producer Apple, a reported $400m from e-commerce firm Alibaba and its Ant Financial affiliate, $600m from insurer China Life, and contributions from internet company Tencent, telecoms group SoftBank. Didi Chuxing was formed through a merger of China’s two largest ride-ordering platforms – Didi Dache and Kuaidi Dache – in early 2015.
Ant Financial closed $4.5bn in a series B round, which valued the company at about $60bn. The round featured postal service China Post Group and insurance companies including China Life. Other investors included sovereign wealth fund China Investment Corp (CIC), private equity firm Primavera Capital Group, state-owned China Development Bank Capital and CCB Trust, a subsidiary of China Construction Bank. Formed by Alibaba in 2014, Ant brings together several online financial services and investment entities.
US-based ride-sharing app producer Uber received a $3.5bn investment from Public Investment Fund, the sovereign wealth fund of Saudi Arabia. The cash constituted the single largest investment in the company and boosted its total funding to over $12.5bn. Founded in 2009, Uber operates a smartphone app that allows users to hail a car driven by freelance drivers.
China-based local listings and group buying company China Internet Plus Holdings raised over $3.3bn in new funding from undisclosed investors. The firm counts Tencent and Alibaba as investors, and was created when group buying company Meituan merged with local listings and reviews platform Dianping in October 2015, when it was valued at $15bn.
US-based visual messaging platform Snapchat raised $1.8bn in its series F round. Part of the capital ($538m) was provided by Alibaba, which invested alongside financial services group Fidelity Investments, York Capital and Glade Brook Capital. Snapchat operates an ephemeral social messaging platform revolving around videos, text and customisable photos.
Cainiao, a China-based logistics affiliate of Alibaba, received funding from a range of investors in a round reportedly over RMB10bn ($1.54bn). The funding, raised at a $7.7bn valuation, was provided by Singaporean state-owned funds Temasek Holdings and GIC, Malaysia’s Khazanah Nasional, a sovereign investment fund, and China-based investment firm Primavera Capital. Cainiao oversees an e-commerce logistics system that spans more than 120 warehouses and 180,000 express delivery stations across more than 600 Chinese cities.
Alibaba committed $1.25bn to China-based online food delivery platform Ele.me. Alibaba chipped in $900m while its affiliate Ant Financial supplied the remaining $350m. Ele.me operates an online platform used to order food for delivery from local restaurants and takeaways.
China-based online financial services provider Lufax raised almost $1.22bn in series B financing from investors including insurance firm Ping An at a valuation of $18.5bn. The round consisted of $924m in equity funding from investors such as state-owned Bank of China Group, state-owned food producer Cofco, investment bank Guotai Junan and investment group Minsheng Shangyin International, and an additional $292m from its series A backers. Founded in 2011, Lufax oversees an online peer-to-peer lending and brokerage platform with more than 3.6 million active users.
Koubei, an on-demand service provider launched by Alibaba, raised $1.2bn from investors including private equity firm Silver Lake Management, sovereign wealth fund CIC, Primavera Capital and CDH Investments. Launched in June 2015 with $1bn from Alibaba and Ant Financial, Koubei operates an online platform incorporating services such as ride-ordering, restaurant booking, food delivery and event ticketing.
SoftBank agreed to invest $1bn in US-based satellite operator OneWeb as part of a $1.2bn round that featured several other corporates, all existing investors in the company – mobile chipmaker Qualcomm, aerospace group Airbus, beverage producer Coca-Cola, conglomerates Virgin Group and Bharti Enterprises, cable and internet service provider Totalplay, as well as satellite service companies Hughes Network Systems and Intelsat. OneWeb is building a network of 720 low-earth-orbit satellites that will provide internet coverage across the world.
Exits
GCV Analytics tracked 211 exits involving corporate VC investors and companies backed by such investors. This is a record for exits since 2011. The total capital involved in the transactions was estimated at $41.39bn, representing a relatively modest increase over the capital deployed in exits in 2015 – $40.86bn. The US hosted more than half of last year’s exits (137), followed by India (15), China (14) and the UK (10). Much like the VC deals, the top corporate-backed exits stood above the $1bn mark. Several of those multibillion-dollar deals were in enterprises from the consumer sector.
Financial services group Fidelity exited US-based lung cancer treatment developer Stemcentrx in an acquisition by biopharmaceutical company AbbVie valued at up to $9.8bn. Founded in 2011, Stemcentrx emerged from stealth in September 2015 with a pipeline of oncology drugs to kill cancer stem cells. Its lead drug candidate, Rova-T, is in registrational trials for small-cell lung cancer.
Real estate and cinema group Dalian Wanda acquired US-based film studio Legendary Entertainment for $3.5bn, providing exits to various investors including SoftBank. Legendary has produced a string of blockbusters since it was launched in 2004, including Christopher Nolan’s Dark Knight trilogy, Man of Steel, 300, the Hangover trilogy and last year’s highest grossing film, Jurassic World.
Big box retailer Wal-Mart agreed to acquire Jet.com, a US-based e-commerce company backed Alibaba and Alphabet. Wal-Mart formally announced the transaction, made up of $3bn in cash to be paid in instalments and $300m in stock. Jet launched its e-commerce platform in July 2015, two years after it was founded, offering customers the chance to save money on a wide range of consumer products.
Internet and electronics group LeEco agreed to acquire US-based flat screen television producer Vizio in a $2bn deal, giving exits to contract manufacturers AmTran Technology and Foxconn. Founded in 2002, Vizio develops consumer electronics products like smart television sets and sound bars, which are assembled in China to be sold at relatively low cost.
China-headquartered online travel agency Ctrip acquired UK-based online travel search platform Skyscanner in a £1.4bn ($1.74bn) deal, allowing internet company Yahoo Japan to exit. Founded in 2007, Skyscanner operates an online platform allowing users to search for flights, hotels, vehicle rentals and compare prices from a range of providers. It has about 60 million monthly active users and is accessible in over 30 languages.
Automotive manufacturer General Motors purchased Cruise Automation, a US-based driverless vehicle technology developer backed by chipmaker Qualcomm. Founded in 2013, Cruise Automation develops a technology capable of turning any car into a driverless vehicle. Dan Ammann, president of GM, told news publication Business Insider he expected the acquisition of Cruise to enable GM to bring fully autonomous cars to the market.
Alibaba invested $1bn in Singapore-based e-commerce marketplace Lazada in a deal giving partial exits to investors including e-commerce holding company Rocket Internet and retailer Tesco. Founded in 2012 and incubated by Germany-based Rocket Internet, Lazada operates a diversified e-commerce platform that covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Alibaba also agreed to sell its stake in China-based local listings and group buying platform China Internet Plus for roughly $900m, as part of a $3.3bn round led by Tencent in January. Alibaba was reportedly looking to divest its stake so it could focus on Koubei, its own local services platform.
Industrial auctioneer Ritchie Bros Auctioneers agreed to buy US-based online equipment marketplace IronPlanet for $758.5m, giving exits to industrial machinery manufacturers Caterpillar and Volvo Construction Equipment. IronPlanet operates an online marketplace for industrial machinery and equipment with over 1.5 million registered users around the globe.
Funding initiatives
GCV Analytics tracked 286 funding initiatives with corporate backing in 2016, whose estimated total worth was over $134bn globally. These include 142 corporate-backed VC funds, 60 new corporate venturing units, 41 accelerators, 14 incubators and 28 other initiatives. One is notable – the SoftBank Vision Fund ($100bn) – accounts for the vast bulk of the estimated total funding.
The funding raised in 2016 was not evenly distributed geographically. On a country-by-country basis, the US hosted the largest number of such initiatives (76), clearly outnumbering China (31), India (20) and Japan (19). However, in terms of the total value of funds on regional basis, Asia clearly champions the world with the behemoth $122bn raised, followed by North America with $6.58bn and Europe with $5.51bn. It is worth noting that even without the unusually large SoftBank fund, which will actually be based in the UK, Asia would still have been far ahead of North America and Europe with $22.36bn of new funding in which corporate venturers participated.
The most significant outlier in 2016 was the SoftBank Vision Fund. The vehicle was launched when Japan-headquartered telecoms and internet group SoftBank announced it would commit a total of $25bn to the fund and Saudi Arabia, through its state-owned Public Investment Fund, would provide $45bn. There were also talks about “large global investors” to add capital to bring it to $100bn. Later, Masayoshi Son, chief executive of SoftBank, announced that the $100bn fund was set to be oversubscribed, according to Bloomberg. The SoftBank Vision Fund will look to expand SoftBank’s growth through investments in technology companies that could form alliances with its group companies.
Smartphone maker HTC launched the Virtual Reality Venture Capital Alliance (VRVCA) in partnership with 27 other VR investors. VRVCA is to invest in VR technology and content startups, as well as such working on augmented and mixed reality. The VRVCA partners have a total of $10bn of deployable capital. Alvin Wang Graylin, president of VR at HTC China, was appointed president of the coalition. Other VRVCA backers include Colopl, Gumi, Legend Capital, the corporate venturing arm of Legend Holdings, as well as institutional investors such as venture capital firms Sequoia Capital, GGV Capital, Qiming Venture Partners, Matrix Partners and Redpoint Ventures.
HTC also agreed to set up a RMB10bn ($1.45bn) VR investment fund in partnership with China’s Shenzhen municipal government. Shenzhen VR Investment Fund will look to secure financial support from Chinese and international partners.
China-based internet company Baidu set up $3bn investment vehicle Baidu Capital. The unit is to focus on mid to late-stage startups in the internet sector, making individual commitments between $50m and $100m in multiple currencies.
Hony Capital, a private equity firm launched by China-based conglomerate Legend Holdings, closed a $2.7bn dollar-renminbi fund, according to Bloomberg. About 70% of the fund is in dollars and the rest in renminbi. The dual currency approach is meant to avoid conflict between the firm’s dollar and yuan investors, who traditionally would have seen their capital invested separately. Founded and sponsored by Legend in 2003, Hony focuses on Chinese investments and targets areas such as consumer businesses, healthcare and pharmaceuticals as well as industrial equipment producers.
Norwest Venture Partners (NVP), the venture firm backed by Wells Fargo, closed a $1.2bn fund after an 18-month period during which it had recorded 22 exits. This is NVP’s 13th fund. Originally founded in 1961, the firm invests primarily in the US, with some deals in India and Israel, targeting enterprises from seed to late stage. The size of the fund is the same as the previous two, raised in 2010 and 2014.
Germany-headquartered industrial product manufacturer Siemens set up a new corporate venturing unit to invest €1bn ($1.1bn) in disruptive technology. The vehicle, Next47 – a reference to 1847, the year Siemens was founded – is to invest in innovative technology in sectors relevant to Siemens, such as decentralised electrification, artificial intelligence, autonomous machines, networked mobility and blockchain-equipped data transfer technology. The unit will be geographically agnostic, operating from offices in Berkeley, California, as well as Shanghai and Munich.
IDG Capital Partners, the China-headquartered venture capital affiliate of IT media firm International Data Group (IDG), closed its latest fund at $1bn. IDG Capital Fund III was raised in partnership with US-based VC firm Breyer Capital and is to fund healthcare, energy, consumer products and technology, media and telecoms companies based in China or seeking to enter the Chinese market.
Venture capital firm Sapphire Ventures has closed $1bn in new capital, with the money coming from its sole limited partner, Germany-based enterprise software provider SAP. Founded as SAP Ventures by SAP in 1996, the firm spun out in 2011 and changed its name to Sapphire in late 2014. Sapphire targets enterprise and consumer technology developers, investing in innovation throughout Europe, the US and Israel.
Ten oil and gas companies announced plans to establish a $1bn fund to invest in research and startups focused on low-carbon technologies.
The Oil and Gas Climate Initiative won the backing of 10 oil companies – BP, China National Petroleum Corporation, Eni, Pemex, Reliance Industries, Repsol, Royal Dutch Shell, Saudi Aramco, Statoil and Total. Combined, these 10 companies represent a fifth of the world’s oil and gas production. Each of the 10 is to invest $100m in the fund.
