In 2017, GCV Analytics tracked 2,320 deals worth an estimated $109.23bn of total capital. While the deal count registered a minor increase year-to-year (6%) compared with the 2,173 transactions of 2016, the total value of corporate-backed VC rounds reached a new all-time high, surpassing $100bn.
The number of active corporate venturers also grew. Since 2011, when our publication was launched, GCV Analytics has tracked more than 2,234 distinct corporate investors, according to our definition – any corporate investor, with or without a specialised CVC unit, which has participated in at least one venturing round over a given period of time. The number of active corporate venturers has risen considerably, particularly over the past four years, by 70% from 678 in 2014 to 1,153 last year.
According to data from our partner PitchBook, overall venture capital activity has been decreasing in terms of deal count over the past three years – dropping from 19,288 deals in 2015 to 12,929 in 2017. Deals in the CVC realm, by comparison, appear to have remained relatively stable at above 2,000 transactions for that same period. Moreover, corporate venturing’s overall share of all VC activity has increased from 11% in 2015 to 18% in 2017.
This may be attributed to the fact that corporate venturers are more strategically oriented, providing optionality for corporate parents in emerging technologies, irrespective of developments in the overall VC space. Furthermore, portfolios of corporate venturers tend to be concentrated in technologies and areas where they usually have significant expertise, which makes them more likely to pick promising investments.
Nearly half of all tracked corporate-backed transactions in 2017 took place in the US (1,140). Other notable innovation geographies on a global scale were China (264), India (147), the UK (128), Japan (71) and Israel (61). East Asia still accounts for almost half of the disclosed US dealflow but its often behemoth multibillion-dollar investment rounds actually account for good portion of the estimated total value of the entire corporate venturing world.
Emerging businesses from five sectors raised the largest number of corporate-backed rounds – health with 420 deals, IT with 411, financial services with 313, media with 266 and services with 263. These figures do not necessarily always coincide with the sectors that have drawn most attention in the media or raised most capital.
In terms of horizontals and technologies spanning sectors, artificial intelligence, big data, machine learning, autotech, e-commerce, fintech and payment tech, commerce and shopping as well as entertainment, among others, drew the most attention and interest from corporate venturers.
Looking at 2017 on a quarterly basis, there was a gradual decrease in total deal count from the first quarter, when GCV Analytics tracked 599 transactions, to the fourth, when 557 transactions were recorded. In terms of total value, there was an upward trend until the third quarter, which registered the highest estimated total capital involved in corporate-backed rounds at $34.8bn. This figure, however, went down by 14% to $29.75bn in the last quarter.
US and Asia-based investors vied to be the top corporate investors in 2017 – diversified internet conglomerate Alphabet (Google) with 81 deals, telecoms company SoftBank with 58 investments, media and research firm International Data Group (IDG) with 51, internet company Tencent (50), semiconductor manufacturer Intel (42) and cloud service provide Salesforce (41), among others. The three investors involved in the largest rounds were SoftBank, Tencent and IDG.
Deals
GCV Analytics tracked many large deals through 2017. The top 10 were well above the $1bn mark. These sizeable rounds were raised mostly by emerging businesses in the ride-hailing, e-commerce and media spaces. The most often frequent corporate backer of these top rounds was SoftBank and the $97bn Softbank Vision Fund.
China-based ride-hailing service Didi Chuxing raised $5.5bn from investors including SoftBank. The round included Silver Lake Kraftwerk, part of private equity group Silver Lake, and financial services firms China Merchants Bank and Bank of Communications. Didi Chuxing runs a Chinese ride-hailing platform with 450 million registered users. In addition to taxis, it also offers car rental, carpooling, luxury and business transport, designated driver and urban bus services. The company revealed its “active internationalisation plans” and is working on intelligent driving and smart transportation projects.
Later, Didi Chuxing closed a $4bn round that featured SoftBank and Abu Dhabi’s Mubadala Investment Company. The company said part of the funding would be used for international expansion starting with Taiwan, where it has licensed its brand to local operator Ledi Technology. Additional capital will go to the development of Didi Chuxing’s artificial intelligence technology and the exploration of new business directions, including charging and service networks for electric vehicles.
SoftBank and its Vision Fund agreed to invest a total of $4.4bn in US-based working space operator WeWork. The two paid $3bn to acquire a mixture of primary and secondary shares, and committed to providing $1.4bn for three new regional WeWork subsidiaries in Asia. Founded in 2010, WeWork oversees a network of 160 co-working spaces, stretching across 50 cities in 16 countries. Customers can rent desks or full offices and have access to high-speed internet, office supplies and equipment, and other perks such as free coffee. WeWork plans to move into Asia through its new subsidiaries WeWork China, WeWork Japan and WeWork Pacific.
Tencent led a $4bn round for China-based online services provider Meituan-Dianping, which reportedly valued the company at $30bn. Travel services provider Priceline Group also participated in the round, among a host of other institutional and traditional venture investors. Meituan-Dianping runs a local services and e-commerce platform that processes about 21 million orders a day, for items such as food, event tickets and flights, connecting 280 million customers annually with a network of some 5 million local businesses.
The SoftBank Vision Fund invested an amount reported to be “at least” $2.5bn in India-based e-commerce company Flipkart. Sources said the transaction involved the purchase of primary and secondary shares. Founded in 2007, Flipkart has built the largest e-commerce marketplace in India by estimated market share. It currently lists about 80 million products across more than 80 consumer categories including electronics, fashion, appliances and furniture.
Earlier, Flipkart had raised $1.4bn from Tencent, online marketplace operator eBay and software provider Microsoft at a post-money valuation of $11.6bn. The funding was announced by the company alongside news that it had acquired eBay India, the local branch of eBay, which is to continue to run as an independent Flipkart subsidiary.
Singapore-based on-demand ride service Grab secured $2bn from its China-based counterpart, Didi Chuxing and SoftBank. The funding was raised at a reported post-money valuation of $6bn. Grab runs an app-based service spanning 65 cities in seven Southeast Asian countries that enables users to order lifts through private cars, motorcycles, taxis or carpooling, equating to an average of almost 3 million rides a day. The company claims to have a 95% share of the third-party taxi-hailing market in the region and a 71% market share for private vehicle hailing.
Entertainment and media group Walt Disney agreed to invest a further $1.58bn in its portfolio company BamTech to take a majority stake in the US-based online video streaming technology provider. Disney paid $1bn for a 33% stake in BamTech in August 2016 as part of a deal that granted it an option to acquire a majority stake. This latest investment raised its share of the company to 75%. BamTech was originally created by MLB Advanced Media, the interactive media arm of sporting league Major League Baseball (MLB). It powers the online video offerings of MLB and several other major sporting organisations that together have attracted about 7.5 million paid subscribers. The deal will give Disney the means to put together its own streaming sports service, as it plans to launch an offering focused on its ESPN sports media subsidiary.
China-based video-streaming platform iQiyi raised $1.53bn from investors including internet group Baidu and IDG Capital, the local venture capital affiliate of IDG. Baidu contributed $300m to the round, which also featured venture capital firm Sequoia Capital, among others. Launched as Qiyi in 2010, iQiyi operates an online video platform that offers both a free and a premium subscription-based streaming service. It had about 480 million monthly users at the end of 2016. The financing, which was provided in the form of convertible debt, is expected to support the strengthening of iQiyi’s original output.
US-based ride-hailing platform Lyft expanded a funding round led by CapitalG, the growth equity arm of Alphabet, from $500m to $1.5bn. E-commerce firm Rakuten also took part in the round, as did Fidelity Investments, among others. The round valued the company at $11.5bn post-money. Lyft’s on-demand ride service is the second most popular in the US, behind Uber, and the company recently started an international expansion with selected cities in Canada.
Exits
GCV Analytics tracked 203 exits involving corporate venturers. This is a 10% drop from the previous year’s 224. The US hosted more than half of these transactions (123), followed by China (21). The estimated capital involved in these exits totalled $43.16bn, a modest 8% increase over the $41.81bn in 2016. Most of the top exits last year were initial public offerings (IPOs), though the overall share of IPOs remained stable compared with previous years. In 2017, we also witnessed the largest acquisition of a tech company that had previously received corporate backing.
This record-breaking transaction involved Intel acquiring Israel and US-based developer of vision driver assistance systems Mobileye for $15.3bn by purchasing 84% of the company’s outstanding ordinary shares. Mobileye had previously received backing from financial firms Goldman Sachs and Morgan Stanley in the 2000s as well as car rental services Enterprise Rent-a-Car and financial firm Fidelity in 2013, before it floated on the New York Stock Exchange in 2014. Founded in 1999, Mobileye develops a collision avoidance system designed to reduce vehicle injuries and fatalities, offering computer vision and machine learning, data analysis, localisation and mapping for advanced driver assistance systems and autonomous driving.
US-based visual media platform Snap closed its IPO at $3.91bn, after its underwriters took up the option to buy an extra 30 million shares. Snap issued 145 million shares at $17 each, which were joined by 55 million shares divested by existing backers to raise an initial $3.4bn. Exiting investors included e-commerce firm Alibaba, Tencent and Yahoo. NBCUniversal subsequently revealed it had invested $500m in Snap through the offering, giving it a stake of approximately 2.1%. Snap is best known for the Snapchat platform but its IPO filing indicates its long-term plans involve expanding into an all-purpose visual media company that will also delve into hardware.
SoftBank invested $500m in China-based online insurance platform ZhongAn Online Property and Casualty Insurance as part of the latter’s $1.5bn IPO. ZhongAn issued approximately 199 million new shares on the Hong Kong Stock Exchange at HK$59.70 ($7.64) each, at the top of the HK$53.70 to HK$59.70 range it had set. SoftBank acquired a stake of just under 5%. ZhongAn’s online platform provides about 300 specialised insurance packages, with its most popular option being to append insurance to e-commerce purchases to cover the cost of returning the goods.
Germany-based online food ordering platform Delivery Hero went public in a €996m ($1.13bn) IPO that gave a partial exit to e-commerce holding company Rocket Internet. The IPO consisted of 18.95 million new shares, 15 million shares held by existing investors and 5.09 million shares held by the Rocket Internet-founded Global Online Takeaway Group, all at €25.50 each, at the top of the €22.00 to €25.50 range set earlier. The shares, issued in Germany and Luxembourg, equated to 18.8% of Delivery Hero’s overall share capital, giving it a valuation of $5.3bn. Delivery Hero has built an online food ordering and delivery platform that serves customers in more than 40 countries across Europe, Latin America, the Middle East, North Africa and Asia-Pacific.
NeoTract, a US-based medical device manufacturer backed by pharmaceutical firm Johnson & Johnson, agreed to an acquisition by medical device maker Teleflex for a total consideration of $1.1bn. Teleflex paid $725m in cash on closing the deal. The remaining $375m are payments contingent on certain commercial milestones related to sales up to the end of 2020. Founded in 2004, NeoTract has developed a minimally invasive device, UroLift, to treat lower urinary tract symptoms caused by an enlarged prostate gland, a condition known as benign prostatic hyperplasia.
Qudian, a China-based online consumer lending service backed by financial services provider Ant Financial and game producer Kunlun Tech, raised $900m from its US flotation. The company priced 37.5 million American depositary shares at $24 each on the New York Stock Exchange, above the $19 to $22 range it had set, giving it a market value of about $7.9bn. Founded in 2014 and formerly known as Qufenqi, Qudian runs an online platform that provides credit to mostly younger customers who are underserved by traditional banks due to their lack of credit history. The company utilises big data and artificial intelligence technology to assess the creditworthiness of borrowers.
Yixin Group, a China-based e-commerce marketplace operator spun out of automotive transaction services provider BitAuto, raised HK$6.77bn in its IPO. The company issued almost 879 million shares on the Hong Kong Stock Exchange at the top of its HK$6.60 to HK$7.70 range. Its stock opened at HK$10 and briefly reached HK$10.18 before closing at HK$8.12, giving it a market cap of about $6.54bn. Yixin runs an online marketplace for vehicles, and a financial services operation that provides leasing as well as financing for car purchases.
Enterprise software provider Sage Group agreed to acquire US-based financial management software provider Intacct in an $850m deal, giving exits to payment services provider American Express and professional services firm Deloitte. Founded in 1999, Intacct has built a cloud-based platform for enterprises that incorporates cash, inventory, contract and vendor management as well as accounting, purchasing, financial consolidation, revenue recognition, subscription billing, financial reporting and project and fund accounting.
Biotechnology producer Bioverativ agreed to acquire True North Therapeutics, a US-based rare disease therapy developer backed by pharmaceutical firms GlaxoSmithKline, Biogen Idec, Baxter and Baxalta, in a deal that could reach $825m. Bioverativ paid $400m up front with the potential to pay $425m more in milestone payments to True North’s shareholders depending on development, regulatory and sales achievements. True North was spun out of pharmaceutical company iPierian in 2013. Its lead drug candidate is a monoclonal antibody, TNT009, which is being developed to combat the rare condition cold agglutinin disease.
Bytedance, owner of news app Toutiao, acquired China-based social video app developer Musical.ly, giving an exit to mobile app developer Cheetah Mobile. Bytedance reportedly agreed to pay between $800m and $1bn. Musical.ly has created a short-form music-based social video app aimed at a millennial user base. It enables users to upload a 15-second clip of themselves lip-synching or engaging in some other activity accompanied by a popular song. The platform, which includes a livestreaming feature, has accumulated more than 60 million registered users, many of whom are in the US, and will continue to operate independently following the acquisition.
Funding initiatives
GCV Analytics recorded 297 new funding initiatives with corporate backing last year, including 150 venture funds, 55 new units, 42 corporate-backed accelerators, 17 incubators and 33 other initiatives. Most of these were set up in Asia (105), North America (101) and Europe (63). The countries that hosted the most were the US (92), China (45), India (20) and France (19).
The number of new initiatives were 10% fewer compared with the 332 in 2017. The total estimated size of the initiatives ($43.34bn) was significantly lower than the 2016 figure of $137.44bn but this was largely due to the outsized $97bn SoftBank Vision Fund, which was announced in 2016. If we discount the size of that fund, the 2016 figure would have been $40.44bn. However, Asia accounted for $31.55bn or about 73% of the total capital raised in new initiatives in 2017, which points to the leading role of the region now and in the future. Most of the top funding initiatives were raised in Asia, often with government participation. In September last year, Global Corporate Venturing organised its first GCV Asia Congress in Hong Kong, which received great interest from the local investment community.
The largest fundraising initiative reported in 2017 featured the government of China. Premier Li Keqiang attended the fifth meeting of the heads of government of Central and Eastern European countries in Riga, Latvia, and launched Sino-CEE Financial Holdings, which was set to manage a €10bn investment fund that will focus initially on businesses in Central and Eastern Europe. The fund was also supported by two China-based corporate investors – insurance provider China Life Insurance and conglomerate Fosun. The targeted sectors include high-tech manufacturing, consumer goods and infrastructure projects. Sino-CEE Financial Holdings was actually set up earlier by state-owned financial institution Industrial and Commercial Bank of China – by some accounts the largest financial services firm in the world by total assets and market capitalisation.
The Chinese government also set up a fund backed by several state-owned firms that will invest in the country’s internet sector. The targeted size of the fund was RMB100bn ($14.5bn), though by the time it was announced the fund had raised $4.35bn in capital. The China Internet Investment Fund will be overseen by state agencies the Cyberspace Administration of China and the Ministry of Finance. It forms part of the Chinese government’s Internet Plus initiative, which aims to strengthen traditional industries through the introduction of internet technology. Financial services firm Industrial and Commercial Bank of China, its largest limited partner (LP), supplied $1.45bn. Other LPs include telecoms companies China Mobile and China Unicom, insurance provider China Post Insurance and Citic Guoan Group, part of investment firm Citic Group Corporation.
China-based smartphone manufacturer Xiaomi agreed to form a RMB12bn strategic investment fund in partnership with the government of the Chinese province of Hubei. Xiaomi, Hubei’s guidance fund Yangzte River Industry Fund, and the government of Hubei’s largest city, Wuhan, each agreed to provide 33% of the capital for Xiaomi Yangtze Industry Fund. The fund will invest in companies able to expand the Mi ecosystem Xiaomi is building around its connected devices. The ecosystem would include a wide variety of connected hardware products ranging from appliances and TVs to robots and component makers.
China-based internet company Baidu announced the RMB10bn Apollo Fund, which will focus on the autonomous driving sector. The fund was established to back 100 self-driving car projects over the next three years, seeking opportunities across the globe in the areas of software, hardware, vertical services and data providers. It drew its name from Baidu’s open-source autonomous driving platform Apollo, which has attracted 70 industry partners so far, including car manufacturers like Hyundai. Baidu announced the latest iteration of the platform, Apollo 1.5, in conjunction with the Apollo Fund. Portfolio startups will gain access to the Apollo platform, which enables features such as high-definition maps, day and night obstacle detection and end-to-end deep learning.
China-based manufacturing services provider Foxconn partnered venture capital group IDG Capital to form a RMB10bn investment fund focused on transport technology. Foxconn and IDG supplied 10% of the capital as well as experts to run the fund. The unnamed fund will target a range of technologies including autonomous driving software and advanced batteries, and will invest in companies based in China, Japan and the US. The fund is expected to be active for seven years, and to “encompass early and mature-stage financing, combining VC and private equity models”.
On-demand chauffeured travel platform UCar formed a $1.47bn investment subsidiary. The strategic investment fund is to cover the entirety of the automotive value chain. Ucar’s chairman and CEO Lu Zhengyao said: “We are already the single largest vehicle buyer in the country and we have a strong sales network and rich service offerings for people to ride in cars.” The fund’s first commitment as a lead investor was in China-based electric vehicle developer Xiaopeng Motors, which raised RMB2.2bn in a series B round. Founded in 2014, Xiaopeng is working on an all-electric sports utility vehicle called Xpeng that could be mass-produced relatively quickly.
US-based hardware producer Apple announced that it was setting up a $1bn investment fund that will focus on the advanced manufacturing space. Few details were disclosed about the structure, strategy or staffing of the fund. It also remained unclear how much of it would be dedicated to venture investments. The initiative followed Apple’s $1bn commitment to the SoftBank Vision Fund.
China Life and Baidu announced a RMB7bn private equity fund partnership. The fund followed a government statement that state-owned companies, which include insurers like China Life, would be allowed to set up venture funds and “insurance companies will be encouraged to invest in startups”. China Life will put up as much as RMB5.6bn of the capital for the fund – the Baidu Fund Partnership – while Baidu will provide up to RMB1.4bn. The two China-based corporates have each invested an initial 30%. The fund will target mid and late-stage investments in internet-focused companies, including mobile internet, artificial intelligence and online finance technology companies, with a “significant association” with China.
China-based insurance group Ping An launched the $1bn Ping An Global Voyager Fund to invest in financial and healthcare technology startups. The $1bn figure represents Global Voyager Fund’s initial size, and Ping An, which has a customer base of more than 138 million people, said in a statement it intended to become an “internationally leading technology investment pioneer”. The fund is Ping An’s second dedicated corporate venturing unit, following the establishment of its Ping An Ventures subsidiary in 2012, and the company has been an active venture capital investor ever since.
Xiaomi has set up a fund to invest up to $1bn in 100 India-based startups over the next five years. Xiaomi joined forces with its venture capital affiliate Shunwei Capital as it sought to build an ecosystem of mobile apps around its smartphones. The investments will focus on manufacturing, entertainment content, fintech and hyperlocal services such as phone repairs. The corporate, which entered India in 2014, hopes the investments will help create more loyalty among Indian users driven by a desire to own the most up-to-date popular devices, regardless of brand.
