The poor performance of the Facebook initial public offering preceded a slowdown in corporate venturing activity in a turbulent third quarter. (Click for charts)
The headlines from July to September have been full of economic turmoil, from concerns about the slowdown of China, to talk of a full bail-out of Spain, and the US Federal Reserve deciding to embark on another round of quantitative easing, known as QE3, or QE infinity.
Against this uncertain backdrop it has been unsurprising to see a pull-back in deal activity by corporate venturing-backed companies.
The downward trend was especially marked in exits by portfolio companies of corporate venturing units, with 18 exits in the third quarter worth $708m.
This compared with 42 exits and four initial public offerings in the second quar-ter worth $29.3bn – $18.4bn of this included the initial public offering of US-based social network Facebook.
Many commentators have already suggested the diff-culties faced by Facebook on the public markets, which was trading at a more than 40% discount to its flotationprice at press time, had been a drag on fresh initial public offerings.
The public market for issues has certainly been weak, with no successful corporate-backed flotations tracked by Global Corporate Venturing during the quarter.
However, there are signs these flotation market difficuties are lifting. In early October, Lifelock, the US-based identity theft protection business backed by US-based anti-virus software company Symantec and US-based bank Goldman Sachs managed to float.
At press time a number of other corporate venturing-backed companies were also attempting to list.
Similarly to exits, investment activity cooled in the third quarter compared with the second quarter and the same time last year. There were 252 investments in portfo-lio companies worth $4.2bn in the third quarter.
This compared with 273 investments worth $4.7bn in the second quarter and 414 deals worth $10bn in the third quarter last year.
Deal activity was subdued in September. Global Corporate Venturing tracked 61 investments in September worth $1bn, down against 111 investments worth $2bn in August and 138 investments worth $3.6bn in September last year.
There were six exits in the month worth $147m. This compared with 12 exits in September 2011 worth $186.9m and eight exits in August worth $145m.
The largest investment of the month was the $200m raised by US-based mobile payments company Square, in a D round backed by US-based café chain Starbucks and Citi Ventures, the corporate venturing unit of the US bank.
The next biggest round was the $100m E round raised by electric car company Fisker Automotive, which has previously been backed by alternative energy company Quantum Fuel Technologies and A123 Systems, a battery manufacturer and parts supplier to Fisker.
The third-big-gest deal was Social Finance (SoFi), a US-based crowd-sourcing platform for alumni to provide loans to students, which raised $77.2m in its series B round from a consortium including Chinese-language social network Renren.
Renren invested $49m of the round.Two of September’s exits included troubled solar exits MiaSolé and GreenVolts.
MiaSolé was sold to China-based trade buyer Hanergy for $30m, after receiving about $500m in funding, while GreenVolts said it was winding up and conducting a sale of its assets.
By coincidence the difficultSeptember for solar echoed the same period last year when solar companies Solyndra and SpectraWatt each filed for Chapter 1 bankruptcy protection in the US.
The contraction in corporate venturing clean-tech investment has continued apace, with 18 clean-tech investments in the third quarter, down from 27 in the second quarter and 68 in the third quarter of 2011.
Similarly healthcare dealflowhas suffered, with 37 healthcare deals in the third quarter, down from 44 in the second quarter and 74 in the third quarter of 2011.
The most active sectors in the third quarter were IT and consumer with 49 deals each.
The media sector had 46 deals. The most common rounds were B rounds, with 46 backed, followed by A rounds, with 45.
There were 35 C rounds, 21 D rounds, 17 E rounds and 23 seed rounds.As is typical in corporate venturing, the US dominated deal activity, with 170 investments (67.5%).
The next most active region was the UK with 14 deals, followed by Germany with 11, India with 10, and Japan with nine trans-actions. There were also fivedeals in each of Israel and China.