The covid-19 pandemic is far from over, with a second wave in Europe, but our data suggest investment activity among corporate venturers continues to recover.
According to GCV Analytics, the number of corporate-backed deals from around the world was 303 in October, comparable with the 302 rounds from the same month last year. Investment value dropped by 39%, standing at $10.97bn – down from the $17.98bn last year.
The US came first in the number of corporate-backed deals, hosting 118 rounds, while Japan was second with 53 and China third with 24.
The leading corporate investors by number of deals were diversified internet conglomerate Alphabet, telecoms group SoftBank and digital media company Gree. In terms of involvement in the largest, SoftBank topped the list along with internet group Tencent and financial services firm Goldman Sachs.
There were 33 corporate-backed funding initiatives in October, including VC funds, new venturing units, incubators, accelerators and other. This figure suggested a 32% increase compared with October 2019 which had 25 initiatives. The estimated capital raised in those initiatives was $3.24bn, higher than the $2.59bn in the same month last year.
Deals
Emerging businesses from the IT, health, financial, services and media sectors raised the largest number of rounds. The most active corporate venturers came from the financial, IT, consumer and media sectors.
Sweden-based battery developer Northvolt secured $600m in a funding round co-led by carmaker Volkswagen, Goldman Sachs’s Merchant Banking Division and investment management firm Baillie Gifford. Commercial vehicle producer Scania, Baron Capital, Bridford Investments, Norrsken VC, PCS Holding and Imas Foundation, the sister entity of Ingkea Foundation, the owner of home furniture chain Ikea’s retail outlets, all took part.
Founded in 2016 as SGF Energy, Northvolt creates lithium-ion batteries for the automotive and industrial sectors and grid-scale energy storage. It will use the funding to expand its production and recycling capabilities and to drive R&D activities. The company plans to reach 150GWh of manufacturing output in Europe by 2030.
China-based digital retail technology provider Dmall closed a RMB2.8bn ($419m) series C round featuring Tencent, napkins and nappy producer Hengan International and electronics producer Lenovo. The round was co-led by the government owned China Structural Reform Fund and financial services firm Industrial Bank, the latter through an equity investment platform. Lenovo participated through corporate venturing unit Lenovo Capital.
Dmall runs a mobile app with 18 million monthly active users that allows customers to buy consumer items from brick-and-mortar stores, including 120 retail chain partners. Dmall wants to enhance its user experience and develop new offerings such as a retail-focused intelligent internet-of-things platform, . The company also plans to use Tencent’s online retail and payment tools.
US-based consumer product delivery service GoPuff secured $380m from investors including SoftBank’s Vision Fund at a valuation of $3.9bn. Venture capital firm Accel and investment firm D1 Capital Partners co-led the round, which was also backed by hedge fund Luxor Capital.
GoPuff’s platform allows customers to order thousands of products from food and drink to over-the-counter medication and home products for delivery in less than 30 minutes with a flat delivery fee of $1.95 per order. Orders are fulfilled through a network of 200 micro-fulfilment centres across more than 500 cities. The funding will support the expansion of GoPuff’s product range, which now includes groceries, cooking and baking goods.
Scopely, the US-headquartered mobile game publisher backed by media group Advance, game producer Take-Two Interactive and over-the-top media company Chernin Group, secured $340m in series E funding. Wellington Management, NewView and funds managed by BlackRock participated, among other investors.
The round reportedly valued the company at $3.3bn. Founded in 2011, it specialises in licensed games, having produced mobile game tie-ins for properties such as Marvel, Star Trek and The Walking Dead. It will use the cash for strategic acquisitions as it looks to expand its line of games.
Zhenkunhang, the China-headquartered owner of an online marketplace for industrial products, completed a $315m series E round which included Tencent. Private equity firm YF Capital led the round, which also featured Legend Capital, the venture capital firm sponsored by conglomerate Legend Holdings, and GLP-C&D Equity Fund, a joint venture between warehouse operator GLP and investment holding company Xiamen C&D.
Zhenkunhang runs an e-commerce platform that enables producers of industrial components and supplies such as adhesives to sell their products, and advertise services such as storage and machine maintenance.
China-based, Asia-focused drug developer LianBio secured $310m in crossover financing from investors including pharmaceutical firm Pfizer. Investment management firm RA Capital co-led the oversubscribed round with investment firm CMG-SDIC Capital and Venrock Healthcare Capital Partners, a branch of VC firm Venrock, among other investors.
Launched in August, LianBio develops therapeutics licensed from pharmaceutical partners including MyoKardia and BridgeBio for conditions such as cancer and cardiorenal diseases which affect the heart and kidneys, with a focus on Asia, particularly China.
Cazoo, a UK-based online marketplace for used vehicles, obtained £240m ($308m) in a funding round featuring DMG Ventures, the CVC arm of media group Daily Mail and General Trust. General Catalyst and D1 Capital Partners co-led the round with funds managed by Fidelity and Blackrock. The round also featured L Catterton, Durable Capital Partners, Spruce House Partnership, Novator, Mubadala Capital and unnamed backers. It reportedly valued the company at more than $2.5bn.
Founded in 2018, Cazoo operates an online dealership for reconditioned vehicles. Users can also access financing and calculate the value of an exchange.
Alphabet invested about $300m in Indonesia-based e-commerce marketplace Tokopedia. The funding is part of a larger round with a $1bn target that already includes a $500m contribution from Singapore government-owned fund Temasek that was reported in January, before it closed five months later at a reported $7.5bn pre-money valuation.
Founded in 2009, Tokopedia operates an e-commerce platform that sells a diverse range of items including electronics, fashion and cosmetics, and which had more than 90 million monthly active users as of May. The company’s overall funding stands at about $3.1bn.
Consumer electronics manufacturer Xiaomi’s Changing Industrial Fund co-led a RMB1.5bn ($225m) funding round for China-headquartered image sensor chip producer SmartSens. The round was co-led by China Merchants Bank’s CMB International subsidiary, an undisclosed telecoms-focused fund and the state-owned China Integrated Circuit Industry Investment Fund.
Lenovo Capital, the investment arm of electronics manufacturer Lenovo, also took part, as did chipmaker Wingtech Technology and smartphone producer Transsion Holdings, among other investors. SmartSens’ technology uses machine learning and artificial intelligence to help capture high-definition images and video footage. It is used in consumer electronics such as drones, smart home products, security and surveillance systems.
SoftBank provided $215m for Norway-based online learning platform developer Kahoot through a private placement. SoftBank will buy 43 million shares priced at NOK43.00 ($5.00) each, giving the corporate a 9.7% stake and valuing Kahoot above $2.2bn. It also includes a provision preventing SoftBank from increasing its stake past 10% in the next six months.
Kahoot is the creator of an online platform that uses gamification to help children and adults learn. More than 200 million games have been played over the past year. The deal came four months after venture capital firm Northzone and Kahoot chief executive Eilert Hanoa supplied $28m for the company through a separate private placement to take its total funding to $118m.
Exits
GCV Analytics tracked 31 exits involving corporate venturers as acquirers or exiting investors in October: 20 acquisitions, eight initial public offerings (IPOs), one stake sale and two other transactions.
The exit count figure was slightly below the 38 recorded exits in September and August this year. The total estimated exited capital, dropped to $5.31bn, down substantially from the $15.92bn in the previous month (though one of the reported acquisitions in September was sized at $8bn). In comparison, in October 2019, the exit count was 26 and the estimated total capital stood at $1.15bn.
Enterprise communication software producer Twilio agreed to acquire US-based customer data platform developer Segment for $3.2bn in shares, enabling Alphabet’s GV subsidiary to exit. Twilio will pay for the deal entirely through common stock. The valuation is more than double that at which Segment last raised money, in a $175m series D round co-led by GV in April 2019 that increased its funding to $284m. Founded in 2012, Segment has built a software platform that allows users to standardise and unify the collection and management of customer data so it can be efficiently channelled into other parts of the company.
Tencent scored an exit when China-headquartered lifestyle product retailer Miniso floated on the New York Stock Exchange in a $608m IPO, which consisted of 30.4 million American Depositary Shares (ADSs), each representing four common shares, priced at $20 each, above the $16.50 to $18.50 range the company had set for the offering.
Miniso sells a range of affordable goods including toys, accessories, snacks, cosmetics and small electronics across a network of 4,200 stores spanning 80 countries, roughly 2,500 of which are located in China. The proceeds will fund the expansion of its stores and investment in logistics and IT.
Life sciences technology provider 10x Genomics agreed to purchase US-based gene sequencing technology producer ReadCoor in a $350m deal that will give an exit to pharmaceutical firm Eli Lilly.
Goldman Sachs advised ReadCoor on the acquisition, which will consist of a combination of cash and stock. The company had raised $50m in funding since it was founded in 2016. Spun out of Harvard University, ReadCoor has developed products such as a spatial sequencing system that can spatially resolve up to thousands of RNA, DNA, therapeutic molecules and proteins.
US-based oncology drug developer Kronos Bio went public in a $250m IPO on the Nasdaq Global Select Market, providing an exit for Alphabet. The size of the offering was increased from almost 10.3 million shares to more than 13.1 million and they were priced at $19 each, above the $16 to $18 range set by the company.
Its shares subsequently closed at $27.07, valuing the company at more than $1.4bn. Kronos is working on precision cancer treatments that will use a function known as dysregulated transcription, and its technology is based on research conducted at Massachusetts Institute of Technology.
Up to $90m of the IPO proceeds will fund a registrational phase 2/3 clinical trial for the company’s lead drug candidate, entospletinib, for acute myeloid leukaemia. Between $20m and $30m has been earmarked for a phase 1/2 trial for a second candidate, KB-0742, in advanced solid tumours.
C4 Therapeutics, a small molecule drug developer backed by diversified conglomerate Kraft Group and pharmaceutical firms Roche and Novartis, floated in a $182m IPO. The company increased the number of shares in the offering from just over 8.8 million to 9.6 million and priced them at $19.00 each, above the IPO’s initial $16 to $18 range.
Founded in 2016, C4 is working on treatments for diseases such as cancer or neurodegenerative conditions by degrading and destroying disease-causing proteins. Approximately $40m of the IPO proceeds will go to a phase 1/2 clinical trial for a product candidate dubbed CFT7455 in multiple myeloma and non-Hodgkin lymphomas. Another $56m will fund trials for a candidate called CFT8634 for synovial sarcoma or solid tumours.
US-headquartered small molecule drug developer Aligos Therapeutics went public in a $150m IPO representing an exit for pharmaceutical firms Roche and Novo. The company priced 10 million shares in the middle of the IPO’s $14 to $16 range. Its shares opened at $17.40 on the Nasdaq Global Select Market and closed at $14.85, valuing it at about $550m.
Aligos will direct up to $40m of the IPO proceeds and its cash on hand into a phase 1 clinical trial and drug manufacturing preparations for its lead product candidate, a potential hepatitis B treatment known as ALG-010133. Up to $38m will be channelled into a phase 1 trial for a second hepatitis B candidate, ALG-000184, and $40m into development of two more candidates, ALG-020572 and ALG-125097, while $12m to $14m will fund work on a candidate for the liver disease non-alcoholic steatohepatitis
Eargo, a US-headquartered hearing aid developer backed by real estate developer Nan Fung, floated in an IPO sized at approximately $141m. The offering involved Eargo increasing the number of shares in the offering from approximately 6.67 million to more than 7.85 million and pricing them at $18 each, above the IPO’s initial $14 to $16 range. The company’s shares opened on the Nasdaq Global Select Market at $36.00 and closed at $33.68 on their first day of trading, valuing it at more than $1.22bn.
Founded in 2010, Eargo has created a high-fidelity hearing aid that is designed to be comfortable and virtually invisible. The company made an $18.3m net loss in the first six months of 2020 from $28.6m in revenue and will spend at least $50m of the IPO proceeds on sales and marketing and $20m on research and development.
Eli Lilly agreed to buy US-based neurological disease drug developer Disarm Therapeutics for an upfront fee of $135m in a deal that will allow fellow pharmaceutical firm AbbVie to exit. The transaction could potentially grow to more than $1.22bn taking into account future payments covering development, regulatory and commercial milestones resulting from Eli Lilly successfully developing or commercialising drugs based on the acquisition.
Disarm is working on treatments for neurological disorders such as multiple sclerosis or amyotrophic lateral sclerosis (ALS) that are intended to work by inhibiting the SARM1 protein, thought to be a prime driver of axonal degeneration in the early stages of such diseases. The company was founded by venture capital firm Atlas Venture with Jeffrey Milbrandt and Aaron DiAntonio of Washington University School of Medicine in St Louis.
Spruce Biosciences, the US-based endocrine disorder drug developer backed by pharmaceutical firm Novo, closed its IPO at approximately $104m. The company had raised an initial $90m when it floated, having priced 6 million shares at $15 each. Its share price closed at $17.85 and the IPO’s underwriters took up the option to acquire a further 900,000 shares at the same price.
The proceeds for the offering will go to advancing a pipeline of therapeutics mainly focusing on non-steroidal treatments for a life-threatening condition affecting the adrenal glands known as classic congenital adrenal hyperplasia. Spruce had previously raised approximately $204m.
Galecto, the US-based cancer and fibrosis drug developer backed by pharmaceutical firms Novo, Bristol Myers-Squibb and Merck Group, raised $85m when it floated on the Nasdaq Global Market. The company priced almost 5.67 million shares at $15 each, in the middle of the $14 to $16 range it had set for the offering. The share price valued it at approximately $368m.
Founded in 2011, Galecto is developing treatments for fibrosis, a condition that causes scarring on connective tissue, and cancer. It had about $85m in reserve pre-IPO and will put that
and the proceeds from the offering towards clinical development of its drug pipeline. The company’s approach is based on research by Ulf Nilsson and Hakon Leffler at Lund University, Sweden, and University of Edinburgh professor Tariq Sethi. It was spun out with help from commercialisation firm Forskarpatent i Syd.
Note: Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.