The new breed of Chinese tech giants emerges
While WeChat owner Tencent, e-commerce firm Alibaba and internet group Baidu remain the largest players in the Chinese tech space, 2018 saw some of their biggest counterparts (and in some cases portfolio companies) accelerate growth and begin to make their presence felt in corporate venturing.
Bytedance was already known as the operator of China’s most popular news aggregation app, Toutiao, but some crafty acquisitions – in particular that of Musical.ly – widened its reach into a more diversified digital media company that had agreed $3bn of funding from SoftBank in October at a reported $75bn valuation. Musical.ly was merged with Bytedance’s TikTok short-form video app and became the company’s star attraction, and by December ByteDance had followed investments in companies including 17Zuoye by pledging some $280m for a $1.44bn corporate venturing fund.
Meituan Dianping meanwhile went public at a $52bn valuation, floating at the top of its range in Hong Kong in September to raise $4.22bn, $400m of which came in the form of a cornerstone investment by shareholder Tencent. It had already flexed its muscles by paying $2.7bn to acquire bicycle rental service Mobike in April. The subsequent downturn in China’s bike sharing industry and the decline in Meituan Dianping’s share price – it’s down more than two-thirds from the IPO price – may not be good signs, but the company has the basis for some rapid growth.
China’s increasingly oppressive surveillance society is nevertheless throwing up some rapidly growing players, especially in the image recognition sector. SenseTime secured $620m in series C-plus funding at a $4.5bn valuation in May, and was in talks to raise $1bn from SoftBank Vision Fund in July. By August it had hired Jennifer Xuan Li from Baidu as investment director, having invested in 51HiTech, Helian, Suning Sports and Moviebook in 2018, subsequently backing a $173m round for IoT technology producer Terminus Technologies in October.
SenseTime’s biggest rival, Megvii, is meanwhile looking to raise a $500m round that will be closed at an expected $3.5bn valuation. Also known as Face++, Megvii has also begun to take part in corporate venturing, investing in retail technology provider XianLife and video-based image recognition technology supplier Video++.
Technology drives transport forward
Autonomous driving software continued to progress, as the added corporate interest in 2017 blossomed into some huge rounds. SoftBank invested up to $2.25bn in Cruise in June, Pony AI closed a $214m round in July and Momenta secured a $1bn valuation in October, while lidar sensor developer Quanergy raised funding at a $2bn valuation, and automotive mapping software providers DeepMap, MapAnything and RoboSense all raised cash too.
On the fund end, the Renault-Nissan-Mitsubishi partnership unveiled a $1bn strategic fund known as Alliance Ventures in January, shortly before internet group Baidu formed a $200m investment initiative together with mobility and AI technology producer Asia Mobility Industries later the same month. Aisin Group, Volvo and Toyoda Gosei also launched autotech funds.
Trucking services marketplaces saw some real growth too. Manbang Group nabbed $1.9bn at a $6.5bn valuation in April and is in talks with Tencent and SoftBank to add $1bn more in a round that will value it at $9bn. Its chief rival Fuyoukache raised $170m in a series D round this week, and Convoy and Next Trucking extended the business model to the US, the former notching up $185m in a September series C round, while LetsTransport transplanted it to India.
Fleet management technology also got a healthy boost, with G7 Networks closing a $320m round backed by Tencent, Total and GLP earlier this month. Telematics technology providers Cambridge Mobile Telematics, TransWiseway and KeepTruckin meanwhile secured $500m, $102m and $50m respectively.
Advances in autonomous driving also fuelled investment in a new breed of car producers as a raft of smart electric vehicle makers emerged from China to take on Tesla, including Nio, which floated in a $1bn IPO in September, while Xiaopeng Motors secured $348m in January and another $585m in August, Chehejia completed a $475m series B round in March and carmaker FAW invested $260m in Byton in May.
Scooters pick up the slack in on-demand transport
If 2017 was the year bicycle hiring apps made the pace, this year turned out to be all about electric scooter services, particularly in the US where the bicycle rental platforms never fully took off.
The big winners were Lime, which raised $335m in a July round led by GV that included on-demand ride provider Uber, and Bird, which had secured $300m at a $2bn valuation a few weeks earlier, in a round that contained no corporate investors.
Even by modern standards, the pace of growth for both has been staggering. Lime closed that round at a $1.1bn valuation just five months after raising $120m in series B funding, and had hired GV’s Joe Kraus as chief operating office by November. Bird meanwhile managed to hike its valuation from $300m as of a $100m round in March, in the process reportedly becoming the fastest independent company ever to achieve a 10-figure valuation.
As with ride hailing, the model is extending internationally, with India-based Vogo raising $100m and Europe-focused Dott securing $22.5m in corporate-backed rounds in recent weeks, adding to the $49m received by France-headquartered Cityscoot in February. However, it needs to be asked how viable the model is in the long term, particularly considering the trouble suffered in the bicycle sharing industry.
Ofo raised more than $2bn in 2017 but is reportedly close to collapse after excessive growth and repeated breakage, with some 11 million customers said to be seeking refunds. The higher costs associated with electric scooters would in theory make those operators more vulnerable.
Genomics generates big money
Healthcare had an, ahem, healthy year, but much of the big money was directed toward genomics-focused companies, and Illumina, which launched its Illumina Ventures unit less than three years ago, proved to be a big winner.
Personal genomics platform developer Helix completed a $200m series B round featuring Illumina and Mayo Clinic in June, and Illumina also invested in Kallyope, which uses genomics technology to target the gut-brain axis, and which closed its own series B round at $87m in December. GSK invested $300m in personal genetics service 23andme in July, Genetic sequencing technology producer Oxford Nanopore Technologies closed $206m in October and contract genomics service provider Wuxi NextCode received $200m last month while other participants in the sector including Genomatica, uBiome, Genetron and Singlera Genomics also raised substantial sums.
An Illumina spinoff, cancer test developer Grail, raised $300m at a $1.6bn valuation in May and had reportedly considered Hong Kong as a possibility for an IPO before news emerged earlier this month that it had switched its focus to the US markets. Illumina’s largest exit involved Myriad Genetics paying $375m for genetic screening service Counsyl in May.
Elsewhere in healthcare, Flatiron Health scored a huge exit for investors including GV in February, when Roche agreed to acquire it in a deal that valued the cancer research software provider at $2.15bn. Meanwhile, Moderna Therapeutics, the messenger RNA drug developer that had closed the largest ever funding round for a biotech developer, in 2015, went public in the largest ever IPO for a biotech company, securing $604m in the process.
