After the shock of the covid-19 pandemic and an almost universal lockdown in 2020, the world has cautiously started to open up and is looking forward to a complete reopening in the eventual post-pandemic world. Fiscal and monetary policy measures in developed economies have not only staved off more profound social turmoil because of the covid-induced economic crisis but largely put the economy back on track.
Both public and private markets have reacted with a huge amount of verve and enthusiasm, bordering on irrational exuberance, according to some.
Our data for the first quarter of 2021 show corporate venture capital is largely in line with this broader theme of optimism, at least in terms of investment activity levels.
GCV Analytics tracked a record 1,012 funding rounds involving corporate venturers, a 21% increase over the 834 rounds recorded in Q1 last year. The estimated total investment dollars stood at $56.55bn, up 121% from the $25.13bn recorded during the same period of 2020.
When comparing Q1 2021 with the previous quarter, there was a nearly 10% increase in the deal count, going up from 931. Estimated total investment went up by 36% from $41.51bn.
The US hosted the largest number of funding rounds (428), while Japan came in second with 144 deals, and China third with 93 deals.
The most active corporate investors came from the financial services, IT, health and media sectors.
The leading investors by number of deals were diversified internet conglomerate Alphabet, telecoms firm SoftBank, investment and financial services firm Fidelity and internet company Tencent. The list of corporate venturers involved in the largest deals by size was headed also by Fidelity, Tencent, Alphabet and SoftBank.
An indicator we look at on quarterly basis is the relative proportion of deals that are less than $10m, $11m–$99m and more than $100m. In Q1 the relative share of large deals continued to rise to 24% of the total of deals with disclosed size. This number increased significantly for the first time in Q4 2020. It has historically made up 10%-12% of total corporate dealflow but with current market exuberance it has effectively doubled. In Q1, we tracked 133 funding rounds larger than $100, with 118 of them between $100m and $500m and 15 above $500m.
Most of the corporate investors taking minority stakes during the first quarter were investors that had done at least one deal before (77%). However, nearly one out of every four (23%) corporates was disclosing its first minority stake deal. Newcomers to venturing – whether with a specific unit or not – appear to comprise roughly a fifth to a fourth of all corporate investors every quarter. This tendency has remained stable from 2018 onwards.
Deals
Emerging enterprises from the health, IT, fintech, services and consumer sectors proved the most attractive for corporate venturers, accounting for more than 93 deals each. The top funding rounds by size, however, were raised mostly by companies from the transport and consumer sector.
Most of the funding from the biggest rounds reported in the first quarter went to emerging enterprises from the transport, financial services and life sciences sectors. Six of the top 10 rounds stood above $1bn.
Electric truck developer Rivian raised $2.65bn from investors including Amazon’s Climate Pledge Fund. The round was led by funds and accounts advised by T Rowe Price and also featured Fidelity, Coatue, D1 Capital Partners and undisclosed new and existing investors.
The funding was reportedly secured at a $27.6bn valuation. Founded in 2009, the US-based company is developing an electric pick-up truck dubbed the R1T which is slated for commercial release in June 2021, and an electric sports utility vehicle called the R1S that is due for release two months later.
US-headquartered autonomous driving technology developer Cruise raised more than $2bn from investors including Microsoft and automotive manufacturers General Motors and Honda.
Microsoft invested through a strategic partnership that will involve it partnering its ecosystem with Cruise’s to bolster the commercialisation of the latter’s technology. The corporates were joined in the round by undisclosed institutional investors, and the cash was provided at a $30bn post-money valuation.
Founded in 2013, Cruise is developing autonomous driving software that will be used in all-electric vehicles forming the basis for shared taxi services, in addition to hardware such as sensors, robotics and telematics systems.
China-headquartered community buying platform developer Xingsheng Youxuan secured approximately $2bn in a funding round featuring Tencent and real estate developer China Evergrande Group.
Sequoia Capital China led the round, which also featured FountainVest Partners, Primavera Capital Group, KKR and Temasek. It valued Xingsheng at $6bn
pre-money.
Xingsheng Youxuan runs an e-commerce business that allows local communities to club together to purchase items in bulk. The company processes more than 8 million daily orders and covers more than 30,000 towns across the country.
US-headquartered cold chain services provider Lineage Logistics secured $1.9bn in equity funding from investors that included Canadian real estate developer Oxford Properties and investment bank Morgan Stanley’s MS Tactical Value and Conversant Capital vehicle.
Founded in 2008, Lineage provides chilled transportation for food in addition to temperature-controlled storage through a network of 340 warehouses across five continents, using technology to make its activities more efficient.
GoPuff, the US-based operator of a personal services app, received $1.15bn from investors including SoftBank’s Vision Fund I at an $8.9bn valuation. Fidelity Management and Research also took part in the round.
Founded in 2013, GoPuff runs an online platform that allows users to order products such as food and drink, cleaning, baby and pet products, over-the-counter medications and, in some places, alcohol, for delivery. The company operates from a network of fulfilment centres and charges a flat $1.95 fee per delivery.
Exits
GCV Analytics tracked 145 corporate-related exits during the first quarter of 2021, including 80 acquisitions, 33 reverse mergers, 29 initial public offerings (IPOs) and three mergers. Top exiting corporates this quarter included Fidelity, Alphabet and SoftBank.
The total estimated amount of exited capital in Q1 2021 stood at $63.79bn, three times the $20.90bn in Q1 of the previous year and roughly comparable with the figure from the last quarter of 2020 ($58.14bn). All of the top 15 exits stood all above $1bn mark. The surge in exits can be attributed to the boom of reverse mergers. Reverse mergers – involving fewer regulatory hurdles than traditional IPOs – appear to be preferred by many venture investors to score an exit and take advantage of somewhat frothy public markets.
Identity authentication technology provider Okta agreed to acquire US-based identity verification platform developer Auth0 for a total of $6.5bn, giving an exit to telecoms firms NTT Docomo, Telstra, Deutsche Telekom and cloud enterprise software provider Salesforce.
Founded in 2013, Auth0’s software platform enables app development teams to secure and authorise access for users, mobile devices and other applications. The acquisition is an all-share deal and is expected to close by the end of 2021.
China-based video streaming platform developer Kuaishou Technology raised $5.4bn in an IPO on the Hong Kong Stock Exchange that scored exits for internet groups Tencent and Baidu. The company issued about 365 million shares priced at HK$115 ($14.83) each. They closed at HK$300 on the first day of trading, giving it a market cap of roughly $160bn.
Kuaishou has built a short-form social video app with more than 300 million daily active users. Its chief rival, Douyin, is better known internationally as TikTok.
Coupang, a South Korea-based online marketplace backed by SoftBank, floated on the New York Stock Exchange in an upsized $4.55bn IPO. The company priced 130 million shares at $35.00 each, above the price range of $32 to $34 it had set.
Founded in 2010, Coupang runs an e-commerce platform that offers a wide range of consumer goods through a same-day delivery service. It increased its annual revenue 91% to almost $12bn in 2020 and cut its net loss from $699m to $475m.
Lucid Motors, a US-based luxury electric vehicle provider backed by diversified conglomerate Mitsui, agreed to execute a reverse merger with special purpose acquisition company Churchill Capital Corp IV, giving it a listing on the New York Stock Exchange, following Churchill’s flotation in a $1.8bn IPO in July 2020.
Saudi Arabia’s Public Investment Fund anchored a $2.5bn private investment in public equity financing for the company at an initial pro-forma equity valuation of approximately $24bn.
Lucid has been developing a luxury sedan dubbed the Lucid Air that is slated for later this year. It also expects to launch a luxury sports utility vehicle dubbed Gravity in 2023. In addition to its own vehicles, it plans to offer its technology to third parties.
IronSource, the Israel-based app monetisation software provider backed by conglomerate Access Industries, agreed a reverse merger with a special purpose acquisition company at an $11.1bn pro forma equity valuation.
The company joined forces with Thoma Bravo Advantage, which is sponsored by private equity firm Thoma Bravo, and obtained the listing on the New York Stock Exchange, where the latter raised in a $900m IPO in January 2021.
A Thoma Bravo affiliate also led a $1.3bn PIPE deal supporting the transaction. IronSource provides software tools that help app developers – particularly mobile game developers – monetise their products and engage more effectively with their users, by adding specific touchpoints where relevant content can be delivered.
Fundraising
Corporate venturers supported a total of 93 fundraising initiatives in the first quarter of this year, up 37% from 68 initiatives reported during the same period in 2020 and also more than the 70 reported in Q1 2019. The estimated total capital raised, $9.48bn, was roughly 5% higher than last year’s Q1 figure of $8.99bn.
The initiatives included 59 announced, open and closed VC funds with corporate limited partners (LPs), 22 new corporate venturing units, eight accelerators, three incubators and one other initiative.
Legend Capital, the China-based venture capital firm formed by diversified conglomerate Legend Holdings, launched a RMB10bn ($1.54bn) sixth renminbi-denominated fund. Formed in 2001 with a $35m commitment from Legend Holdings, Legend Capital operates as an independent VC firm but retains the backing of its former parent.
The firm has not revealed how much capital it has secured for Legend Capital Comprehensive Growth Fund VI, but the fund has a RMB10bn target for its close. The state-owned Xiangcheng Financial Holdings is among its limited partners. The vehicle will invest in developers of technology in areas such as semiconductors and integrated circuits, consumer electronics and new energy vehicles.
Singapore-based e-commerce and video game group Sea Group committed $1bn to a corporate venture capital (CVC) unit called Sea Capital. Founded in 2009 as Garena, Sea offers online games through a platform also called Garena, as well as running an e-commerce marketplace called Shopee and a digital financial services offering under the Sea Money brand. It floated in an $884m IPO in 2017. Sea Capital is launched to build a broader ecosystem around the company’s offering and will target developers of consumer and enterprise technology. The $1bn will be deployed over the next few years.
The unit will be overseen by chief investment officer David Ma, founder and head of Composite Capital Management, an investment management firm recently acquired by Sea. He will report to Sea chairman and chief executive Forrest Li.
China-based VC firm Qiming Venture Partners raised RMB 2.9bn ($441m) for the final close of its RMB Fund VI, with backing from state-backed conglomerate Xiamen C&D. Existing LPs for the firm’s previous funds also made commitments to RMB Fund VI, including China-headquartered insurance companies, fund-of-funds manager Oriza FOFs Investment Management and science and technology-focused fund of funds. Founded in 2006, Qiming manages nine US dollar funds and six renminbi-denominated funds, and has $5.9bn of assets under management. The firm typically targets early and growth-stage companies in the technology, telecommunications, media and healthcare sectors.
France-based mobile network operator Orange has spun off its corporate venturing arm, Orange Ventures, and hired Mathieu de La Rochefoucauld as managing partner of the now independent firm. Orange has committed an additional €350m ($426m) to Orange Ventures, which since September 2019 has been run by president and managing partner Jérôme Berger
It invests in connectivity, cybersecurity, digital enterprise, financial services and e-health technology, as well as in new territories the group is exploring, such as Africa. Its portfolio companies include Monzo, Actility, Raisin and WeaveWorks.
US-headquartered pharmaceutical firm AstraZeneca launched a RMB2.2bn ($338m) healthcare investment fund with investment banking firm China International Capital Corporation’s private equity vehicle, CICC Capital. Wuxi AstraZeneca CICC Investment was officially registered in January 2021 and is targeting developers of innovative therapeutics, medical devices, diagnostics technology and artificial intelligence-equipped healthcare technology. The fund will also back the development of innovative supply chain solutions for pharmaceutical companies. AstraZeneca had previously partnered China International Capital Corporation to establish a vehicle called Healthcare Industrial Fund in late 2019 with $1bn in capital.
Heritage Group, a US-based venture capital firm backed by 15 strategic LPs in healthcare, has raised $317m for its third fund. Heritage Healthcare Innovation Fund III has about 50 investors and the firm referenced AdventHealth, Amedisys, Blue Cross Blue Shield of Tennessee, CardinalHealth, Cerner, Community Health Systems, Health Care Service Corporation, Horizon Blue Cross Blue Shield of New Jersey, Intermountain Healthcare, LifePoint Health, Memorial Hermann, Sutter Health, Tenet Health, Trinity Health and UnityPoint Health as strategic partners.
Heritage raised $220m for its second fund in 2016 and has invested in companies including Medical Solutions, Sharecare, HealthChannels, Abode Healthcare, MDLive, Lumere and Spero Health.
US-based life sciences investment firm Adjuvant Capital raised $300m for an oversubscribed fund from investors including pharmaceutical firms Merck and Novartis.
Limited partners also include Bill and Melinda Gates Foundation and Dalio Philanthropies, among many other investors. Launched in 2019, Adjuvant Capital’s fund focuses on medical technologies aimed at public health issues that have traditionally struggled to attract VC
funding.
Areas of interest include malaria, tuberculosis and Lassa fever. The fund has already backed 14 companies, such as US-based herpes vaccine developer X-Vax Technology, Austria-based vaccine developer Themis Bioscience and Denmark-based vaccine developer MinervaX.
Chevron Technology Ventures, the strategic investment arm of US-headquartered oil and gas provider Chevron, launched a $300m vehicle called Future Energy Fund II to fund developers of clean energy technology. Future Energy Fund II will provide funding for developers of technology that can help reduce carbon emissions, covering areas such as industrial decarbonisation, mobility technology, the decentralisation of the energy structure and circular carbon technology. The fund is the eighth to be formed by the unit since it was launched in 1999 and it is the successor to the first Future Energy Fund, which was formed in 2018 with $100m in capital.
Ascension Ventures (AV), the VC firm formed by health system Ascension, closed its fifth fund with $285m in capital supplied by 13 healthcare providers. Limited partners included Ascension, as well as AdventHealth, Carle Foundation, CentraCare, Children’s Medical Center of Dallas, Intermountain Healthcare, Novant Health, OhioHealth, OSF HealthCare, Luminis Health, Sentara Healthcare and Texas Health Resources. One unnamed health system has also joined the roster of investors.
Ascension Ventures was launched in 2001 and now has more than $1bn under management. The firm has backed approximately 80 companies in the software, services, medical device and diagnostic sectors. It operates as a stage-agnostic investor with a strategic focus on the needs of its LPs.
France-based venture capital firm Singular raised €225m ($265m) for the close of its first fund, which was backed by insurance firms Axa and MACSF.
Axa invested in the fund through corporate venturing arm Axa Venture Partners, while its other LPs included pension fund manager Ontario Teachers’ Pension Plan, development bank BPIfrance, Mubadala Capital, Vintage Investment Partners and Sofina. The vehicle also secured commitments from unspecified pension funds, funds-of-funds, sovereign funds and family offices. The firm began the fundraising process in late 2019.
Singular was founded by Raffi Kamber and Jérémy Uzan, former partners at France-based VC firm Alven. The firm will primarily participate in series A and B rounds for European technology startups, investing up to €20m per deal.