In the second quarter of 2017, GCV Analytics tracked 560 funding rounds involving corporate venturers, a 27% increase over the 442 rounds recorded in the same quarter last year. However, the estimated total investment slipped to $26.45bn, down 15% from last year’s $31.13bn.
The US hosted well over half of those funding rounds (299), while China came in second with 64 deals, India third with 29, and the UK fourth with 22.
There was a slight decrease in deal count compared with the first quarter of this year, when there were 575 deals. However, estimated total investment jumped significantly by 44%, from $18.33bn.
Emerging enterprises from the health, IT and financial services sectors proved the most attractive to corporate venturers, accounting for at least 70 deals each. The top funding rounds by size, however, were raised mostly by companies from other sectors.
The most active corporate investors came from the financial services, IT, media and health sectors.
The leading investors by number of deals were diversified internet conglomerate Alphabet, industrial conglomerate General Electric and software provider Microsoft. The list of corporate venturers involved in the largest deals by size was topped by telecoms company SoftBank, internet company Tencent and Alphabet.
Deals
Most of the funding in the biggest rounds went to emerging enterprises from the consumer, transport and financial services sectors. Four were above $1bn.
SoftBank provided $5bn of the $5.5bn raised by China-based ride-hailing platform Didi Chuxing, which runs the largest on-demand ride platform in China by market share. Didi Chuxing revealed that SoftBank had led the round, which reportedly valued it at more than $50bn. The size of SoftBank’s contribution was revealed in its earnings report.
SoftBank also invested $1.4bn in One97 Communications, the India-based e-commerce company that owns mobile payment platform Paytm. The round valued One97 at $7bn post-money. One97 operates a diversified e-commerce and online services business but it is now best known for Paytm, a mobile payment platform it launched in 2010, which enables users to buy phone credit, pay bills, buy insurance and book travel tickets.
India-based e-commerce firm Flipkart raised $1.4bn from Tencent, online marketplace operator eBay and software provider Microsoft at a post-money valuation of $11.6bn. Flipkart has also signed a cross-border trade agreement with eBay that will allow its customers to access eBay’s online stock inventory through the Flipkart platform. Flipkart runs India’s largest e-commerce marketplace by sales, carrying a wide range of consumer goods.
Tencent led a $1.2bn funding round for Indonesia-based on-demand ride and delivery service provider Go-Jek. The deal, Tencent’s first venture capital investment in Indonesia, valued Go-Jek at $3bn post-money. Go-Jek initially focused on a ride-hailing service involving motorcycle taxis called ojeks, but has since expanded to four-wheel vehicles and now oversees a network of 200,000 drivers in 25 Indonesian cities.
US-based health intelligence provider Outcome Health raised $600m from a host of investors featuring CapitalG, a corporate venturing subsidiary of Alphabet. Other investors included Goldman Sachs Investment Partners, Leerink Transformation Partners, Pritzker Group Venture Capital, Balyasny Asset Management and unnamed health systems and healthcare stakeholders. Founded in 2006, Outcome Health has developed a platform to deliver health information and intelligence during critical moments of care to help both medical professionals and patients make better decisions.
Exits
GCV Analytics tracked 36 exits during the second quarter of 2017, including 23 acquisitions, seven IPOs, four mergers and two business closures. The majority of these took place in the US. The top exiting corporates this quarter include technology and internet companies like Alphabet and Intel, and media and research company International Data Group (IDG), which reported at least three exits each.
The total estimated exited capital was $2.83bn, a significant drop from the $12.71bn posted in the same quarter last year. It is also a decrease from the $7.51bn recorded in the first quarter of this year.
Biotechnology producer Bioverativ agreed to acquire True North Therapeutics, a US-based rare disease therapy developer backed by pharmaceutical firms including GlaxoSmithKline, in a deal that could reach $825m. Bioverativ is to pay $400m upfront, and potentially up to $425m in milestone payments contingent 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 called TNT009 which is being developed to combat a rare haemolytic condition known as cold agglutinin disease.
Big box retailer Walmart is reportedly about to acquire US-based men’s fashion e-commerce company Bonobos in a deal that would give exits to retail chains Nordstrom and Coppel. Walmart is expected to pay around $300m. Apparel company Bonobos initially specialised in chinos but has subsequently expanded its clothing range to include suits, shirts, shorts and golfing apparel.
Telecoms firm Telstra is set to exit US-based cloud communications platform developer TeleSign after mobile data services provider Bics agreed to acquire the company for $230m in cash. Founded in 2005, TeleSign supplies secure authentication and mobile identity services to digital and internet service providers, enabling them to add real-time communications to existing applications or services without building out backend infrastructure.
US-based data company Cloudera went public in a $225m IPO that gave semiconductor maker Intel an exit, but at a steep discount from its investment valuation. Cloudera issued 15 million shares on the New York Stock Exchange at $15 each, above the $12 to $14 range it had set. Founded in 2008, Cloudera has developed a cloud-based hybrid open-source enterprise data management platform that incorporates machine learning and advanced analytics.
GV, formerly known as Google Ventures and a subsidiary of Alphabet, exited US-based deep data analysis technology provider Lattice Data in an acquisition by computing company Apple, which paid “around $200m” for Lattice, according to TechCrunch. Founded in 2015, Lattice is developing machine learning software that can convert unstructured “dark” data such as text or images into structured data that can be analysed.
Funding initiatives
Corporate venturers supported a total of 83 fundraising initiatives in the second quarter, down from the 94 initiatives reported in the same quarter last year. The estimated total capital raised, $9.77bn, was about half last year’s $19.93bn.
The initiatives include 40 announced, open and closed VC funds, 17 new corporate venturing units, 11 corporate-backed accelerators and six corporate-backed incubators, among others.
While the number of initiatives recorded was similar to those reported in the previous quarter, the investment level was less than half that estimated for the previous quarter – $9.77bn, down from $21.1bn.
China-based smartphone manufacturer Xiaomi agreed to form a RMB12bn ($1.74bn) strategic investment fund in partnership with the government of the Chinese province of Hubei. Xiaomi, Hubei’s Yangzte River Industry Fund, and the government of Hubei’s largest city, Wuhan, have agreed each to provide a third of the capital for the Xiaomi Yangtze Industry Fund, with the RMB12bn figure representing the overall target. The fund will invest in companies able to expand the Mi ecosystem Xiaomi is building around its mobile and smart connected devices.
China-based electric vehicle developer Xiaopeng Motors raised RMB2.2bn ($324m) in a series B round led by on-demand chauffeured travel platform UCar. Founded in 2014, Xiaopeng is working on an all-electric sports utility vehicle, Xpeng, capable of being mass produced relatively quickly, and is looking to begin commercial manufacturing later this year. UCar formed a RMB10bn ($1.47bn) strategic investment fund that chairman and CEO Lu Zhengyao revealed would cover the whole automotive value chain. Through it, UCar led the round raised by Xiaopeng.
US-based electronics producer Apple announced the establishment of a $1bn investment fund that will focus on the advanced manufacturing space. The company has yet to disclose any details about structure, strategy or staffing of the fund, or whether it would be involved in venture investments.
China-based insurance group Ping An launched the $1bn Ping An Global Voyager Fund to invest in financial and healthcare technology startups. The fund is Ping An’s second dedicated corporate venturing initiative, following the establishment of Ping An Ventures in 2012. The $1bn figure represents the Global Voyager Fund’s initial size, and Ping An, which has a customer base of more than 138 million, said in a statement it intended to become an “internationally leading technology investment pioneer”.
WuXi Healthcare Ventures, the strategic investment arm of pharmaceutical research firm WuXi PharmaTech, merged with venture capital firm Frontline BioVentures. The new entity is called 6 Dimensions Capital. It will have approximately RMB5.5bn ($800m) of assets under management and intends to begin work raising dollar and renminbi-denominated funds soon.
Telecoms firm Saudi Telecom formed $500m corporate venturing fund STV, with which it expects to start investing by the fourth quarter of 2017. The Saudi Arabia-based company has since late 2011 invested in IT, telecoms, media and entertainment companies through independently managed venture capital fund STC Ventures. The new fund will also be managed independently and will target companies developing artificial intelligence, virtual reality, banking, logistics and digital health technology and services. It will aim to invest about $100m a year.
China-based private equity firm Cathay Capital closed the first fund for its venture capital arm Cathay Innovation at $320m with support from a range of corporate investors, including BNP Paribas Cardif, financial services firm BNP Paribas’s insurance arm, as well as airport operator ADP, diversified holding group Artemis, appliance makers Joyoung and SEB, tyre producer Michelin, oil and gas company Total and auto parts supplier Valeo. Cathay Innovation was formed as a VC vehicle to support startups across North America, Europe and China.
UK-based life sciences-focused investment firm Medicxi closed a late-stage fund at $300m with contributions from pharmaceutical firm Novartis and Verily, a life sciences subsidiary of Alphabet. Medicxi Growth 1 will aim to work with its corporate partners, including telecoms firm Telefónica, by exchanging dealflow and industry insights.
US-based media and entertainment group DMG Entertainment launched strategic investment fund DMG Capital Group with $300m that will support entertainment, technology and media companies. DMG Entertainment operates across various branches of the entertainment industry. The unit will operate from offices in Los Angeles and Silicon Valley, and will look to work with growth and private equity firms as well as entrepreneurs with an eye to international growth.
German public-private partnership High-Tech Gründerfonds (HTGF) achieved the first close of its third fund at €245m ($275m) with the support of the German Ministry for Economic Affairs and Energy. High-Tech Gründerfonds III will begin investing in the autumn, when it will commit to €3m into startups. Development bank KfW also contributed to the vehicle, as did 25 Germany-based large corporations.
The companies included chemicals companies Evonik, Lanxess, Altana, BASF, Wacker and Büfa, medical device maker B Braun, industrial group Robert Bosch, photography services provider Cewe, mail company Deutsche Post DHL, telecoms firm Drillisch, conglomerates Haniel and Körber, furniture manufacturer Hettich, insulation provider Knauf, electrical engineering manufacturer Phoenix Contact, retail bank Postbank, molecular diagnostics technology developer Qiagen, software developer SAP, credit bureau Schufa, retail conglomerate Schwarz Gruppe, which owns chains such as Lidl and Kaufland, chainsaw producer Stihl, utility Thüga and software tools developer Vector Informatik.
Quarterly data can fluctuate as additional data are reported after GCV goes to press.
