In the third quarter of 2017, GCV Analytics tracked 559 funding rounds involving corporate venturers, a slight 2% increase from the 447 rounds recorded in Q3 2016. However, the estimated total investment surged to $34.46bn, up 83% from the $18.78bn last year.
The US hosted nearly half of those funding rounds (274), while China came in second with 72 deals, India third with 38, and the UK fourth with 32.
When comparing Q3 2017 with the first quarter of this year, there was a decrease in deal count, dropping from 579. However, estimated total investment jumped significantly from $16.19bn, i.e. by 102%.
Emerging enterprises from the IT, health, media and financial services sectors proved the most attractive for corporate venturers, accounting for at least 69 deals each. The top funding rounds by size, however, were raised mostly by companies from a variety of sectors, as outlined below.
The most active corporate investors, in turn, came from the financial services, IT, media, health and industrial sectors, as illustrated in the deals heatmap.
The leading investors by number of deals were telecoms firm SoftBank and its Vision Fund, diversified internet conglomerate Alphabet, cloud services platform Salesforce and media and entertainment company Disney. The list of corporate venturers involved in the largest deals by size was also topped by SoftBank, along with ride-hailing platform Didi Chuxing and payment services company Ant Financial. SoftBank was also the most often found in investors in the top venturing rounds by dollar size.
Deals
Most of the funding from the biggest rounds reported in the second quarter went to emerging enterprises from the consumer, transport, financial services and media sectors. Eight of the top 10 rounds were above $1bn.
SoftBank and its $93bn Vision Fund agreed to invest a total of $4.4bn in US-based working space operator WeWork. The two will pay $3bn to acquire a mixture of primary and secondary shares, and will provide $1.4bn in funding for three new regional WeWork subsidiaries in Asia. Founded in 2010, WeWork oversees a network of 160 co-working spaces, stretching across 50 cities in 16 countries. Customers can rent desks or full offices and have access to rapid-speed internet, office supplies and equipment, and other perks such as free coffee.
The SoftBank Vision Fund also invested an amount reported by LiveMint to be “at least” $2.5bn in India-based e-commerce company Flipkart. Flipkart confirmed the investment in a statement without giving the figure. Founded in 2007, Flipkart has built the largest e-commerce marketplace in India by market share. It currently lists about 80 million products across more than 80 consumer categories including electronics, fashion, appliances and furniture.
Singapore-based on-demand ride service Grab raised $2.5bn series G round from carmaker Toyota’s Next Technology Fund, SoftBank and Didi Chuxing at a $6bn valuation. Founded in 2012 as GrabTaxi, Grab operates an on-demand ride-hailing service that is currently available across 87 cities in Southeast Asia.
China-based Ant Financial, an affiliate of its former parent and e-commerce firm Alibaba, acquired a minority stake in Hong Kong-based financial services firm MassMutual Asia along with Yungfeng Capital, the family office investment firm of Alibaba’s founder Jack Ma, which acquired a 60% majority stake in the firm. The other 40% were acquired by Ant Financial and a host of other investors including media group Sina and Singapore government-backed acquirer City-Scapes. The total size of the transaction was $1.7bn, which was comprised of $1bn in cash and $700m in shares. MassMutual Asia manages general insurance as well as a Mandatory Provident Fund, a compulsory pension plan for the retirement of residents in Hong Kong.
Entertainment and media group Walt Disney invested $1.58bn in US-based online video streaming technology provider BamTech to take a majority stake in it. Disney had paid $1bn for a 33% stake in BamTech in 2016 as part of a deal that granted it an option to acquire a majority stake. This latest investment hiked its share to 75%. BamTech was originally created by MLB Advanced Media, the interactive media arm of sporting league Major League Baseball (MLB). It powers the online video offerings of MLB and several other major sporting organisations.
SoftBank Vision Fund led a $1.1bn round for Switzerland-based drug developer Roivant Sciences. The round also featured existing investors including pharmaceuticals distributor Dexxon. Founded in 2014, Roivant pursues a business model whereby it develops therapeutics through a range of subsidiaries: Myovant, which focuses on endocrine diseases and women’s health in general, Axovant (neurology), Dermavant (dermatology), Enzyvant (rare diseases) and Urovant (urology).
E-commerce firm Alibaba led a $1.1bn round for Indonesia-based e-commerce platform Tokopedia. The round included undisclosed existing investors, the company said, and reports suggested SoftBank and venture capital firm Sequoia Capital. Tokopedia runs an online marketplace where online merchants and local brands sell a range of consumer products spanning categories like fashion, software, electronics, cars and lifestyle products.
Exits
GCV Analytics tracked 50 exits during the third quarter of 2017, including 35 acquisitions, nine initial public offerings (IPOs), four mergers and two business closures. The majority of these transactions took place in the US.
Top exiting corporates this quarter include technology and internet companies like Alphabet, Ant Financial and media and research company International Data Group (IDG), which reported at least three exits each.
The total estimated amount of exited capital in Q3 2017 was the record-setting $25.10bn, most of which was accounted for by a single large transaction – Intel’s massive $15.3bn acquisition of Mobileye.
The largest acquisition of a corporate-backed company ever-recorded was completed by Intel during this third quarter. Intel acquired Israel and US-based developer of vision driver assistance systems Mobileye for $15.3bn by purchasing 84% of the company´s outstanding ordinary shares. Mobileye had previously received backing from financial firms Goldman Sachs and Morgan Stanley in the 2000s as well as by car rental services Enterprise Rent-a-Car and financial firm Fidelity in 2013 before it floated on the New York Stock Exchange in 2014. Founded in 1999, Mobileye develops a collision avoidance system designed to reduce vehicle injuries and fatalities, offering computer vision and machine learning, data analysis, localisation and mapping for advanced driver assistance systems and autonomous driving.
SoftBank committed $500m to China-based online insurance platform ZhongAn Online Property and Casualty Insurance as part of the latter’s $1.5bn IPO. ZhongAn issued approximately 199 million new shares on the Hong Kong Stock Exchange priced at HK$59.70 ($7.64) each, at the top of the range it had set earlier. SoftBank purchased a stake under 5%. ZhongAn runs an online platform which offers more than 300 specialised insurance packages.
Germany-based online food ordering platform Delivery Hero went public in a €996m ($1.13bn) initial public offering (IPO), giving a partial exit to e-commerce holding company Rocket Internet. The IPO was comprised of 18.95 million newly issued shares and 20 million shares held by the Rocket Internet, all priced at €25.50 each. Delivery Hero has built an online food ordering and delivery platform that serves customers in over 40 countries across Europe, Latin America and the Middle East and North Africa, and Asia-Pacific regions.
US-based medical device producer NeoTract was acquired by medical device maker Teleflex for $1.1bn, providing pharmaceutical group Johnson & Johnson with an exit. Founded in 2004, NeoTract develops a minimally invasive device, UroLift, to treat lower urinary tract symptoms caused by an enlarged prostate gland, a condition known as benign prostatic hyperplasia (BPH).
Enterprise software provider Sage Group agreed to buy US-based financial management software provider Intacct for $850m, giving exits to payment services provider American Express and professional consulting services firm Deloitte. Founded in 1999, Intacct has built a cloud-based platform for enterprises that incorporates cash, inventory, contract and vendor management as well as accounting, purchasing, financial consolidation, revenue recognition, subscription billing, financial reporting and project and fund accounting.
Funding initiatives
Corporate venturers supported a total of 61 fundraising initiatives in Q2 2017, down from the 90 initiatives reported at the same time last year. The estimated total capital raised, $5.11bn, also considerably lower than last year’s Q3 figure of $6.43bn.
The initiatives in question include 25 announced, open and closed VC funds, 12 newly launched corporate venturing units, nine corporate-backed accelerators and seven corporate-backed incubators, among others.
This has also been the lowest number of initiatives recorded since Q1 2017 but this is likely attributable to the summer slowdown of investment activity during August, related to the holiday season.
China-based internet company Baidu announced a RMB10bn ($1.5bn) vehicle called Apollo Fund aimed at the autonomous driving sector. The fund is set to back 100 self-driving car projects over the next three years. It will seek opportunities across the globe in the areas of software, hardware, vertical services and data providers. The vehicle draws its name from Baidu’s open-source autonomous driving platform Apollo, which has attracted 70 industry partners so far, including car manufacturers such as Hyundai. Baidu announced the latest iteration of the platform, Apollo 1.5, in conjunction with the Apollo Fund.
Insurance firm China Life and internet company Baidu announced a RB7bn ($1.05bn) private equity fund partnership. China Life will put up as much as RMB5.6bn of the capital for the fund, which will be known as Baidu Fund Partnership, while Baidu will provide up to RMB1.4bn. The two China-based corporates will each invest 30% of those figures initially. Baidu Fund Partnership will target mid and late-stage investments in internet-focused companies, including mobile internet, artificial intelligence and online finance technology companies, with a “significant association” with China.
Lilly Asia Ventures, the Asia-focused biomedical venture capital firm sponsored by US-based pharmaceutical firm Eli Lilly, closed its fourth fund at $450m. It has not disclosed any limited partners apart from Eli Lilly. Founded in 2008, Lilly Asia Ventures was formed by Eli Lilly to invest in life sciences and healthcare technology developers in Asia, and particularly in China. It typically invests between $5m and $15m per round at growth stage, and tries to take a board seat if possible.
South Korea-based electronics producer Samsung launched a $300m automotive-focused investment fund dubbed Samsung Automotive Innovation Fund. The fund will make strategic investments in companies developing connected and autonomous vehicle products in areas such as smart sensors, machine vision, artificial intelligence, high-performance computing, connectivity, automotive safety, security and privacy technology. The unit will bolster Samsung’s own technology efforts in the sector. It has received licenses to test its autonomous driving software and hardware on the road in California and Korea.
Eight Roads Ventures, the investment arm of financial services conglomerate Fidelity International, established a healthcare fund aimed at China-based startups. The $250m vehicle will primarily invest in four healthcare-related areas: therapeutics, services, medical technology and IT and digital health. Approximately 40% of the money will go towards therapeutics. The fund is expected to be followed by a broader technology vehicle, though details about the latter are yet to emerge.
The government of Poland launched its Pzl800m ($225m) PFR NCBR CVC Fund of Funds, a vehicle that will invest in corporate venturing subsidiaries in the country. The fund will be managed by PFR Ventures, the investment arm of the Polish Development Fund. The government is providing half the capital, with the remainder to be provided by private backers. The initiative is expected to generate six to nine corporate venturing funds with an average of Pzl80m to Pzl150m in size. Apart from capital, the government expects portfolio businesses to also gain access to the respective corporate’s expertise. The funds will invest between Pzl5m and Pzl35m in domestic startups.
Vertex Ventures, the VC arm of Singapore state-owned investment firm Temasek, raised more than $150m for its third fund aimed at Southeast Asia and India. The fundraising effort included a commitment from Thailand-based financial services firm Kasikornbank. The $150m figure represents the fund’s target, but Vertex said it will close the fund at the end of the year. The fund is expected to focus on fintech startups, providing between $3m and $5m to series A-stage companies and using Kasikornbank’s expertise and network.
Singapore-based integrated engineering and industrial product manufacturer ST Engineering launched a corporate venturing subsidiary dubbed ST Engineering Ventures that is armed with $150m in funding. ST produces a range of aerospace, defence, electronics and marine products. The unit will seek opportunities in sectors relevant to ST’s long-term growth, such as robotics, autonomous technology, data analytics and cybersecurity, and will initially operate out of offices in Singapore, Israel and the US.
Switzerland-based growth equity firm Evolution Equity Partners closed its latest fund at $125m, with contributions from Cisco Investments and Witelo Fund, representatives of networking technology provider Cisco and PZU Insurance Group. Evolution has offices in Zurich and New York City, USA, and invests in technology developers, with a particular focus on cybersecurity and enterprise software. The fund is targeting companies building software platforms, and in particular technologies such as machine learning, big data, software-as-a-service, mobile and the point where consumer and enterprise software meet. It will provide between $5m and $25m for each investment.
France-based investment firm BlackFin Capital Partners achieved a first close of its Tech Fund 1, having secured more than €100m ($117m) with the support of several insurance companies. The insurers, which included Vaudoise Assurances Group, Groupama Group, Sogecap, Natixis Assurances and Swiss Life, were joined by France’s public investment bank Bpifrance, which contributed directly and through its MultiCap Croissance fund, and unnamed financial services firms and family offices. The fund has a target size of more than €150m and will identify opportunities in the financial sector, including pure-play fintech, insurance technology and regulation technology.
