AAA Dealflow continues to grow in October

Dealflow continues to grow in October

The number of corporate-backed rounds tracked by GCV Analytics in October was 214, up 39% from the 154 deals in the same month last year. Investment value also increased significantly to $14.02bn – up 50% from the $9.34bn in October 2017.

However, compared with the third quarter of this year, October’s figures were somewhat weaker. While lower than in preceding months, October does appear to part of an upward trend for corporate-backed deals this year – record numbers have been recorded for the first half and the first three quarters.

The US hosted the largest number of corporate-backed deals with 98 rounds, China was second with 27, India and the UK third with 10.

The leading corporate investors by number of deals were telecoms group SoftBank, diversified conglomerate Alphabet and internet company Tencent. In terms of involvement in the largest deals, SoftBank topped the ranking, along with eSports team owner Axiomatic, Tencent and e-commerce company Alibaba.

GCV Analytics reported 23 corporate-backed funding initiatives in October, including VC funds, new venturing units, incubators, accelerators and others. This is an increase over September, when there were 19 such initiatives. The estimated capital raised in those initiatives was an impressive $46.91bn, swollen by the $45bn already committed to the second SoftBank Vision Fund.

Deals

Emerging businesses from the IT, health, services, financial and consumer sectors raised the largest number of deals during October. The most active corporate venturers came from the financial services, IT, media and consumer sectors, as shown on the heatmap. There were two deals above $1bn.

China-based digital media company Bytedance raised $3bn from investors including SoftBank, reportedly at a $75bn valuation. SoftBank had reportedly intended to invest $1.8bn in the round, depending on whether secondary shares were available. Bytedance’s best known division is news aggregation app Toutiao, which had 120 million daily users at the start of 2018, but it also runs short-form video platform TikTok, which has more than 500 million monthly users, and photo modification app Faceu. The company has recently launched additional products, such as budget e-commerce platform Zhidian and social commerce app Xincao.

Epic Games, a privately held US-based games developer, raised approximately $1.25bn in funding from investors including Axiomatic. Smash Ventures, investment firm KKR, multi-family office Iconiq Capital, private equity firm Vulcan Capital and venture capital firms Kleiner Perkins and Lightspeed Venture Partners also participated. The transaction reportedly valued Epic at almost $15bn. Epic was formed in 1991 but its first big hit came in the late 1990s when it released Unreal, a first-person shooting game for the PC and Mac with a multiplayer option which utilised the company’s Unreal Engine and became increasingly popular in its multiple sequels.

SoftBank was reportedly in final talks about investing $500m in Singapore-based ride-hailing platform Grab. The investment would come as part of a funding round that Grab intends to close at $1bn, and which would follow a $2bn round closed in August at an $11bn post-money valuation that included a $1bn commitment from carmaker Toyota, as well as cash from Ping An Capital, a unit of insurance firm Ping An. Founded as GrabTaxi, Grab’s core business is an on-demand ride service that spans more than 500 towns and cities in eight Southeast Asian countries.

US-based data warehousing technology provider Snowflake Computing completed a $450m round which featured Capital One Growth Ventures, the strategic investment subsidiary of financial services firm Capital One. Venture capital firm Sequoia Capital led the round, which valued Snowflake at $3.5bn. Snowflake has created a data warehousing platform for the cloud that enables businesses to store and manage large quantities of data.

US-based biopharmaceutical company Cerevel Therapeutics was launched with $350m from private equity firm Bain Capital to commercialise several neuroscience assets licensed from pharmaceutical firm Pfizer. Bain Capital supplied the money through Bain Capital Private Equity and Bain Capital Life Sciences. Cerevel is developing treatments for disorders affecting the central nervous system. Pfizer has licensed preclinical and clinical-stage assets to the company, including compounds aimed at Parkinson’s disease, Alzheimer’s disease, epilepsy, schizophrenia, addiction and neuroinflammation.

China-based alcoholic beverages retailer 1919 Wines and Spirits Platform Technology raised RMB2bn ($288m) from Alibaba, reportedly at $1bn valuation. The transaction made Alibaba the company’s second-largest shareholder with a 29% stake. Founded in 2010, 1919 operates an e-commerce platform for domestic and imported wine, spirits and beers. It owns branded bricks-and-mortar stores but also sells its products through third-party retailers. Alibaba’s investment will allow 1919 to pursue growth as Chinese consumer demand for wine surges. The country is expected to become the second-largest market for wine, behind the US, within five years, according to a study by wine fair operator Vinexpo.

China-based supply chain finance provider Linklogis closed a $220m series C round backed by logistics services provider GLP, consumer electronics manufacturer Skyworth and Tencent. Bertelsmann Asia Investments, a corporate venturing division of media group Bertelsmann, also participated in the round, which was led by Singaporean sovereign wealth fund GIC. Founded in 2016, Linklogis provides supply chain financing to micro-sized and small enterprises using big data, artificial intelligence and blockchain technologies to power its risk assessment platform.

China-based online car-trading platform Huashenghaoche raised $210m in a series D round backed by JD Finance, the financial services spinout of e-commerce company JD.com. The round was led by private equity firm Crescent Point Group and also featured investment bank Goldman Sachs and venture capital firm Frees Fund. Founded in 2015, Huashenghaoche operates an online marketplace and a chain of 400 bricks-and-mortar stores where customers can buy or rent vehicles. It also offers related services such as automotive financing and insurance products.

India-based online restaurant listing and food delivery service Zomato secured a $210m commitment from Ant Financial, the financial services affiliate of Alibaba, according to a regulatory filing. The confirmation of Ant Financial’s investment followed reports that the corporate was set to participate in a $400m funding round alongside online travel agency Ctrip at a valuation of $1.8bn to $2bn. Founded in 2008, Zomato operates an online platform that enables consumers to order food, review and post photos of dishes from some 1.2 million restaurants in 24 countries.

Careem, the United Arab Emirates-based ride-hailing platform, raised $200m from existing investors including travel agency Al Tayyar and e-commerce firm Rakuten. STV, the venture capital fund anchored by telecoms firm Saudi Telecom, and investment holding company Kingdom Holding also participated. The round reportedly valued the company at about $2bn. Careem’s on-demand ride service serves 120 cities in the Middle East, North Africa, Turkey and Pakistan, and has accumulated 30 million registered users. US-based peer Uber was reportedly in talks with Careem over an acquisition for between $2bn and $2.5bn in September.

Exits

In October, GCV Analytics tracked 26 exits with corporate venturers participating as either acquirers or exiting investors. The transactions included 17 initial public offerings (IPOs), 10 acquisitions and one merger.

The number of exits rose slightly compared with September, when there were 26. Total estimated exited capital amounted to $7.56bn, down 23% from the $9.29bn estimated during the previous month.

Alibaba confirmed it was merging online food delivery subsidiary Ele.me with its local services spinoff Koubei with funding from SoftBank. The corporate had previously revealed it was joining SoftBank to provide about $3bn of funding for the new but still unnamed entity, which will compete with Meituan Dianping. Alibaba had already invested $1bn Ele.me when it acquired a majority stake in the company. Ele.me operates a food delivery service that dominates the Chinese market with a 49.8% share, according to Bloomberg. Koubei was launched by Alibaba and Ant Financial in 2015 as a mobile portal for services such as restaurant bookings, short-term accommodation, travelling and shopping, all linking to Ant’s mobile payment platform, Alipay. The merged company will cover about 3.5 million merchants in more than 670 Chinese cities and will utilise Alibaba’s expertise in areas such as new retail technology, membership, marketing, logistics and finance.

Brazil-based payment processor StoneCo floated in a $1.22bn IPO alongside a $100m private placement by Ant Financial. The company issued 45.8 million common class A shares at $24 each, above the IPO’s $21 to $23 range. Its shareholders sold a further 4.9 million shares, while Berkshire Hathaway – the investment holding of investor Warren Buffett – and other existing backers agreed to buy 25.9 million shares. Stone has created a software platform that enables merchants and service providers to accept, make and integrate electronic payments online and offline. It also provides additional services such as sales, customer and operational support. The company generated about $165m in revenue over the first half of this year, making a $22.7m net profit.

Funding Circle, a UK-based peer-to-peer lending platform backed by e-commerce holding company Rocket Internet, went public in a £440m ($576m) IPO in its home country. The company issued $393m of new shares at £4.40 each, at the lower end of the £4.20 to £5.30 range, while shareholders divested about $184m of shares. The offering valued Funding Circle at $1.97bn. The company runs a platform on which small businesses can access debt financing provided by a pool of some 80,000 investors who provide the capital through an online account. Businesses repay the money in monthly instalments which are distributed to lenders.

Innovent Biologics – a China-based biopharmaceutical company backed by insurers China Life, Taikang and Ping An, pharmaceutical firm Eli Lilly and conglomerate Legend Holdings – raised $421m in its IPO. The company issued 236 million shares at HK$13.98 ($1.78) each, near the top of the $1.60 to $1.80 range the company had set. Founded in 2011, Innovent Biologics is working on treatments for cancer, eye conditions, autoimmune disorders and cardiovascular diseases. It has 17 assets in its pipeline, with four candidates in late-stage clinical development.

US-based immuno-oncology drug developer Allogene Therapeutics closed an IPO that gave exits to pharmaceutical companies Pfizer and Gilead Sciences at almost $373m. The company raised an initial $324m when it issued 18 million shares priced at the top of its range at $18 each on the Nasdaq Global Select Market. Allogene’s shares closed at $25 on the first day of trading. Joint book-running managers Goldman Sachs, JPMorgan Securities, Cowen and Company and Jefferies bought a further 2.7 million shares for $48.6m. Founded in 2018, Allogene is developing allogeneic T-cell therapeutics based on intellectual property licensed from Pfizer. The company raised $300m in an April 2018 series A round featuring $35m from Pfizer.

Anaplan, a US-based business planning software provider backed by enterprise software suppliers Salesforce and Workday, raised almost $264m when it floated on the New York Stock Exchange. The company had raised the IPO range from $13-$15 to $15-$17 a share, and it priced the offering at the top of the range, issuing 15.5 million shares, securing a market cap of about $2.1bn. Anaplan has developed connected planning software that links employees to data across an organisation including sales, finance and the supply chain, helping them in planning.

Guardant Health, a US-based cancer diagnostics technology developer that has SoftBank as its largest shareholder, went public in an IPO realising about $238m. The company issued 12.5 million shares on the Nasdaq Global Select Market at $19 each, above the IPO’s $15 to $17 range, giving it a market capitalisation of about $1.58bn. Its shares opened at $27.75 and closed at $32.20 on the first day of trading. Guardant has created liquid biopsy-based blood tests that detect advanced cancer with assistance from large datasets and data analytics technology, and which are intended to be cheaper and less invasive than tissue biopsies. The tests are personalised for each patient based on the molecular profile of their tumours. The company is using the technology to develop tests for early-stage and recurring cancers.

SurveyMonkey, a US-based online survey management platform backed by corporates Alphabet and Salesforce, closed its IPO at $207m after underwriters took up the greenshoe option. The company priced 15 million shares at $12 each to raise an initial $180m when it floated on the Nasdaq Global Select Market. Subsequently, the underwriters bought another 1.75 million shares and the company’s shares closed at $16.03 the same day. SurveyMonkey has created a software platform that enables users to design, make and distribute online surveys and analyse the results. In addition to the IPO, Salesforce, an existing backer, agreed to invest $40m in SurveyMonkey through a private placement.

Cybersecurity software producer Check Point Software Technologies acquired Israel-based cloud security technology developer Dome9, enabling SoftBank to exit. The price was reported to consist of $175m in cash plus stock and options. Dome9 has built a software platform that enables enterprise customers to visualise and analyse security across multiple cloud computing platforms. The technology will be integrated into Check Point’s Infinity security architecture.

Cybersecurity technology provider Palo Alto Networks agreed to acquire US-based cloud security software developer RedLock for about $173m in a deal that will enable computing equipment maker Dell to exit. RedLock emerged from stealth mode in March 2017 with $12m of funding from Dell Technologies Capital, Dell’s corporate venturing arm, as well as venture capital firms Sierra Ventures and Storm Ventures. Founded in 2015, RedLock has built software platform RedLock Cloud 360, which uses artificial intelligence to bring together security data from a wide range of sources to identify and combat cyberthreats to cloud software platforms.

Note: Monthly data can fluctuate as additional data are reported after GCV goes to press

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