Our definition of the consumer sector encompasses food and beverages, hygiene and beauty products, apparel and other clothing accessories, e-commerce platforms, consumer electronics and other physical consumer goods.
GCV reported 124 rounds involving corporate investors from the consumer sector between March 2016 and February 2017 – 52 took place in the US, 27 in China and seven in the UK and six in Germany.
Most of these 124 commitments went to emerging enterprises in the consumer sector (50), IT (18), services (17) and financial (12).
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds rose significantly, from $17.61bn in 2015 to $21.59bn last year, a 23% increase. The deal count on the other hand went down, declining by 8% from 149 rounds in 2015 to 137 last year.
The 10 largest investments by corporate venturers from the consumer sector cover a range of businesses, spanning transport, telecoms, fashion and apparel companies, and e-commerce platforms.
Investment professionals from consumer companies told GCV they were observing two key trends – the rise of e-commerce platforms and the growing importance of brands that resonated with today’s buyers, who were looking for high-quality products offering “unique consumer experiences”.
Natalie Hwang, managing director at Simon Ventures, the corporate venturing arm of US-based real estate company Simon Property, specialises in evaluating next-generation commerce and retail technologies. She said the rise of e-commerce reflected the evolution of the consumer sector in the digital age.
“There are good reasons why commerce [initially] evolved to a model where consumers go to stores rather than have merchants go to the consumer,” Hwang said. “E-commerce reverses the product selection paradigm by bringing commerce to the consumer, making product selection and ordering much more efficient, but with product delivery remaining the weak link in online transactions, particularly with last-mile logistics.”
Hwang forecast a future in which e-commerce continued to dominate a wide variety of consumer products, while traditional retail largely revolved around brand differentiation. “Commodity retailing and price-sensitive categories involving goods that are inexpensive to ship will increasingly continue to transact online, with in-store retailing going to highly branded retailers who excel at crafting unique consumer experiences that Will inspire, engage and compel their audiences.”
John Haugen, vice-president and general manager of 301 Inc, the corporate venturing arm of US-based consumer foods manufacturer General Mills, also stressed the role of brand differentiation. “We seek to invest in emerging food startups with a compelling product and strong brand that can be expandable,” he said (see interview).
Ben Lee, managing director of funds at CircleUp, a US-based investment platform connecting early-stage consumer brands and investors, attributes the critical role of branding to a fundamental shift in consumer attitudes. “Today people want to feel connected to what they are buying and consuming. They do not want the makeup their parents wore, and do not want to feed their dogs the brands they grew up with.”
The challenge for large corporations was that consumers were losing interest in mass-market products that have remained unchanged for decades, Lee noted. “Better-quality authentic emerging products are surfacing left and right, and they have entered the mainstream,” he said (see interview).
The top two corporate investors from the consumer sector, accounting for the highest number of disclosed rounds, and each taking part in the largest rounds, were China-based e-commerce company Alibaba and Japan-based e-commerce business Rakuten. Other leading investors include Germany-based retail conglomerate Tengelmann, China-based e-commerce portal JD.com, General Mills as well as UK and Netherlands-based consumer goods conglomerate Unilever.
Corporate investment in consumer-focused emerging enterprises decreased between 2015 and 2016 in both deal count and total value. According to GCV Analytics data, $11.48bn was invested in 234 rounds in 2016, a 21% dip from the $15.13bn invested in 288 deals in 2015.
Some of the biggest investors in consumer-focused emerging businesses were US-based corporates from outside the sector, such as media and research company International Data Group (IDG), semiconductor manufacturers Intel and Qualcomm, and internet conglomerate Alphabet.
Deals
Consumer-focused corporates invested in a number of large rounds – one of which was record-setting – raised by emerging e-commerce and transportation-related businesses. China-based e-commerce company Alibaba participated in five of the top 10 deals.
China-based ride-hailing service Didi Chuxing closed the largest funding round recorded by a private venture capital-backed company, raising $7.3bn in debt and equity, as the Wall Street Journal reported. The $4.5bn equity portion of the round included a reported $400m from Alibaba and its Ant Financial affiliate, $1bn from electronics producer Apple, $600m from insurer China Life, and contributions from internet company Tencent and telecoms group SoftBank. Didi Chuxing was formed by the merger of China’s two largest ride-ordering platforms – Didi Dache and Kuaidi Dache – in early 2015.
Alibaba and Ant Financial invested $1.25bn in China-based online food ordering platform Ele.me. Alibaba provided $900m while Ant Financial contributed the remaining $350m. Ele.me runs an online platform for ordering food for delivery from local restaurants, operating in an increasingly busy sector in China.
Beverage producer Coca-Cola took part in a $1.2bn round raised by US-based satellite operator OneWeb. SoftBank invested $1bn of the total, while several other corporates, all existing investors in the company, provided the remaining $200m. These investors include Qualcomm, aerospace group Airbus, conglomerates Virgin Group and Bharti Enterprises, cable and internet service provider Totalplay, and satellite services companies Hughes Network Systems and Intelsat. Founded in 2012, OneWeb is building a network of 720 low earth orbit satellites that will provide worldwide internet coverage.
China-based chauffeured lift service UCar received RMB3.68bn ($568m) in a funding round featuring Alibaba. The round also featured investment banks China International Capital and Citic Securities as well as state-owned equity investment company Shenwan Hongyuan. UCar’s service involves offering qualified drivers and high-quality cars to professional customers.
Rakuten Ventures, the corporate venturing vehicle of the e-commerce company, was among the investors that agreed to invest over $550m in Indonesia-based on-demand mobile platform Go-Jek. Go-Jek’s core offering is a ride-sharing service using motorcycle taxis called ojeks, but it has built a mobile platform that offers a range of on-demand services across 14 Indonesian cities, including courier deliveries, mobile payments, food delivery and lifestyle services.
Yixin Capital, a China-based online automotive financing subsidiary of automotive retail services provider Bitauto, raised $550m from a consortium featuring its parent company. Investors include local corporations such as e-commerce platform JD.com as well as internet companies Tencent and Baidu.
E-commerce holding group Rocket Internet was among the investors in a €330m ($363m) round closed by Global Fashion Group (GFG), a holding entity for several of its portfolio companies. Rocket Internet itself provided $75m of the funding. Established in 2014, GFG oversees six online fashion retailers – Jabong, Lamoda, Zalora, Dafiti, Namshi and the Iconic – covering 27 countries in Asia, South America, the Middle East and Australia.
United Arab Emirates-based ride-hailing platform Careem closed a first tranche of a $500m round co-led by Rakuten and telecoms group Saudi Telecom at $350m. Careem runs a ride-hailing service that spans 47 cities across 11 countries in the Middle East and North Africa, and southern Asia. The platform claims to have around 6 million users.
ETCP, a China-based creator of a smart parking app, secured RMB1.55bn ($230m) in a series B round led by Ffan.com, an e-commerce subsidiary of conglomerate Dalian Wanda. Founded in 2012, ETCP has developed an app that uses big data and cloud computing technology to help users find, reserve and pay for parking spaces in advance. The company operates in 10 Chinese cities, where it has formed partnerships with about 5,000 car parks.
Yiguo.com, the China-based operator of an e-commerce platform for fresh food, raised $200m in a series C-plus round led by appliance retailer Suning Commerce Group. Alibaba and Yunfeng Capital, the private equity firm founded by Alibaba chairman Jack Ma, also took part in the round. Founded in 2005, Yiguo provides fresh food to customers in 310 Chinese cities and operates an extensive range of cold-chain logistics facilities.
E-commerce -platforms offering services from food delivery and fashion to purchasing tickets dominated the top consumer-focused enterprises attracting corporate venturers.
Weiying Technology, the China-based operator of cinema and event ticketing app WePiao, raised RMB4.5bn ($693m) in a series C-plus round led by gaming company Dalian Zeus Entertainment. The round included Tencent and mobile game publisher iDreamSky. Founded in 2014, WePiao is an app-based service that sells tickets for more than 4,500 Chinese cinemas and around 1,200 theatres, stadiums and exhibition venues.
UK-based online food-ordering platform Deliveroo raised $275m in a series E round featuring Nokia Growth Partners, the corporate venturing subsidiary of communications technology provider Nokia. Founded in 2012, Deliveroo operates an online platform through which users can order food from local restaurants and cafes to be delivered to homes or workplaces.
Ant Financial, Alibaba and internet company Sina Corp co-led a RMB13.7bn ($260m) series A round for online ticketing platform Taobao Movie. Alternative asset manager CDH Investments also co-led the round, which valued the unit at $2.1bn. Media companies Bona Film, Hehe Pictures, Huace Media and undisclosed other Chinese entertainment companies also took part in the round, according to a regulatory filing. Taobao Movie lets users book tickets for films at more than 5,000 Chinese cinemas.
US-based e-commerce app operator Letgo raised $175m from investors including media and e-commerce group Naspers. Founded at the start of 2015, Letgo runs a mobile marketplace that has been downloaded more than 45 million times, and which has roughly 20 million monthly active users. Users list items for sale by uploading a photograph.
China-based smartphone service provider Tink Labs has obtained $125m in a funding round from investors including FIH Mobile, a unit of contract manufacturing company Foxconn. Tink Labs indicated that the deal valued the company at more than $500m. Founded in 2012, Tink Labs provides hotel chains with mobile phones in the rooms.
China-based online fruit and vegetable retailer Benlai Life closed $117m in series C and C-plus funding from investors including kitchen appliance manufacturer Joyoung. Benlai Life, which is operated by holding company Kindler’s Information Technology, sells fresh produce to Chinese customers through a logistics chain that covers 22 major cities.
UK-based fashion e-commerce company Farfetch raised a $110m series F round co-led by IDG Capital Partners. The round valued Farfetch at about $1.5bn. Founded in 2008, Farfetch operates an e-commerce business that sells fashion products from some 400 designer boutiques across the world, together with brands from 37 countries.
Exits
Consumer-focused corporate venturers completed a record 26 exits over the past year, including 21 acquisitions, two mergers and three initial public offerings. These exits are a significant increase over the 18 recorded in 2015 and 17 reported in 2014. Half the exits (13) took place in the US.
Retailer Walmart sealed a $3.3bn acquisition of Jet.com, a US-based e-commerce company backed by Alibaba and Alphabet. The transaction was made up of $3bn in cash to be paid in instalments and $300m in stock. Jet launched its e-commerce platform in July 2015, two years after it was founded, and offers customers the chance to save money on a range of consumer products by using algorithms that calculate the final bill based on the amount of goods bought and a customer’s proximity to one of Jet’s warehouses. Walmart made the acquisition to compete against established e-commerce players such as Amazon.
MakeMyTrip agreed to buy fellow India-based online travel services platform Ibibo in an all-share $1.8bn deal, making Ibibo’s backers, Naspers and Tencent, shareholders. Naspers owned 91% of Ibibo and Tencent 9% through holding company MIH Group. The two companies received a 40% stake in MakeMyTrip through the deal, which valued Ibibo at $720m. Ibibo was incubated by Naspers and launched in 2007. Since then it has grown through a series of acquisitions, including bus-ticketing service RedBus, hotel and air travel aggregator Goibibo, bus-tracking app YourBus and car-sharing platform Ibibo Ryde.
Beverage producer Dr Pepper Snapple Group agreed to acquire US-based antioxidant-infused beverage maker and portfolio company Bai Brands for $1.7bn. Founded in 2007, Bai manufactures canned and bottled fruit-flavoured drinks under the Bai and Bai Bubbles brands, the latter of which includes caffeinated drinks, ready-to-drink teas and bottled waters.
Alibaba invested $1bn in Singapore-based e-commerce marketplace Lazada in a deal that gave partial exits to investors including Rocket Internet and retailer Tesco. Alibaba acquired a 67% stake in Lazada through the investment, securing $500m of new shares and $500m of shares held by existing investors. Founded in 2012 and incubated by Germany-based Rocket Internet, Lazada operates a diversified e-commerce platform that covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It receives some 5 million visits each day.
Consumer goods manufacturer Unilever agreed to buy US-based grooming product seller Dollar Shave Club in a deal reported by Fortune to be vaued at $1bn in cash, giving an exit to mass media group Comcast. Founded in 2012, Dollar Shave Club’s online platform sells men’s grooming products through a subscription model. It began with razors before expanding to include skincare products such as cleansers, wipes and creams, as well as haircare products.
China-based last-mile delivery services provider Dada Nexus secured a $200m investment from JD.com and is to merge with the latter’s logistics subsidiary JD Daojia. The merged company continues to operate under the Dada Nexus brand. Founded in 2014, Dada Nexus runs a crowdsourced delivery platform available in 37 Chinese cities, boasting 1.3 million delivery contractors.
Typeface services provider Monotype acquired US-based visual marketing software provider Olapic in a $130m deal, providing an exit to consumer goods manufacturer Unilever. Olapic’s Earned Content Platform enables companies to find, curate and utilise user-generated images and videos as part of their brands’ e-commerce marketing activities.
Processed food conglomerate Century Pacific Food exited the Philippines-based owner of the local Shakey’s pizza franchise when the latter listed on the stock exchange. The IPO provided an exit for both Century Pacific Food and Singapore’s sovereign wealth fund GIC. Founded in 1954 by entrepreneur Sherwood “Shakey” Johnson, Shakey’s began as a pizza parlour and live music venue in Sacramento, California. The US-based chain launched in the Philippines in 1975.
Flipkart agreed to acquire Jabong, the India-based branch of GFG, for $70m in cash. Jabong sells a range of fashion and apparel through an online platform. However, the company has not been profitable and had announced it was changing its business model from an inventory-based structure to an online marketplace for other vendors.
Impinj, a US-based radio-frequency identification technology provider, backed by several corporate investors, raised $67.2m when it priced its IPO at $14 a share. The flotation gave an exit to Unilever, Intel and logistics firm UPS. Founded in 2000, Impinj develops technology that uses tag integrated-circuits to identify, track and locate items such as clothing, medical supplies, auto parts, driving licences, food and luggage, and then sends the data to businesses that manage, sell or transport them.
Emerging enterprises operating in the consumer sector provided their corporate investors with exits vauled between $2m and $3.3bn. The transactions included 29 acquisitions, an IPO and a business closure.
Internet and electronics group LeEco agreed to acquire US-based flat screen television producer Vizio in a $2bn deal, giving exits to contract manufacturers AmTran Technology and Foxconn. Founded in 2002, Vizio develops low-cost consumer electronics products such as smart televisions and sound bars which are assembled in China.
Cinema operator Wanda Cinema Line, a unit of conglomerate Dalian Wanda, agreed to buy Mtime, a China-based website that provides news on the film industry and sells tickets. Wanda Cinema Line paid $280m in cash for Mtime.com and all its operational entities. Mtime will keep its brand and operational team and will form an international film marketing website, according to Bloomberg. Set up in 2006, Mtime runs a Chinese language entertainment portal. Dalian Wanda bought US film studio Legendary Entertainment for $3.5bn in January 2017, making Wang Jianlin, Dalian Wanda’s chairman, the first Chinese executive to control a major Hollywood film company.
Brainbees Solutions, the India-based operator of childcare products e-commerce platform FirstCry, agreed to acquire the franchise business of online baby products retailer BabyOye from Mahindra subsidiary Mahindra Retail for Rs3.6bn ($54m). Brainbee Solutions issued $52.5m worth of shares and paid the rest in cash. BabyOye was founded in 2010.
One Kings Lane, a US-based e-commerce company, was acquired by retail chain Bed Bath & Beyond for less than $30m. Founded in 2009, One Kings Lane sold furnishings through flash sales. The company had raised more than $225m from investors including media company Scripps Network, which participated in a $50m series D round in 2012.
Funds
Corporate venturers and corporate-backed VC firms that invest in the consumer sector secured an estimated $12.79bn via 53 funding initiatives tracked from March 2016 to February 2017. The dollar figure was more than 10 times the capital collected over the previous year – $1.21bn from more than 38 initiatives. Several notable corporate venturing units were launched over this period as well.
The Chinese government established a fund seeking to raise RMB100bn ($14.5bn), backed by several state-owned firms that will invest in the country’s internet sector, including e-commerce. The fund has so far raised $4.35bn in capital. Financial services firm Industrial and Commercial Bank of China is its largest limited partner, supplying $1.45bn. The fund’s other limited partners include telecoms companies China Mobile and China Unicom, insurance provider China Post Insurance and Citic Guoan Group, part of investment firm Citic Group.
Baidu launched $3bn investment vehicle Baidu Capital. The investment subsidiary is to focus on mid to late-stage startups in the broader internet sector, including e-commerce, and is expected to make individual commitments of between $50m and $100m.
IDG Capital Partners closed its latest fund at $1bn. IDG Capital Fund III was raised in partnership with US-based VC firm Breyer Capital and will target consumer products and technology, healthcare, energy, media and telecoms companies based in China or looking to enter the Chinese market.
Venture capital firm Sapphire Ventures raised $1bn in new capital, with the money coming from its sole limited partner, Germany-based enterprise software provider SAP. Founded as SAP Ventures by SAP in 1996, the firm spun out in 2011 and changed its name to Sapphire in late 2014. Sapphire targets enterprise and consumer technology developers, and invests in technology funds in Europe, the US and Israel. The $1bn will be split into a $300m early-stage fund and a $700m growth fund.
China-based local services platform Meituan-Dianping formed a RMB3bn ($435m) venture capital fund to invest in the consumer internet sector. The firm was formed in late 2015 by the merger of group buying specialist Meituan and local listings and reviews platform Dianping in a deal worth $15bn. In addition to providing capital, Meituan-Dianping is set to secure finance from Tencent and agribusiness New Hope Group. The firm is seeking commitments from other investors.
US-based meat processor Tyson Foods launched its $150m venturing unit Tyson New Ventures. The unit will invest in businesses involving alternative proteins, food security and the internet.
US-based cereal producer Kellogg launched corporate venturing fund Eighteen94 Capital (1894). The fund was established in response to the pace of change in the food industry, according to Kellogg vice-president of investor relations Simon Burton. Kellogg said it was committing “approximately $100m” to 1894 for investments in startups, and portfolio companies would be able to work with the firm as well as its organic cereals subsidiary Kashi.
Singapore-based venture capital firm Golden Gate Ventures closed its second early-stage fund at $60m following commitments from investors including insurance company Hanwha Life Insurance. The fund, which was oversubscribed by $10m, also received capital from media conglomerate Hubert Burda Media and financial services firm Siam Commercial Bank, the latter through its corporate venturing division, Digital Ventures. Golden Gate Ventures targets startups in e-commerce, entertainment, fashion, fintech and payments, services, gaming, media and travel. This fund will seek out early-stage opportunities in Southeast Asia’s consumer sector.
France-based luxury goods producer LVMH established corporate venturing arm LVMH Luxury Ventures to invest in early-stage luxury consumer startups. The firm provided the vehicle with €50m of capital. It will be led by Julie Bercovy, LVMH’s deputy head of mergers and acquisitions and will back high-end fashion, cosmetics and accessories startups with an annual turnover of between €2m and €5m.
People
Rob Chumley and Raja Doddala, co-founders of 7-Ventures, the corporate venturing arm of US-based convenience retail chain 7-Eleven, left the unit. 7-Eleven formed 7-Ventures in 2013 to access disruptive models in retail services and delivery being created by startups such as PostMates and DoorDash. In addition to supplying equity funding, the company also offered the opportunity to use its outlets as a testing ground for new products.
Baidu hired Liu Wei as chief executive of its new Baidu Capital investment unit. Baidu formed the unit last year and provided it with $3bn in capital. Liu was previously a partner at Legend Star, a venture capital subsidiary of conglomerate Legend Holdings. He joined Legend Star in 2011, and during his time at the unit its investments included speech recognition technology developer AI Speech and educational app developer Knowbox.
Baidu also appointed Wenjie “Jenny” Wu as managing partner of Baidu Capital. Wu was the first of three managing partners recruited for the fund. She was formerly chief financial officer and then chief strategy officer for Ctrip, the China-based online travel services platform.
In addition, Baidu hired Zhang Jinling from smartphone manufacturer Xiaomi as chief financial officer (CFO) of Baidu Capital. Zhang, who was a vice-president at Xiaomi, is taking a dual role at Baidu as CFO of both Baidu Capital and the corporate’s online food delivery subsidiary, Baidu Waimai, according to Chinese media reports. Zhang joined Xiaomi in 2013 to head its finance and investment activities.
Mary Kay James, a managing director at DuPont Ventures, the corporate venturing unit of the chemicals company, joined US-based meat processor Tyson Foods to run its new $150m fund, Tyson New Ventures.
