Over the second quarter of this year, GCV Analytics has tracked 336 deals involving corporate VC investors. The deals were worth an estimated total of $23.54bn and the majority of them took place in the US, China and Western Europe.
The most interesting and attractive sectors for corporate VC investors were IT, health, consumer, media and financial – each with at least 30 deals registered this quarter. The majority of corporate investors, in turn, came from the IT, financial services, media and health sectors.
The top three investors by number of deals were Alphabet, International Data Group (IDG) and Tencent. However, when looking at those involved in the largest deals, the list is topped only by Chinese companies – China Life, Tencent and Alibaba.
The estimated total amount raised in those transactions – $23.54bn – was considerably higher than the previous quarter ($18.34bn) as well as last year’s second quarter ($14.67bn). The reverse is true when it comes to the number of deals. We tracked notably fewer deals in the second quarter – 336 versus 421 in Q1, and 439 in Q2 of the previous year. This suggests there tended to be fewer but larger funding rounds.
This is generally due to the large deals taking place in China. In June, for example, we witnessed the largest round in history – a whopping $7.3bn.
In June, China-based ride-hailing service Didi Chuxing closed the largest financing round ever raised by a private, VC-backed company, as reported by the Wall Street Journal. It totalled $7.3bn – a combination of debt and equity, where $4.5bn in equity came from Apple, China Life Insurance, Tencent, SoftBank, Alibaba and Ant Financial, with another $2.8bn in debt.
Ant Financial, the financial services affiliate of China-based e-commerce group Alibaba, closed $4.5bn. Valuing Ant Financial at roughly $60bn, the series B round featured postal service China Post Group and insurance companies such as China Life, among other investors.
Also in this quarter, Alibaba announced it was to invest $1.25bn in China-based online food delivery service Ele.me after becoming its largest shareholder. Alibaba is to acquire a 27.7% stake through the investment, valuing the platform at more than $4.5bn.
In addition to record-setting deals in the Far East, during the second quarter, there were many exits. GCV Analytics tracked 47, the majority takng place in the US and Europe. Both the total number of exits and their total estimated amounts in Q2 compare favourably to previous quarters going back to the beginning of 2015.
Financial services group Fidelity is now to exit US-based lung cancer treatment developer Stemcentrx, in an acquisition deal by biopharmaceutical company AbbVie. The deal could be sized at up to $9.8bn. Founded in 2011, Stemcentrx emerged from stealth in September 2015 with a pipeline of oncology drugs being developed to kill cancer stem cells. Its lead drug candidate, Rova-T, is in registration trials for small cell lung cancer.
Alibaba invested $1bn in Singapore-based e-commerce marketplace Lazada in a deal that gave partial exits to a host of investors, including e-commerce holding company Rocket Internet, retailer Tesco and investment firm Kinnevik. Alibaba thus acquired a 67% stake in Lazada, 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.
Also during the quarter, Salesforce Ventures, the venturing unit of cloud-based service Salesforce, moved to exit US-based cloud security provider CloudLock, after networking equipment manufacturer Cisco agreed to acquire it for $293m.
A number of sizeable fundraising initiatives were also tracked during Q2. An estimated total of $18.41bn was raised in 90 funding initiatives, including recently closed VC funds, new corporate venturing units, accelerators, incubators and other initiatives. One special fund accounts for more than half of that total – $10bn, and there were two others above the $1bn mark.
Smartphone maker HTC launched a virtual reality funding initiative dubbed Virtual Reality Venture Capital Alliance (VRVCA) in partnership with 27 other VR investors. VRVCA is to invest in VR technology and content startups, as well as working on augmented and mixed reality. The move comes as HTC is in the process of spinning out its Vive VR headset into a subsidiary named HTC Vive Tech Corporation, the Verge reported. The VRVCA partners have $10bn of deployable capital, according to its website.
Hony Capital, the private equity firm launched by China-based conglomerate Legend Holdings, closed a $2.7bn dollar-renminbi fund, according to Bloomberg. About 70% is in dollars and the rest in renminbi. Founded and sponsored by Legend in 2003, Hony focuses on Chinese investments and has already managed five dollar-denominated private equity funds, two renminbi funds and two renminbi mezzanine funds, working out to RMB48bn ($7.4bn) under management.
Germany-headquartered industrial product manufacturer Siemens announced it would invest €1bn ($1.1bn) in disruptive technology companies through a unit that will be launched at the start of October. The unit, dubbed Next47 as a reference to 1847, the year Siemens was founded, will invest in innovative technology in sectors relevant to Siemens, such as decentralised electrification, artificial intelligence, autonomous machines, networked mobility and blockchain-equipped data transfer technology.
In addition to funds, 19 new venturing units have been created, most notably by large corporates such as Microsoft, Naspers and Illumina, while Germany-based Merck has renamed its MS Ventures unit Merck Ventures and doubled its commitment.
Finally, co-investment trends over the past year and the past quarter appear to have been consistent over time. Alphabet co-invests with traditional VC firms Sequoia Capital, New Enterprise Associates and Kleiner Perkins Caufield & Byers. Similarly, China-based internet company Tencent often co-invests with Sequoia Capital.
