In 2019 GCV Analytics tracked 3,232 deals worth an estimated $134bn in capital raised. While the deal count was a notable increase on a year-on-year basis (13%) versus the 2,861 transactions reported in 2018, the total value of corporate-backed venture capital rounds decreased by 20% to $134bn, down from an estimated $168bn in the previous year.
Nearly half all tracked corporate-backed transactions took place in the US (1,312). Other notable countries were Japan (382). China (324), India (196) and the UK (182).
Corporations around the globe have reaped value from venturing activity, demonstrated by the growth in the number of active corporate venturers we have observed over the years. Since 2011, GCV has tracked over 3,200 distinct corporate investors, according to our broad definition: any corporate investor, with or without a specialised CVC unit that has participated in at least one minority stake investment round. We also saw the number of corporate venturers a year increase more than two and a half times, particularly in recent years – from 727 in 2014 up to 1,854 in 2019.
The leading five sectors were IT with 634 deals, health with 545, financial services with 472, business services with 464, consumer with 296 and media with 275. These figures do not necessarily coincide with the sectors that had most attention in the media or raised the most capital.
Looking at 2019 by quarter, the deal count rose from 817 deals in Q1 to 873 transactions in Q3 and then went down to 711 deals in the fourth quarter. The estimated capital in corporate-backed deals went down from $34.8bn in Q1 to $29.9bn in the second quarter and then plateaued during the third to go back up to $40bn in the last quarter.
The top corporate investors for 2019 included diversified internet conglomerate Alphabet with 99 deals, telecoms company SoftBank with 86 investments, financial services firm Goldman Sachs (64), internet company Tencent (63) and electronics manufacturer Samsung (48). The top three investors involved in the largest rounds were Softbank, Tencent and conglomerate Legend Holdings.
Deals
GCV Analytics tracked many large deals through 2019. All of the top deals stood well above the $1bn mark. These sizeable rounds were raised mostly by emerging businesses in transport and services. The most frequent corporate backer of these top rounds was SoftBank. However, its largest deal was actually a bailout, which skews the numbers.
SoftBank agreed to provide $9.5bn as a rescue package for US-based workspace provider and portfolio company We Company, whose valuation dropped sharply from $47bn to less than $10bn after a controversy around governance issues which came to light when it filed for an initial public offering (IPO). The rescue deal involved $3bn for a tender offer allowing all other investors to sell shares, a $1.5bn funding commitment that will be brought forward from April 2020 as well as $5bn in debt financing. SoftBank said it would come out with a stake sized at approximately 80%. Reports suggested the deal would revise the We Company’s valuation to between $7.5bn and $8bn.
China-based logistics services provider Cainiao Smart Logistics Network raised 23.3bn yuan ($3.33bn) from e-commerce group Alibaba. Alibaba increased its stake from 51% to 63% through the investment, which included new shares and a secondary transaction of undisclosed size, involving an unnamed shareholder. Cainiao was co-founded by Alibaba, which owned a 48% stake at launch, diversified conglomerate Fosun and retailer Intime Retail Group in 2013. The company runs a logistics platform that connects delivery drivers, goods and warehouses to facilitate e-commerce deliveries. Alibaba brought its stake to 51% by investing $798m in 2017.
Tencent invested $2bn to lead a $3bn series F round for China-based short-form video streaming platform Kuaishou. Private equity firms Boyu Capital and Yunfeng Capital, venture capital firm Sequoia Capital and Singaporean government-owned investment firm Temasek also participated in the round, which reportedly valued the company at approximately $28.6bn. Founded in 2011, Kuaishou has created an online platform where users can upload, watch and share short-form videos.
India-based short-term accommodation platform Oyo raised $1.5bn in a series F round backed by SoftBank. Ritesh Agarwal, Oyo’s founder and chief executive, reportedly invested $700m and venture capital firms Lightspeed Venture Partners and Sequoia Capital India also participating in the round, which valued Oyo at $10bn. Founded in 2013, the company operates a network of leased and franchised hotels where customers can book rooms that offer standardised amenities. It also has an offering called Townhouse, similar to its core service but aimed at millennials. Oyo initially concentrated on its domestic market but has expanded to more than 1.2 million rooms across 800 cities in 18 countries.
China-based automotive e-commerce platform Chehaoduo secured a $1.5bn investment from the SoftBank Vision Fund, the near-$100bn vehicle managed by SoftBank. The funding was employed to drive technology, product and services development. Chehaoduo also plans to increase its marketing activities and bolster its offline presence. The spinout of classified marketplace Ganji operates a used vehicle auction and trading platform known as Guazi and an after-sales services subsidiary, Maodou.
US-based electric truck developer Rivian completed a $1.3bn financing round that included carmaker Ford Motor Company and e-commerce group Amazon. Funds and accounts advised by asset management firm T Rowe Price led the round, which also featured funds managed by BlackRock. Founded in 2009, Rivian is developing an electric sports utility vehicle and pick-up truck, which are expected to come to market in late 2020. It will produce the vehicles at a custom plant in the state of Illinois. Amazon is collaborating with the company on the development of a plug-in electric delivery van that will use the latter’s technology, through a deal struck in September. It has placed an order for 100,000 vans.
US-based satellite services provider OneWeb secured $1.25bn in funding from investors including SoftBank, diversified conglomerate Grupo Salinas and mobile semiconductor producer Qualcomm. The corporates were joined by the government of Rwanda, and the round increased the total raised by the company to about $3.4bn since it was founded in 2012. OneWeb is building a network of low earth-orbit satellites to provide high-speed internet connectivity to rural areas and other underserved parts of the world. The satellites are built in partnership with another investor, aerospace manufacturer Airbus. This round followed a launch of OneWeb’s first six satellites, and the funding was meant to accelerate production and increase its launches to 30 a month.
Tencent invested $800m to lead a series D round for China-based real estate brokerage Ke.com sized at almost $1.2bn that included $50m from property developer Country Garden. Private equity fund manager Gaw Capital Partners supplied $100m for the round, while venture capital firm Gaochun Capital invested $80m, Source Code Capital $52m, New Horizon $30m, China Renaissance unit Huaxing Capital $20m and Strait Capital $5m. The round was filled out by undisclosed additional investors who put up a total of $113m, and it reportedly valued Ke.com at $9.5bn. Spun off by online real estate portal Lianjia in 2018, Ke.com runs an online platform where users can buy new, second-hand and rental properties in some 500 cities across China and utilises virtual reality technology to help users inspect properties. The cash supported an ongoing expansion in company’s research and development and marketing costs in addition to increased management investment as the company forges links to more urban property owners.
US-based autonomous driving software developer Cruise Automation secured $1.15bn in funding from investors including General Motors, the automotive manufacturer that spun off the company. Fellow carmaker Honda and the SoftBank Vision Fund also participated in the round, which also featured investment manager T Rowe Price Associates, and valued it at $19bn post-money. Cruise is working on software that will enable driverless cars to process data from their sensors and adapt accordingly, particularly in electric vehicles such as GM’s Chevrolet Bolt hatchback. GM acquired Cruise for $1bn in 2016, three years after it was founded, and spun it off in 2018.
Software provider Microsoft invested $1bn in US-based AI research technology provider OpenAI in a bid to enhance its own work on artificial general intelligence (AGI) technology. Founded in 2015 and overseen by a non-profit organisation, OpenAI is working on research that is intended to harness artificial intelligence in responsible ways. The company is most focused on AGI, which could hypothetically combine extremely high-level knowledge of many fields to devise solutions to complex problems. Microsoft intends to leverage the partnership to enhance its cloud computing platform, Azure, making it better equipped for use in supercomputing and large-scale AI systems, and allowing it to create and deploy more advanced AI models.
Exits
GCV Analytics tracked 274 exits involving corporate venturers and companies backed by them. This represents a 20% increase over the previous year’s level (229). The US hosted two-thirds (186) of these transactions, followed by Germany (11), China (10), India (9) and Israel (7). The total estimated capital involved in the exits was $56.11bn, a notable 37% decrease from the $88.3bn registered in 2018. Most of the top exits for 2019 were acquisitions in addition to a few high-profile and much expected initial public offerings (IPOs).
US-based on-demand ride service Uber, which counts with a range of corporate investors as backers including carmaker Daimler and Toyota, raised $8.1bn when it went public on the New York Stock Exchange. Media group Axel Springer, SoftBank and media company Bennett, Coleman & Co were among also among the corporate backers. This was a long-awaited IPO for a highly valued unicorn.. Uber issued 180 million shares, priced at $45.00 each, near the bottom of the $44 to $50 range it had set earlier. Even though Uber’s IPO was the largest since Alibaba floated in 2014, raising $25bn, it was considered by many a disappointment. It valued Uber at $82.4bn on the first day of trading but its share price then went down to $41, leaving it with a total market capitalisation of around $69bn. Founded in 2009, Uber runs an app-based on-demand ride service spanning 63 countries in addition to food delivery and last-mile delivery services. Its core ride hailing service boasts 91 million monthly active users and its UberEats with 15 million.
Online food delivery service Delivery Hero agreed to buy South Korea-based counterpart Woowa Brothers in a $4bn deal allowing internet companies Naver and CyberAgent to exit. Delivery Hero intends to expand its Korean activities through the acquisition in addition to accessing areas where Woowa Brothers is active, such as cloud kitchens and adjacent on-demand services. Woowa Brothers has built an app-based food ordering service that was responsible for 365 million orders in the year ending September 2019. It has more than 110,000 restaurant partners and made approximately $275m in revenue in 2018.
Uber agreed to acquire United Arab Emirates-based ride hailing service Careem for $3.1bn, providing exits for corporates including e-commerce firm Rakuten, telecoms firm Saudi Telecom, travel agency Al Tayyar, ride hailing service provider Didi Chuxing and Daimler. The transaction reportedly consisted of $1.4bn in cash and $1.7bn in convertible notes, which will be convertible to Uber stock at a price of $55 per share. Careem operates a ride hailing platform that covers more than 100 cities in the Middle East, Africa, Turkey and Pakistan in addition to a digital payment business, Careem Pay, and a last-mile delivery service called Careem Now.
Alphabet agreed to pay $2.6bn to acquire Looker, a US-based data analytics technology provider backed by CapitalG, the corporate venturing unit formerly known as Google Capital. Looker has built a platform that can take business intelligence data from a range of sources and use a proprietary data modelling code language to unify it, allowing it to be used in other applications, analysed together more thoroughly and more easily shared. The company’s technology was added to Google’s cloud computing services provider, Google Cloud, expanding the breadth of its business analytics capabilities and enabling users to quantify data from different sources using the same metrics.
US-based on-demand ride provider Lyft, which counts several corporates among its investors – including carmaker Jaguar Land Rover and automotive parts manufacturer Magna, Alphabet, Alibaba, Rakuten and diversified holding company Icahn Enterprises – raised $2.34bn in an IPO in which it floated at the top of its range. Lyft issued 32.5 million shares priced at $72.00 each. It initially had planned to issue almost 30.8 million shares priced between $62 and $68 each, before upgrading the range from to $70 to $72 earlier. The company was valued at $24.3bn in the offering. Founded in 2012, Lyft runs a ride-hailing platform that facilitated rides for some 30.7 million users in 2018, through a network of about 1.9 million drivers. It made a $911m net loss in 2018 from approximately $2.16bn in revenue. The offering came after some $4.4bn in equity financing for Lyft.
Semiconductor and data technology producer Intel acquired one of its portfolio companies, Israel-based deep learning technology provider Habana Labs, for $2bn. Navin Shenoy, general manager of Intel’s data platforms group, commented: “This acquisition advances our AI strategy, which is to provide customers with solutions to fit every performance need – from the intelligent edge to the data centre.” Founded in 2016, Habana develops AI processors that enhance the performance of models constructed to train AI systems. It launched its second processor, the scalable Gaudi system, in June 2019. The company will continue to operate independently, but as a division of Intel.
OLX Group, a classified listings subsidiary of e-commerce and media group Naspers, paid $1.16bn to increase its stake in Russia-based online classifieds and property listings platform Avito to 99.6%. Naspers provided $50m in funding for Avito in 2013 and invested $1.2bn two years later in order to hike its stake from 17.4% to 67.9%. In this transaction, its share grew from 70.4% and valued the company at $3.85bn. Avito maintains an online classified listings platform with 10.3 million daily visitors covering property, consumer goods, vehicles, services and jobs. OLX meanwhile runs 17 brands covering five continents, with a total of 350 million monthly active users.
Video-based social media platform YY completed the acquisition of one of its portfolio companies, Singapore-based social video livestreaming platform developer Bigo, for more than $1.45bn. The former paid approximately $343m in cash, with the remainder made up of shares. YY had owned 31.7% of Bigo ahead of the acquisition. Founded in 2015, the company’s flagship product is a livestreaming platform called Bigo Live. It also offers a short-form video-based social media service known as Like as well as a range of other apps such as gaming-focused streaming platform CubeTV. Bigo relies on AI to remove sexually suggestive content from its platform and has unveiled plans to partner governments to use the same technology for cyber surveillance.
Pinterest, the US-based social media platform backed by Rakuten, raised $1.43bn when it floated on the New York Stock Exchange. The company priced 75 million shares at $19.00 each, above the $15 to $17 range it had set earlier, giving it a reported market cap of $12.6bn. Founded in 2009, Pinterest runs an online platform with more than 250 million monthly active users where people can post and share images they like with each other. It initially concentrated on building user numbers but has ramped up advertising revenue in recent years. The offering came after Pinterest generated almost $756m in revenue in 2018 while more than halving its net loss to $63m. The company employed part of its IPO proceeds to repay $275m in debt financing.
Harry’s, a US-based razor retailer backed by beauty product distributor Grace Beauty, agreed to an acquisition by consumer products supplier Edgewell Personal Care for $1.37bn. Edgewell was to pay approximately 79% of the amount in cash and the remainder in common stock. Harry’s shareholders will own approximately 11% in Edgewell following the transaction. Founded in 2013, the company runs an online platform that sells men’s grooming products, including razors, shaving cream and post-shave balm as well as face wash and lotion, on top of accessories such as razor stands and wash bags. Customers sign up for a subscription service.