GCV Analytics defines the industrial sector as encompassing manufacturing equipment, artificial and advanced materials, industrial chemicals, agriculture and agtech, robotics and unmanned aerial vehicles, space and satellite tech, additive manufacturing (3D printing), among other things.
GCV reported 227 venturing rounds involving corporate investors from the industrial sector between February 2017 and January 2018. More than half of those (118) took place in the US, while 21 were hosted in China and 12 in India.
The majority of these commitments went to emerging enterprises from the same sector (59), with the remainder going to companies from the IT (45) and health (30) sectors, among others. Industrial corporates seem to have co-invested most frequently in industrial enterprises such as Precision Hawk, Agrivida and Sarcos Robotics in recent years.
Investments in IT emerging businesses by industrial corporates can be attributed to developments in fields with applications in the industrial sector. Horizontals such as artificial intelligence and the internet of things are currently disrupting industry and piushing it towards what is often called “industry 4.0”. This is largely understood to be the amalgamation of automation and big data use in manufacturing.
The interest in IT enterprises, therefore, is hardly surprising. The health and life sciences fields, on the other hand, pique corporate interest due to the potential application of advanced materials and robotics in the manufacture of pharmaceuticals and medical devices.
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds dropped 29% from $7.37bn in 2016 to $5.22bn in 2017. The deal count, however, increased by 12% from 184 in 2016 to 226 in 2017.
The 10 largest investments by corporate venturers from the industrial sector are mostly within non-industrial businesses such as consumer and transport. This indicates that industrial manufacturers, standing further down the traditional supply chain and production structure, find interesting opportunities in a variety of sectors that may be deemed to have strategic potential for them.
The leading corporate investors from the industrial sector were industrial conglomerate General Electric (GE), diversified conglomerate Fosun and industrial goods company Robert Bosch. GE also topped the list of industrial corporates committing capital in the largest rounds, along with conglomerates SK Group and Access Industries. The most active corporate venturers in the emerging industrial companies were diversified internet company Alphabet, mobile chip manufacturer Qualcomm and GE. Alphabet’s industrial portfolio consists mostly of enterprises in areas like additive manufacturing (Desktop Metal), agtech (Farmers’ Business Network, Bowery Farm) as well as robotics and drones (Veo Robotics, Airware).
Robotics and unmanned aerial vehicles, agtech and 3D printing are the three industrial subcategories that have driven most of the growth of the sector since 2014. Promising enterprises in these areas, like Precision Hawk, 3D Robotics, Carbon and Desktop Metal, have attracted a network of varied corporate backers from industrial manufacturers through insurers and automotive companies, media and research firms to food and beverage producers.
Corporate investment in emerging industrial-focused enterprises grew from 2016 to 2017 in terms of both volume and value. According to GCV Analytics data, $13.42bn was invested over 145 rounds in 2017, significantly up from the $1bn invested over 94 deals in 2016.
Deals
Industrial corporates invested in a number of large rounds, raised primarily by transport-focused businesses. While there were multimillion-dollar transactions, none of the top rounds was above $500m.
Megvii, a China-based facial recognition technology developer also known as Face-plus-plus, secured about $460m in a round featuring SK Group and contract electronics manufacturer Foxconn. Russia-China Investment Fund, a private equity fund backed by the governments of each of those countries, led the round, which also reportedly featured Ant Financial, the financial services affiliate of e-commerce group Alibaba. Megvii supplies facial scanning and recognition technology to electronics and internet companies including Ant Financial, and its systems draw on identification files the Chinese government holds on its citizens.
Access Technology Ventures, the corporate venturing vehicle of Access Industries, invested $100m in US-based smartphone producer Essential Products as part of a $300m funding round. E-commerce and cloud computing firm Amazon also participated in the round, through its Alexa Fund, as did internet group Tencent, among other investors. Essential Products develops a smartphone with a high-quality 360-degree camera, an edge-to-edge display and a magnetic connector that connects accessories wirelessly.
US-based electric scooter provider Gogoro closed a $300m series C round, which valued it at more than $800m. The round included diversified conglomerate Sumitomo, energy utility Engie and consumer electronics producer Panasonic. Founded in 2011, Gogoro has developed a smart electric scooter plus a battery-swapping network for its customers, both of which were launched in Taipei, Taiwan, in 2015.
US-based 3D manufacturing technology provider Carbon raised $200m from investors including GE, apparel manufacturer Adidas and chemicals producer JSR for its series D round. Adidas and GE invested through their respective corporate venturing units, Hydra Ventures and GE Ventures. Founded in 2013 and previously known as Carbon 3D, Carbon has developed a method of 3D printing called continuous liquid interface production, a photochemical process that uses oxygen and light to produce objects from resin.
China-based bicycle rental service Hellobike received RMB1bn ($153m) in series D2 funding from investors including Fosun Capital, a subsidiary of Fosun, and venture capital firm GGV Capital. The funding will be added to the $350m in series D funding the company raised from electric vehicle developer WM Motor, VC firm Chengwei Capital and Ant Financial earlier this month. Hellobike has built an app-based bike-sharing network. Rivals Mobike and Ofo each have far more daily users but operate mainly in large urban areas, while Hellobike targets the surrounding rural areas and smaller cities.
US-based electric vehicle charging network operator ChargePoint closed a series G round led by carmaker Daimler at $125m, after raising an additional $19m from investors including industrial product manufacturer Siemens. BMW i Ventures, the strategic investment arm of automotive manufacturer BMW, also took part in the round. ChargePoint runs a network of almost 38,000 chargers and has more than 7,000 corporate and individual customers. It also develops the hardware and software, and intends to use the series G money to expand its network.
US-based metal 3D printing technology producer Desktop Metal closed a $115m series D round that included a range of corporate investors, including GE Ventures, petroleum provider Saudi Aramco, retailer Lowe’s, home product manufacturer Techtronic Industries and Alphabet, which invested through its GV subsidiary. Desktop Metal has developed systems capable of printing 3D metal parts, one of which is small enough to fit in an office.
Canada-based Element AI secured $102m in the largest series A round for an artificial intelligence (AI) technology developer, featuring industrial conglomerate Hanwha, Tencent, software company Microsoft, semiconductor manufacturer Intel, and graphics technology provider Nvidia. Element AI is developing AI technology for use by businesses in sectors such as cybersecurity, finance, manufacturing, robotics, logistics and transportation.
Canada-based optical sensing technology developer LeddarTech secured $101m in funding from a consortium of investors led by lighting manufacturer Osram. Automotive components manufacturers Magneti Marelli and Delphi Automotive as well as semiconductor technology producer Integrated Device Technology also participated in the round. LeddarTech, spun out of National Optics Institute in 2007, is working on automotive-grade light detection and ranging (lidar) technology that uses more affordable and readily available components than similar products. Lidar technology uses a pulsed laser light and a sensor to measure reflected pulses to generate a 3D image of the environment.
US-based car-sharing service Turo raised $92m in a series D round co-led by Daimler and SK Holdings. The round also featured Liberty Mutual Strategic Ventures, the corporate venturing unit of insurance provider Liberty Mutual, among others. Founded in 2008 as RelayRides, Turo operates a peer-to-peer car-sharing marketplace.
Emerging industrial companies received financial backing from corporate investors from other sectors.
SoftBank Vision Fund, the $98bn investment fund formed by telecoms and internet group SoftBank, led an $865m series D round for US-based construction services platform Katerra. Foxconn also participated in the round. Katerra has created an end-to-end construction services business that includes architecture and interior design, engineering, the supply and construction of building materials and the construction itself. Katerra had earlier raised $130m at a valuation of more than $1bn in a series C round. Investors in that round were not disclosed.
China-based robotics technology producer UBtech Robotics closed a $400m series C round led by Tencent, reportedly valuing the company at approximately $4bn. Founded in 2012, UBtech produces family-friendly humanoid robots for a range of applications. Its products include educational kits that enable children to build and program their own robot, and a services robot that provides information in hotels and airports.
The SoftBank Vision Fund led a $200m series B round for US-based indoor farming company Plenty. The round was described by Plenty as the largest agricultural technology investment to date. Plenty is combining plant science with LEDs, microsensors and big data to grow fresh produce indoors in urban locations where it can be more easily shipped to nearby stores.
China-based online steel transaction platform Ouyeel collected $140m in funding from investors including industrial conglomerate Mitsui & Co. The round was also backed by steel companies Jiangsu Shagang, Benxi Steel and Shougang, through its unit Beijing Shougang Fund Investment Company, as well as logistics services provider Global Logistic Properties and financial services firm CCB Trust. Founded in 2015 by steel company Cihna Baowu Steel, Ouyeel operates a platform that offers several steel industry-related services, such as transactions, logistics and storage, industry news, processing, investment and funding, as well as financial products.
The SoftBank Vision Fund also led a $114m series C round for autonomous robotics technology developer Brain Corp. Qualcomm Ventures, the corporate venturing subsidiary of the chip company, also took part in the round. Brain is developing AI technology to allow robots to learn from their physical environments and move in a path that avoids people and obstacles. Corporate customers will need a subscription to use the platform.
US-based data-sharing platform Farmer’s Business Network (FBN) obtained $110m in series D funding from investors including GV. Founded in 2014, FBN operates a social network for famers that enables the anonymous input of information on topics such as pricing and seed performance. The platform aggregates the input to provide precision agronomic data on more than 115 million acres.
Moon exploration company iSpace secured $90.2m in a series A round it claims is the largest yet raised by a Japan-based startup. Media company Tokyo Broadcasting System, office equipment provider Konica Minolta, engineering firm Shimizu, marketing agency Dentsu, telecoms firm KDDI, aviation company Japan Airlines, printing services supplier Toppan and motor vehicle maker Suzuki were among the investors. Founded in 2010, iSpace is looking to launch two lunar missions by the end of 2020. The first will orbit the moon and relay data to earth while the second will land on the moon to test the transportation of payloads of up to 30kg in weight.
Exits
Corporate venturers from the industrial sector completed 16 exits between February 2017 and January 2018 – 14 acquisitions and two initial public offerings (IPOs). These figures were only a slight decrease from the 17 transactions recorded in 2016. The estimated exited capital also decreased to $1.56bn, down from $2.8bn in 2016.
Siemens, Intel and software provider Red Hat exited US-based software management technology provider Black Duck Software, which agreed to an acquisition by electronic design software producer Synopsys for approximately $565m. Black Duck provides technology that automates the process of securing and managing open-source software.
Electronics producer Apple acquired Shazam, a UK-based music identification app developer backed by a range of corporate investors. Although neither company disclosed how much Apple paid, a source reported the price to be about $400m. Shazam has developed an app capable of identifying background music through a mobile device’s microphone, though the company has expanded into commercial partnerships with television media campaigns.
Agricultural and construction equipment manufacturer John Deere agreed to buy Blue River Technology, a US-based agriculture technology developer previously backed by agrochemical company Monsanto. Founded in 2011, Blue River produces robotic systems that integrate computer vision and machine learning technology to detect and monitor individual plants in a crop and apply herbicides and fertilisers only when needed.
Enterprise security software provider Proofpoint agreed to acquire US-based cybersecurity technology developer Cloudmark for $110m, enabling communications technology provider Nokia and trading group Sumitomo to exit. Proofpoint will integrate Cloudmark’s threat telemetry and intelligence data into its Nexus platform, which powers its product portfolio. Founded in 2001, Cloudmark provides messaging security software to protect communications service provider networks and their subscribers against a range of threats.
Access Industries exited Israel-based cybersecurity software developer LightCyber through a $105m acquisition by cybersecurity technology provider Palo Alto Networks. LightCyber has built automated behavioural analytics software that uses machine learning to detect and identify cyberattacks by seeking out behavioural anomalies in a client’s network.
DeviantArt, a US-based online community for artists, backed by design software company Autodesk and video technology producer DivX, was acquired by cloud-based web development platform Wix, which paid approximately $36m in cash, including some $3m in assumed liabilities. Founded in 2000, DeviantArt operates a website that enables artists and designers to share their work. It currently lists more than 325 million pieces of original work uploaded by more than 40 million members.
Money Forward, a Japan-based financial management app developer backed by several domestic corporates, including Mitsui and financial services firms SBI Group, raised approximately $25m in its IPO. The offering took place on the Tokyo Stock Exchange’s Mothers Index Futures market and valued Money Forward at $505m. Money Forward has built app-based financial management platforms for personal and business accounting, and is the first Japan-based fintech developer to float.
US-based autonomous security system developer Knightscope closed $25m in funding, consisting of $20m in a regulation A-plus offering and $5m in related private placements from backers including Konica Minolta. Knightscope had secured more than $15.9m in the offering as of September 2017. The offering involved shares issued to backers who buy a minimum of $999 worth of stock, and was conducted on equity crowdfunding platform SeedInvest. Founded in 2013, Knightscope produces robots that act as mobile security guards.
US-based industrial internet-of-things software developer C-Labs was acquired by Trumpf International, the industrial conglomerate that was already an investor in the startup. Financial terms were not disclosed, but the deal was reportedly worth more than $10m. Founded in 2009, C-Labs has developed software that enables enterprise users to monitor their manufacturing plants. The technology makes it possible to access data collected remotely while guaranteeing security frameworks are adhered to. The company will continue to operate independently.
O-Flexx Technologies, a Germany-based thermoelectrics technology developer, was acquired by automotive parts manufacturer Mahle. The transaction provided an exit to Emerald Technology Ventures, a cleantech-focused VC firm that counts Mahle among its limited partners. Financial terms of the acquisition were not disclosed. Founded in 2006, O-Flexx produces thermoelectric elements that convert heat into electrical energy.
GCV also reported exits from emerging industrial-related enterprises that involved corporate investors from other sectors.
Netherlands-based renewable chemicals producer Avantium secured €103m ($109m) when it floated on the Euronext Amsterdam and Bruxelles exchanges, providing exits to a host of corporate backers: chemicals producer Eastman Chemical, pharmaceutical firm Pfizer, plastics manufacturer Alpha, beverage producer Coca-Cola, conglomerate Swire Pacific, food and beverage manufacturer Danone. Avantium develops techniques and processes to convert biological materials into new materials. Its products include PEF, a recyclable plastic made from plant-based industrial sugars that is used in packaging.
Legend Capital, a corporate venturing fund backed by conglomerate Legend Holdings, exited China-based graphite film producer Tanyuan Tech in a RMB409m ($59m) IPO. The company issued 52 million shares on the Shanghai Stock Exchange, priced at RMB7.87 each. Founded in 2010, Tanyuan produces graphite film with high potential for thermal conductivity and heat dissipation, meaning it can be used to release heat generated by smartphones.
Telecoms firm Verizon acquired US-based drone operating software provider Skyward for an undisclosed amount, giving an exit to its corporate venturing unit, Verizon Ventures. Skyward produces software that makes the management and operation of unmanned aerial vehicles more efficient and cost-effective. Companies can use the platform to integrate and connect their drone network in a single place. Verizon will use Skyward’s technology to provide an end-to-end drone operations service that incorporates planning, workflow, airspace data, registration and regulatory compliance support.
Chemical supplier Nippon Shokubai agreed to acquire US-based chemical producer Sirrus for an undisclosed sum, allowing carmaker General Motors and Mitsui to exit. Founded in 2009 as Bioformix, Sirrus makes monomers and derivatives that enhance performance and cut energy consumption in advanced manufacturing and assembly processes.
Construction machinery supplier Caterpillar acquired Yard Club, a US-based construction equipment management platform that is also one of its portfolio companies, for an undisclosed sum. Founded in 2013, Yard Club has developed an online-based operating system that enables contractors and machinery rental companies to manage their equipment. The company also allows customers to rent equipment directly through the platform, taking a percentage of the revenue in the process.
Funds
Between February 2017 and January 2018, corporate venturers and corporate-backed VC firms investing in the industrial sector secured over $3.67bn in capital via 31 funding initiatives, which included 13 corporate-backed VC funds, 11 new venturing units, three accelerators, one incubator and three others. On a calendar year-to-year basis, the number of funding initiatives fell from 42 in 2016 to 37 last year. Total capital, however, went up from $2.28bn to $14.05bn, almost seven times more, during the same period.
Apple announced the setup of a $1bn investment fund focused on advanced manufacturing. The company did not disclose details about structure, strategy or staffing. The initiative followed the corporate’s $1bn commitment to the SoftBank Vision Fund.
Foxconn paid $600m in return for a 54.5% stake in investment fund SoftBank Asia Capital, previously wholly-owned by SoftBank. The transaction turned SoftBank Asia Capital into a joint venture. Foxconn will take over management of the fund. Foxconn said it hoped to merge SoftBank’s investment expertise with its own global presence as well as advanced manufacturing and technology services knowhow.
US-based venture capital firm Fifth Wall Ventures launched officially with $212m from a syndicate of limited partners that includes several corporates. The firm will seek to invest in real estate technology developers. Fifth Wall’s anchor investors included real estate services provider CBRE, real estate and warehouse logistics company Prologis, house-builder Lennar, office space developer Hines, apartment owner Equity Residential and real estate investment trusts Macerich and Host Hotels & Resorts. Lowe’s, the home improvement retailer that owns corporate venturing unit Lowe’s Ventures, is also an limited partner, as is real estate holding company Rudin Management. Fifth Wall is concentrating on technologies that feed into what it calls the “built world”, the ecosystem of companies that own and operate space, as well as those developing technologies that can modify and innovate how that space is accessed and used.
Singapore-based integrated engineering and industrial product manufacturer ST Engineering launched corporate venturing subsidiary ST Engineering Ventures, armed with $150m in funding. ST produces a range of aerospace, defence, electronics and marine products. Its venturing 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.
Germany-based venture capital firm Project A closed a €140m ($148m) early-stage fund with contributions from several domestic corporates – retailer Otto Group, broadcaster ProSiebenSat.1, diversified holding company Franz Haniel & Cie, games and toy maker Ravensburger, food producer Dr Oetker and publishers Axel Springer and Gruner & Jahr are all limited partners. EU financing agency the European Investment Fund is cornerstone investor in the fund. The firm now has €260m under management, including a €40m fund that is about to close and will enable follow-on investments in Project A’s portfolio companies. It targets fintech, human resources, insurance technology, property technology and industry 4.0.
France-based farming-focused venture capital fund Capagro Innovation reached a €124m second close, following a €66m second tranche featuring a host of corporates. Insurer Groupama, agribusinesses Agromousquetaires and InVivo, agricultural software provider Isagri and liquids packaging producer LSDH committed capital alongside financial services firm Crédit Agricole and French state-owned investment bank BPIfrance. Capagro Innovation invests in growth-stage market-ready businesses in farming-related sectors such as agriculture, agro-economy, agri-food, nutrition and bioenergy. Following the second close, the fund plans to invest €10m in each portfolio company.
China-based venture capital firm Yi Capital closed a first fund at RMB800m ($116m) after securing home appliance manufacturer Joyoung as a limited partner. Joyoung was joined by national industrial guidance fund Zhongjin Qiyuan and Citic Industrial Fund of Funds, part of alternative investment management firm Citic, as well as additional publicly-listed companies and state-owned guidance funds. Founded in 2014, Yi focuses on online and IT technologies enabling traditional industrial companies to upgrade. In particular, the firm is looking to back industrial internet startups that will participate in the accommodation, transport and financial services industries as well as those providing other traditionally offline-based services.
US-based industrial product and software producer Honeywell unveiled strategic investment vehicle Honeywell Venture Capital, which is expected to provide about $100m to startups. Honeywell provides a range of products, from aerospace systems, chemicals and fuels to safety and monitoring equipment and home-building and control technology. It has made strategic acquisitions in the past but done very little in the way of corporate venturing. Honeywell Venture Capital will target companies that could grow more quickly through access to the firm’s resources, including its intellectual property and advanced manufacturing. Murray Grainger will lead the unit as managing director, having taken on a variety of roles since he joined Honeywell in 2004. He was most recently vice-president of business development, M&A and integration.
Toyota Research Institute, the US-based research arm of the Japan-headquartered car manufacturer, committed an initial $100m to corporate venturing unit Toyota AI Ventures. The fund will target early-stage companies developing artificial intelligence, robotics, autonomous mobility, data and cloud technology, and some portfolio companies will benefit from support and mentoring at its Silicon Valley headquarters. Toyota AI Ventures said it intended to also explore a call-and-response approach that involves supporting the creation of companies that can solve specific problems.
UK-based venture capital fund FirstMinute Capital raised $25m from limited partners including Tencent to reach an $85m second close. Tencent was joined by another China-headquartered corporate, property developer Nan Fung Group, and entrepreneurs Cheung Chung-Kiu, Frederic Mazzella and Wes Nichols. FirstMinute Capital aims to tap entrepreneurial expertise drawn from across Europe to support tech startups on the continent. It targets startups operating in sectors such as medical, governmental and financial technology and robotics, as well as those with a focus on data, artificial intelligence and software-as-a-service.
People
General Electric promoted Sue Siegel, CEO of its corporate venturing unit GE Ventures, to chief innovation officer. She will retain responsibility for GE Ventures, which encompasses equity investing, licensing and new business creation, but will now have overall responsibility for developing and accelerating GE’s long-term innovation strategy. Siegel will report to John Flannery, chairman and CEO. She previously reported to GE vice-chairman Beth Comstock, who runs GE Business Innovations, developing new businesses, markets and service models.
Dirk Nachtigal, managing director and founder of BASF Venture Capital, the Germany-based chemicals company’s corporate venturing unit, left to become a venture capital consultant. BASF had hired Markus Solibieda, formerly a partner at private equity firm Mandarin Capital Partners, as managing director at BASF Venture Capital to work alongside Nachtigal. Solibieda now heads the venturing unit. Nachtigal had built what became one of Germany’s most active corporate venturing units. He had been chief financial officer and managing director of the €175m unit since its formation in September 2001.
Girish Nadkarni, formerly president of Switzerland-based power and automation group ABB’s corporate venturing unit, ABB Technology Ventures, joined France-based oil and gas producer Total to lead its corporate venturing subsidiary. Nadarkani moved to Paris to become president of Total Energy Ventures. Francois Badoual, the unit’s former chief executive in France, moved to San Francisco as president of Total New Energies Ventures USA. After Nadkarni’s departure in October 2016, Grant Allen stepped up to head ABB Technology Ventures (see interview overleaf).
Alex Lin, formerly head of ecosystem development at the Singapore government’s innovation agency SGInnovate, joined integrated engineering group ST Engineering. Lin will head corporate venturing unit ST Engineering Ventures, which was set up with $150m in capital. The division is expected to invest in sectors relevant to the corporate’s long-term growth, such as autonomous driving, cybersecurity, data analytics and robotics.
Brian Walsh joined Konica Minolta as head of new ventures. Walsh will lead the company’s innovation strategy and venture development activities in North America. The role involved work on corporate venturing investments as well as partnerships, startup incubation and acquisition deals. His stay at Konica Minolta was short-lived, however. Later last year, he joined management consultancy McKinsey’s New Ventures Fast Growth Tech practice.
Maryanna Saenko left Airbus Ventures, the corporate venture capital arm of the aerospace company, to take a senior associate role at VC firm DFJ. Saenko joined Airbus Ventures as an investment partner in April 2016, having spent two years as a research analyst at research and advisory firm Lux Research. Airbus Ventures operates from offices in Silicon Valley and Paris.
Jessica Straus took an entrepreneur-in-residence position at GE Ventures. Straus was vice-president of development for US trade body the National Venture Capital Association for 18 months before moving to GE Ventures in 2014.
Andrei Zuzin joined Russia-based aluminium producer Rusal and is overseeing its open innovation activities as director of its venture investment division. Zuzin was previously managing director of VEB Innovation, a venture capital fund sponsored by Russian state-owned bank Vnesheconombank, investing in developers of technology at research hub Skolkovo Innovation Centre.
Cyril Vančura, investment principal at Robert Bosch Venture Capital (RBVC), the corporate venturing unit of the Germany-based industrial goods company, left to join Imec, a Belgium-based micro and nano-electronic research centre. Vančura has been investing for RBVC since the start of 2009, particularly in enabling technologies. Initially managed by Tom Vanhoutte and Peter Vanbekbergen, Imec.xpand will back both Imec spinouts and external startups.
