The effects of the Covid-19 pandemic and the global lockdown are still noticeable in June, though our data suggest investment activity is beginning to pick up, so the shock may be just beginning to slowly fade away.
According to GCV Analytics, the number of corporate-backed deals was 249, down 9% from the 273 rounds from the same month last year. Investment value increased by 15% at $9.56bn – up from the $8.34bn in June 2019. Compared with May, June registered fewer (249 vs 270).
The US came first in the number of corporate-backed deals, hosting 107 rounds, while Japan was second with 39 and China – third with 18.
The leading corporate investors by number of deals were internet conglomerate Alphabet, telecoms group SoftBank and financial conglomerate Mizuho. For involvement in the largest deals, SoftBank topped the list with Alphabet and insurer Sompo Holdings.
GCV Analytics reported 20 corporate-backed funding initiatives in June, including VC funds, new venturing units, incubators, accelerators and others. This figure suggested a 17% drop compared with June 2019 which had registered 24 initiatives. The estimated capital raised in those initiatives amounted to $3.6bn, considerably above the $2.66bn during the same month last year.
This may be an early sign of fundraising activity aimed to take advantage of opportunities created by the downturn and the haste to rescue companies affected by the pandemic. There are also near-future opportunities in the low-interest rate environment.
Deals
Emerging businesses from the IT, health, financial services and the media sectors raising the largest number of rounds. The most active corporate venturers came from the financial, IT, health and industrial sectors.
China-based online tutoring service Zuoyebang closed a $750m series E round that included telecoms group SoftBank’s Vision Fund, according to a company post on WeChat. Private equity fund FountainVest Partners and investment firm Tiger Global Management co-led the round, which also featured Qatar Investment Authority, Sequoia Capital China, Tiantu Capital and Xiang He Capital. Zuoyebang operates a platform where users can access online courses and homework assistance plus live tutoring through video. It claims 170 million monthly active users, 50 million daily active users and roughly 12 million paying subscribers. The company was formed by internet group Baidu in 2014 and spun off a year later. The valuation for the round was not confirmed.
US-based stem cell medicine developer Sana Biotechnology closed its first round, raising more than $700m from investors including GV, a corporate venturing subsidiary of internet technology group Alphabet. The round also featured F-Prime Capital, a fund owned by investment and financial services group Fidelity, Canada Pension Plan Investment Board, Alaska Permanent Fund and the Public Sector Pension Investment Board. Baillie Gifford, Arch Venture Partners, Flagship Pioneering, Bezos Expeditions, Omega Funds, Altitude Life Science Ventures and several undisclosed institutional investors filled out the round.
Sana is working on technology intended to repair and control genes in cells and replace missing or damaged cells to tackle the underlying causes of serious diseases, ranging from cancer and central nervous system conditions to heart disease and various genetic disorders. The funding will go to advancing the startup’s core platforms, including those focusing on gene delivery, immunology, stem cell biology and gene modification and control.
China-based ride hailing service Didi Chuxing spun off an autonomous driving technology developer with more than $500m from a funding round led by SoftBank’s Vision Fund II. Didi began testing autonomous driving software in 2016 and channelled it into a separate entity in 2019. The funding will be used to help the company expand R&D spending, conduct more tests on the technology and form additional partnerships within the automotive industry as it looks to bring the introduction of the technology within China nearer. The partnerships would focus on the mass production of driverless vehicles which would hypothetically reduce the costs of Didi’s business significantly while using its fleet management and passenger safety experience. Didi has received regulatory approval to test its technology in three Chinese cities in addition to California. The subsidiary has partnerships in place with Didi’s auto repair and maintenance subsidiary, Xiaoju Automobile Solutions, and financial services platform Didi Finance.
Insurance firm Sompo Holdings invested ¥54bn ($500m) in a US-based data analysis services provider Palantir which is reported to be lining up an initial public offering. The deal comes after Sompo and Palantir launched a Japanese joint venture in November 2019. The companies said in a statement that Palantir Japan has worked to combat Covid-19. Palantir did not disclose the valuation at which either corporate invested. Founded in 2004, Palantir has built big data analysis software that uses artificial intelligence to sift through massive amounts of structured and unstructured data to find informative patterns. Its customers include US law enforcement agencies as well as businesses such as Sompo.
US-based crop sustainability product supplier Indigo received about $300m in series F funding from investors including logistics services firm FedEx, at a $3.5bn post-money valuation. FedEx took part in the round’s $200m first close in January, contributing to the $175m equity portion along with Flagship Pioneering and Alaska Permanent Fund. The latter two joined Riverstone Holdings in the second tranche of the round, which reportedly has a $500m target. Formerly known as Symbiota, Indigo offers agronomic tools and services for farmers including aerial imagery, crop health data and microbial products that improve crop yields. It also maintains an online marketplace for grain trading. The marketplace was launched in September 2018 alongside the completion of a $250m series E round featuring Indigo’s founding investor, Flagship Pioneering, as well as Alaska Permanent Fund, Baillie Gifford and Investment Corporation of Dubai.
China-based semiconductor technology developer Eswin Computing Technology raised more than RMB2bn ($282m) in a series B round co-led by Legend Capital, the venture capital firm formed by conglomerate Legend Holdings. VC group IDG Capital co-led the round, which also featured Beijing Xindongneng Investment Fund, a vehicle backed by electronic components producer BOE Technology. Riverhead Capital, Lighthouse Capital, Triniti Capital, Broad Vision Funds and undisclosed additional investors filled out the round. Founded in 2016, Eswin is working on integrated chips for use in applications such as artificial intelligence-powered data processing, wireless connectivity, displays and video. It also offers packaging and testing services. The funding will go toward R&D activities, supporting intellectual property development, covering video streaming expenses, increasing headcount, enhancing the company’s product offering and strengthen its market position.
Biopharmaceutical firm Gilead Sciences agreed to pay $275m for a 49.9% stake in US-based immuno-oncology therapy developer Pionyr Immunotherapies as part of a wider agreement. The deal gives Gilead the option to fully acquire Pionyr for a further $315m. The latter’s shareholders could eventually earn a total of $1.47bn in option exercise fees and milestone payments. Gilead can exercise its option at any point up to the completion of phase 1b clinical trials for Pionyr’s two lead assets. Founded in 2015, Pionyr is working on cancer treatments that are intended to promote anti-tumour immunity in patients who do not benefit from checkpoint inhibitor therapies. Its lead candidates are aimed at solid tumours and have shown promise in preclinical studies. The company advances research by Max Krummel, a professor in the Department of Pathology at University of California, San Francisco and Sachdev Sidhu, a professor in the Department of Molecular Genetics and the Donnelly Center at University of Toronto.
US-based mobile bank Varo Money completed a $241m series D round that included automotive insurance provider Progressive. Investment firm Gallatin Point Capital co-led the round with private equity group TPG’s The Rise Fund, while private equity firm HarbourVest Partners also participated. JP Morgan was placement agent. Varo operates a digital bank that offers bank and savings accounts with no overdraft, transfer or foreign transaction fees, through a partnership with financial services firm Bancorp. The company has applied for a national bank charter and expects to become the first digital bank in the US to receive such a charter, at which point it will begin introducing credit cards and loans in addition to more savings products.
US-based digital health insurance provider Oscar completed a $225m round, featuring internet and technology group Alphabet that took its total funding to $1.53bn. VC firms General Catalyst, Khosla Ventures, Lakestar and Thrive Capital also took part in the round, as did investment management firms Baillie Gifford and Coatue Management. Oscar operates an online health insurance service with 420,000 members across 15 US states, offering plans tailored for individual, family and business. Users can also access telemedicine treatment free of charge and schedule medical appointments through the app.
Automotive manufacturer Volkswagen revealed invested up to $200m in US-based solid-state battery developer and existing portfolio company QuantumScape. QuantumScape is developing solid-state batteries that would use solid electrodes and a solid electrolyte, in theory offering greater energy density than the lithium-ion batteries generally used for electric, which use liquid or polymer gel electrolytes. The company was spun out of Stanford University in 2010 and began collaborating with Volkswagen two years later, before the carmaker invested $100m in QuantumScape in mid-2018. The 2018 investment was provided in connection with a partnership agreement that will involve the companies working together on the industrial-level manufacturing of solid-state batteries for Volkswagen vehicles, and they said this week they intend to establish a pilot facility soon.
Exits
GCV Analytics tracked 24 exits involving corporate venturers as either acquirers or exiting investors in June. The transactions included 13 initial public offerings (IPOs), nine acquisitions and two mergers.
The exit count figure was higher than in May, which recorded 20 exits. The total estimated exited capital also increased substantially to $7.18bn, up 130% from to $3.1bn in the previous month. In comparison, during the same month of 2019, the exits count was 28 and the estimated total capital stood at $6.02bn.
Genetic information provider Invitae agreed to acquire US-based genetic testing technology developer ArcherDX in a deal valued at about $1.4bn that will allow medical researcher Qiagen to exit. The transaction will consist of $325m in cash and 30 million shares of Invitae stock, which have risen some 40% since the announcement, in addition to 27 million more shares dependent on the completion of milestones. ArcherDX has created a range of precision oncology products informed by genetic sequencing technology and bioinformatics software to assist in cancer research. It had been preparing a regulatory submission for its debut in-vitro diagnostics product in late 2020. The company was launched in 2015 when Qiagen bought the Enzyme Solutions division of biological research technology provider Enzymatics. It had also filed for a $100m initial public offering earlier.
Payment services firm Mastercard agreed to buy US-based financial data provider Finicity in an $825m transaction that will enable credit scoring service Experian to exit. Finicity’s core business involves a digital budgeting platform that provides data to help users manage their finances more effectively, but it has added financial wellness tools and application programming interfaces (APIs) that enable businesses to build their own financial data apps. The technology powers Experian Boost, which allows customers to connect utility bill payments to their online bank accounts to enhance their credit scores. Mastercard will integrate it into its open banking offering. The company’s shareholders will have the chance to receive up to $160m in earn-outs.
Retirement services provider Empower Retirement agreed to acquire Personal Capital, a US-based digital wealth manager backed by financial services firms BBVA, USAA and Power Financial Corporation, for $825m.The deal consists of $825m upfront, and Empower plans to commit up to $175m more to drive business growth. Personal Capital has built a digital wealth management platform that aggregates a user’s financial accounts and offers financial planning tools and recommendations from investment advisers. It has more than 2.5 million customers and manages more than $12bn in assets. Empower facilitates employer-sponsored retirement plans and allows customers to manage individual retirement accounts. It will integrate the company’s capabilities into its own offering but Personal Capital will continue to offer its services to its users.
Legend Biotech, a cellular therapy developer spun off by China-based biotech producer Genscript Biotech, closed its IPO at about $487m. Its backers include pharmaceutical firms Johnson & Johnson and Eli Lilly. The IPO consisted of approximately 21.2 million American depositary shares, representing two common shares each, on the Nasdaq Global Select Market, priced at $23.00 each, above the $18 to $20 range it had set initially. Legend Biotech is working on cancer treatments and will put up to $185m of the IPO proceeds into clinical development of its lead drug candidate, LCAR-B38M/JNJ-4528, which it is developing in partnership with Janssen Biotech, a subsidiary of Johnson & Johnson.
Vroom, the US-based automotive e-commerce platform that counts car dealership owner AutoNation as an investor, also went public in a $468m IPO on the Nasdaq Global Select Market. The company increased the number of shares in the offering from 18.8 million to 21.25 million, and priced them at $22 each, above the $18 to $20 range it had set, itself an extension of the $15 to $17 range on which it had originally decided. The offering valued the business at more than $2.5bn. Vroom’s online platform allows users to buy reconditioned vehicles from sellers including dealers, car rental services and auctions. It increased revenue from $855m in 2018 to $1.91bn the following year, though its net loss also rose, from $85.2m to $143m over the same period.
Spot, an Israel-based workload software provider that agreed to an acquisition by cloud data services provider NetApp sized at $450m, giving an exit to semiconductor producer Intel. Founded in 2015 as Spotinst, Spot has built an infrastructure-as-a-service software platform that enables clients to continuously and automatically optimise cloud computing resources. NetApp expects the acquisition to drive cost savings of up to 90% on its clients’ cloud computing and storage expenses, by reducing the amount of idle and overprovisioned resources they maintain.
China-based video communication technology provider Agora, backed by quantitative trading firm Susquehanna International Group, floated on the Nasdaq Global Select Market in a $350m IPO. The offering consisted of 17.5 million American depositary shares (ADSs), each representing four ordinary shares, priced at $20each, above the $18 to $20 range the company had set. The IPO price valued Agora at $2bn. Existing backers Coatue Management, Neumann Capital and an affiliate of Vitruvian Partners had agreed to buy $50m, $30m and $30m of shares respectively through a private placement concurrent to the IPO. Agora produces software that allows developers to add video engagement functionality to their applications enabling users to communicate with each other online through video in real time.
Forma Therapeutics, a US-based cancer and haematologic disease therapy developer backed by pharmaceutical firms Novartis and Eli Lilly, completed a $319m IPO. The company expanded the size of its IPO from 11.8 million to 13.9 million shares, pricing them above the its initial range at $20 each. Joint book-running managers Jefferies, SVB Leerink and Credit Suisse have taken up the over-allotment option and purchased another 2.09 million shares in Forma. Founded in 2007, Forma intends to channel at least $115m of the IPO proceeds into a phase 1 clinical trial for lead drug candidate FT-4202 in sickle cell disease, and $15m into a phase1 trial for another candidate, FT-7051, in prostate cancer. The offering was preceded by about $144m from investors including Eli Lilly subsidiary Lilly Ventures, Novartis’s Option Fund and Venture Fund, and biopharmaceutical company Cubist Pharmaceuticals.
Avidity Biosciences, a US-based muscle disease drug developer backed by pharmaceutical firms Eli Lilly, EMS, ST Pharm and Takeda, floated on the Nasdaq Global Market in a $259m IPO. The offering came after a considerable hike in its size, Avidity having increased the number of shares from 10 million to 14.4 million before pricing them at $18.00 each, above the IPO’s $14 to $16 range. Founded in 2013, Avidity is developing therapeutics that use oligonucleotides – short strands of DNA or RNA molecules – while incorporating the tissue selectivity of monoclonal antibodies. Although the company is targeting a range of diseases, its initial drug candidates are focused on muscle atrophy. It will put $65m of the IPO proceeds into a phase 1/2 clinical trial for its lead candidate, a myotonic dystrophy treatment dubbed AOC 1001.
Genetron Health, a China-based precision cancer treatment developer backed by gene engineering services provider Vcanbio Cell & Gene Engineering, has raised $256m in an IPO on the Nasdaq Global Market. The offering consisted of 16 million ADSs – each representing five ordinary shares – priced at $16.00 each. The company had originally planned to issue 13 million ADSs priced at $11.50 to $13.50. The IPO price included 1.31 million ADSs bought by Genetron’s shareholders, including 1.25 million by Vivo Capital Fund. Genetron is developing precision oncology therapies and diagnostics products using molecular profiling. It will put 40% of the IPO proceeds into product and technology development and 30% toward sales and marketing while 30% will be used as working capital.
Note: Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.