During the third quarter, GCV Analytics tracked 416 deals involving corporate venturing investors. The deals were worth an estimated total of $16.15bn and the majority of them took place in the US (225), China (43), India (22), Israel (15) and Japan (13).
The most interesting and attractive sectors for corporate venturers were IT, health, consumer, media – each with at least 50 deals last quarter. The majority of corporate investors came from the IT, media, financial services, industrial and telecoms sectors, as indicated on the deals heatmap.
The leading investors by number of deals were Slack, which announced its first 15 deals last quarter, Qualcomm, Alphabet and Bertelsmann. However, the corporate investors involved in the largest deals were Did Chuxing, Alphabet, Tencent, Lenovo and The Walt Disney Company.
The estimated total capital raised in deals, $16.15bn, was considerably lower than the previous quarter ($27.24bn) as well as last year’s record-setting third quarter at $30.1bn. Round size data from the second quarter this year was, however, skewed by the largest round raised historically – a whopping $7.3bn in June.
In the third quarter there were more deals (416) than the previous quarter (348) and fewer than the first quarter (438) of this year. When comparing the number of deals, the third quarter of 2016 was less busy than the same quarter last year – 416 versus 474 deals.
Deals
Most of the top rounds raised in the third quarter went to emerging enterprises from the transport, consumer and media sectors.
Le Supercar, a smart car developer spun out of China-based internet and technology developer LeEco, raised $1.08bn in funding from an array of backers, including laptop and smartphone maker Lenovo and conglomerate Macrolink Group. Launched in 2014, Le Supercar runs a team of more than 1,000 people working on an autonomous car, provisionally called LeSee.
Entertainment and media group Walt Disney agreed to pay $1bn for a 33% stake in BamTech, an online video spinout of sporting organisation Major League Baseball (MLB). BamTech’s technology powers online video streaming platforms and also provides data analytics and commerce management. It was spun out of MLB Advanced Media, MLB’s interactive media subsidiary.
China-based ride-hailing platform Didi Chuxing announced it was to invest $1bn in its US-based rival Uber, as part of a deal to acquire its Uber China subsidiary, according to the Wall Street Journal. Uber China shareholders are to receive a 20% share in the merged company as part of the $35bn transaction. Uber China will continue to operate under its own brand as a subsidiary of Didi Chuxing, and the transaction will bring an end to one of the fiercest battles in the sharing economy.
US-based accommodation marketplace Airbnb reportedly raised $850m in a round led by Google Capital, the growth equity unit of internet and technology group Alphabet. Google Capital co-led the round along with Technology Crossover Ventures. The round valued Airbnb at $30bn, up from the $25.5bn valuation at which it raised funding in 2015.
China-based logistics service provider Best Logistics raised $760m in a round backed by conglomerate Fosun and logistics firm Cainiao Network. The round also featured Citic Private Equity, Goldman Sachs, CDH Investments and state-owned China Development Bank. Founded in 2007, Best Logistics operates a range of services including delivery and warehousing through various subsidiaries and franchises.
Exits
The third quarter featured the largest number of exits since the beginning of 2015. GCV Analytics tracked 57 exits, the majority of which took place in the US, China and India. Major exiting corporates this quarter included technology and internet companies, such as Intel, IDG, Alphabet, Nokia, Samsung, Alibaba and Cisco Systems, with at least three exits each. Most of the exited enterprises were in the IT (16), services (10), transport (8) and health (7) sectors.
The estimated total value of exited capital in the third quarter was slightly lower than the previous quarter, which remains the highest since the beginning of 2015, at $12.54bn compared with last quarter’s $10.73bn.
Big box retailer Wal-Mart sealed the acquisition of Jet.com, a US-based e-commerce company backed by e-commerce group Alibaba and internet technology conglomerate Alphabet. Wal-Mart formally announced the transaction, comprising $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, offering customers the chance to save money on a wide range of consumer products. Its algorithms calculated the final bill based on the amount of goods bought and a customer’s proximity to one of its warehouses.
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 consumer electronics products such as smart televisions and sound bars which are then assembled in China to be sold at relatively low cost.
Consumer goods manufacturer Unilever agreed to buy US-based grooming product seller Dollar Shave Club, in a deal reported by Fortune to be $1bn in cash, giving an exit to mass media group Comcast. Founded in 2012, Dollar Shave Club operates an online platform selling men’s grooming products through a subscription model.
Industrial auctioneer Ritchie Bros Auctioneers agreed to acquire US-based online equipment marketplace IronPlanet for $758.5m, giving an exit to industrial machinery manufacturers Caterpillar and Volvo Construction Equipment. Founded in 1999, IronPlanet operates an online marketplace for industrial machinery and equipment with more than 1.5 million registered users across the world.
Pharmaceutical company Pfizer agreed to buy the remaining shares in US-based healthcare startup Bamboo Therapeutics, seven months after investing $43m for a 22% stake. Pfizer invested in Bamboo in the first quarter of this year. It has agreed to pay $150m and another $645m in potential milestone payments.
Molecular diagnostics equipment provider Myriad Genetics agreed to acquire US-based precision medicine developer Assurex Health, giving an exit to Mayo Clinic and Cincinnati Children’s Hospital Medical Center. Myriad is to pay $225m and could provide up to $185m in performance-based milestones. Assurex’s lead product, GeneSight Psychotropic, evaluates 12 genes that play a role in psychotropic drug response.
Funding initiatives
A number of fundraising initiatives, considerable in size, were also tracked during the third quarter. An estimated total of $6.59bn was raised in 93 funding initiatives, including 53 announced, open and closed VC funds.
IDG Capital Partners, the China-headquartered venture capital affiliate of IT media firm International Data Group, closed its latest fund at $1bn. The firm first began investing in China in 1993 and has since funded more than 100 companies, including internet companies Baidu and Tencent, cybersecurity software provider Qihoo 360, smartphone manufacturer Xiaomi and wealth management firm CreditEase. IDG Capital Fund III was raised in partnership with US-based VC firm Breyer Capital and will fund healthcare, energy, consumer products and technology, media and telecoms companies.
Venture capital firm Sapphire Ventures closed $1bn in new capital from its sole limited partner, Germany-headquartered 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 through a separate evergreen vehicle.
US-based venture capital firm DCM Ventures closed its eighth flagship fund at $500m, securing capital from a raft of corporate limited partners, including internet companies Baidu, Tencent and Naver, social media company Gree, telecoms group SoftBank and mobile semiconductor producer Qualcomm.
China-based venture capital firm Sinovation Ventures raised about RMB4.5bn ($675m) for two funds from limited partners including manufacturing services provider Foxconn, accordin to the Wall Street Journal. Foxconn is the anchor investor in a $300m dollar-denominated fund, which Sinovation closed alongside a $375m renminbi-denominated fund. Sinnovation, formerly Innovation Works, plans to target artificial intelligence, enterprise software and entertainment production companies with both funds.
In addition to funds, 12 corporate venturing units have been launched.
Internet company Baidu launched $200m unit Baidu Venture to invest in artificial intelligence, virtual and augmented reality. It will be headed by the firm’s chairman and chief executive, Robin Li. The $200m represents the amount Baidu is initially looking to raise for the fund. There are reports that Baidu Venture will be operated independently of other corporate venturing activities in a bid to speed up the investment process.
Eighteen94 Capital, the corporate venturing fund of cereal producer Kellogg, was established in response to the pace of change in the food industry. Kellogg has committed “approximately $100m” to Eighteen94, for investments in startups able to work with the firm as well as its organic cereals subsidiary Kashi.
Digital Ventures, the fintech investment subsidiary of Thailand-based financial services firm Siam Commercial Bank, unveiled its strategy to bolster the regional startup ecosystem across three major divisions. The initiative, Forwarding Fintech, formalises Digital Ventures’ mission to invest and innovate through a $50m commitment provided by the bank. It will establish a corporate venturing arm, an accelerator and a research and development division.
In addition to new corporate venturing units, there were also some newsworthy changes in already existing ones.
Both Bloomberg Beta and Santander InnoVentures had their funds doubled by their respective corporate backers, media group Bloomberg and Spain-based bank Santander – with $75m and $100m respectively.
Orix Ventures, the venture capital branch of financial services firm Orix USA, changed its name to Orix Growth Ventures to reflect its business more accurately. The unit operates as a growth finance provider, supplying debt and equity funding to high-growth, venture-backed companies.
Applied Ventures, the corporate venturing subsidiary of semiconductor technology provider Applied Materials, announced it was opening an office in Singapore to identify opportunities across the region. The new office will focus on sectors such as genomics, robotics, energy storage, the internet of things and 3D printing.
Prudential Retirement, a business unit of New York-listed financial services conglomerate Prudential Financial, closed its seed stage-focused corporate venturing group, Gibraltar Ventures. Most of the Gibraltar team, however, including managing director George Castineiras, are being “repositioned” inside Prudential as they help the company build a new innovation strategy around designing, acquiring and partnering startups rather than investing at seed stage.
