Services play a dominant role in most emerging and mature economies today, having overtaken manufacturing and agriculture in importance.
According to consulting firm Research and Market, the global professional services market reached a size of approximately $5.7 trillion in 2018 and had grown at a compound annual growth rate (CAGR) of 7.4% since 2014. It is expected to grow at a CAGR of 9.1% to more than $8 trillion by 2022. The consulting firm’s “Professional services global market opportunities and strategies to 2022” report also notes that growth has been caused by globalisation, technological developments, a drive to outsource backend operations and M&A.
Our broad definition of “services” covers a wide range of industries and sub-sectors – from accommodation and travel through education, and consulting to logistics. It is important to consider developments in each strand to comprehend the trends observed.
According to a report entitled “Travel and tourism. Economic impact 2019” by the World Travel and Tourism Council, that sub-sector accounted for 10.4% of global GDP, providing more 319 million jobs. The direct contribution of tourism and travel to global GDP stood at $2.85 trillion (3.2%) in 2018. The same publication forecast its rise to $4.06 trillion (3.6%) by 2029. This sub-sector is cyclical in nature and its growth has been fuelled by rising purchasing power and disposable income on global level, though such factors vary across geographies.
In terms of innovation in travel tech and accommodation, there seems to have been a slowdown. According to research on the travel tech landscape by Phocuswright, artificial intelligence (AI) technology is the enabler of a broader push toward personalisation and one-to-one marketing in the industry: “Every travel segment, from airlines and hospitality to corporate travel, has touted AI as the path to driving a more personalised travel experience. But the real activity is often happening behind the scenes, where AI reduces redundancy and inefficiencies without the traveller’s awareness. But the hype continues. Probably chief among the hype is the idea of personalisation. The concept of one-to-one marketing has been around for decades, and many believe AI is the enabler of this more personalised future.”
However, the report notes the industry is still facing challenges in reaching this goal: ”There is no doubt that collecting implicit preferences via AI analysis brings us closer to the one-to-one world. But due to the infrequency of leisure travel and the various personas of business travel, this is not an easy task, regardless of advances in machine learning.”
Real estate
Another branch of services very sensitive to cyclical fluctuations is real estate. The 2019 Summer Global Real Estate Outlook by investment bank Morgan Stanley notes that there may be market turbulence ahead but “real estate fundamentals currently remain healthy across all sectors”.
The report also points out as that this is probably an advanced stage of the economic cycle: “Economic growth will moderate globally and diverge across major markets, while interest rate policies are expected to converge and financial conditions will likely tighten. The combination of lower macroeconomic growth and higher interest rates will likely lead to lower commercial real estate returns broadly as a result of moderating real estate fundamentals and flat to marginally higher cap rates.”
If real estate fundamentals deteriorate, this is likely to intensify the interest in the emerging proptech space. Consulting and auditing firm Deloitte’s “A constructive view on real estate” identifies some of the broader technology catalysts in both construction and property tech: data-driven business models, as the data stream generated from buildings is growing exponentially; the rise of digital twins (digital versions of real estate assets; cybersecurity issues arising from smart building management; applications of blockchain technology to real estate problem; and regulatory pushes for the reduction of raw materials due to environmental concerns.
The report, however, laments that some incumbents still see emerging proptech startups in the wrong way: “Commercial real estate (CRE) companies have not yet figured out how to deal with the relatively recent emergence of real estate technology startup… While most of the broader financial services field have made the shift to partnership mentality, CREs continue to view proptechs as disruptor rather than as a potential source of collaboration.”
Logistics
The advent of e-commerce and mobile technologies have provided opportunities for logistics providers, who have found themselves forced to adapt and shift business models. One of the potential drawbacks is that growth has been driven precisely by the boom of e-commerce and it may experience a slowdown if the customer base experiences a drop in disposable income. In a sub-sector like this, digital transformation and efficiencies are crucial. As the 2018 Global Logistics Report by Eye for Transport notes: “Technology continues to hold supply chains in its grasp. AI, machine learning, robotics and control towers are no longer just buzzwords, but implemented for enhanced, real-time visibility, predictive analytics, customer satisfaction and more.”
The report also explains how the industry understands the need to innovate to compete: “As supply chains innovate, different types of technologies are embraced in order for organisations to compete successfully in an ever-changing environment. The type of technology adopted will not only provide visibility, but also the adaptability necessary in today’s environment. Chief supply chain officers lead this charge and are taking their seats at the C-Level to collaborate across silos and with external partners in order to build today’s supply chain.” All this creates fertile ground for solutions developed by agile and innovative startups, so we can expect to see more of them in the corporate-backed dealflow.
Education
Education services are also expected to grow and open up opportunities for edtech developers and service providers. The sub-sector’s growth is underpinned by two major forces – demographics and a growing need for reskilling and professional development in a rapidly changing digitised world. A report by Startup Genome on edtech forecasts there will be 1 billion more students around the globe by 2050.
Global education expenditure, according to data from UNESCO, stood at $4.7 trillion worldwide and will continue to grow in the coming decades. In recent times we have seen the democratisation of education and the rise of massive open online courses on mobile devices. Serving as such a catalyst, technology will have to take up on the challenge of the increasing demand for education in the coming years.
Mature economies are ready to embrace edtech as well. According to the US State of Technology survey, teachers in the country are ready to use edtech in the classroom, with more than 70% indicating they know more about technology than their students. Despite understanding edtech’s benefits, there are some challenges, according to the survey, including legacy infrastructures, organisational inertia and competing priorities that continue to be barriers to adoption.
Consulting services
The global market for consulting services, estimated at $250bn, is among the most mature sub-sectors of services and it has seen growth since the end of the Great Recession, according to an analysis from Consultancy.uk. However, it is also a cyclical market closely linked to macroeconomic conditions. it flourishes in booms and suffers with deteriorating market corrections. As far as innovation is concerned, advanced technologies like cloud computing, robotics, blockchain and big data are key to improving business performance and streamlining operational processes.
The “Global Business Operations Consulting Services Market” report by consultancy SpendEdge contends that “this drive towards technology adoption will boost the growth scopes of business operations consulting service providers whose function is to aid organisations in their technology drive by embedding agile capabilities into the organisation’s processes”. The report also points out that North America will lead in the consulting services market with its positions “cemented by the rapid adoption of technology by the healthcare, retail, non-durable manufacturing, construction, and IT sectors in the US”. The situation is similar In the APAC countries, where “the need to be at par with the dynamic consumer behaviour will compel the retail sector to procure from business operations consulting service providers”. We expect all these trends driving investments in consulting services to continue to be reflected in investment flows.
Legal services
The sub-sector of legal services is also very open to technological disruption that may streamline work. As the “Legaltech startup report 2019” by Thomson Reuters states, “the appetite for innovation of new technology solutions has not yet become the default way to work”. It explains that this “may be, in part, because of the many stakeholders within and outside an organisation that are needed to bring about a truly transformational change in the way a legal process operates”. That does not mean that opportunities or demand do not exist. The report also notes: “Despite pessimistic market indicators, legal services revenue demonstrates consistent growth. As percentage-of-revenue spend on technology and innovation continues to hold firm, absolute spend on legaltech is also likely to increase. Significant external investment into legaltech continues, with some major deals occurring in 2018 and 2019.”
Human resources
Another business services subsector with many opportunities is human resources (HR). According to a report by Grand View Research, the world’s HR industry is expected to reach $30bn by 2025. The industry is facing multiple and intertwined developments in a dynamic landscape. The more generationally diverse workforce of today is now blended (bringing together freelancers and full-time employees), in need of constant skill updates driven by digitisation, and values more flexibility. In this context, technologies like AI, machine learning and automation, augmented and virtual reality, big data and cloud computing are expected to positively impact growth of the human resource management market. This, in turn, is positive for innovative startups.
Year in review
For 2019, we reported 362 venturing rounds involving corporate investors from the services sector. Many of them (119) took place in the US, while 87 were hosted in Japan, 34 in China and 25 in India.
Many of those commitments (142) went to emerging enterprises from the same sector (mostly traveltech, edtech, HR tech and logistics) as well as into companies developing other technologies in synergies with services: 57 deals in the IT (mostly AI and enterprise software), 34 in health (mostly healthcare IT and administration), 33 in consumer (primarily e-commerce platforms as well as food and beverage) and 31 in fintech (mostly payment tech) and 31 in media (mostly digital marketing).
The sector’s incumbents have a broad spectrum of investment interests. The commitments ranged from logistics and last-mile delivery services (Accommerce, Bringg, Flexport, Loggi) through education and learning tech (Edcast and Unbabel) to travel tech (GetYourGuide) and recruiting apps (Andela).
On a calendar year-on-year basis, capital raised in corporate-backed rounds more than doubled from $8.94bn in 2018 to $19.08bn in 2019, an 113% increase. The deal count also increased by 36% to 362, up from the 267 rounds reported in 2018. The 10 largest investments by corporate venturers from the services sector were concentrated mostly in the same sector.
The leading corporate investors from the services sector in number were classified listings operator InfoEdge, postal carrier Japan Post and travel booking platform Booking.com. The list of services corporates committing capital in the largest rounds was headed by hospitality chain Shanghai Jin Jiang, courier service SF Express and Fifth Wall Ventures, a venture firm backed by more than 50 corporates.
The most active corporate venture investors in emerging services businesses were telecoms firm SoftBank, internet conglomerate Alphabet and cloud computing services provider Salesforce.
The emerging services businesses in the portfolios of corporate venturers came from HR tech (Beekeeper, Timee) and office management services (Eden Technology) through travel tech and accommodation services (Lyric and Metro Engines) and real estate tech (OpenDoor) to logistics services (CBCloud) and edtech (Unifa).
Overall, corporate investments in emerging services-focused enterprises went up slightly from 374 rounds in 2018 to 465 by the end of 2019, suggesting a 24% increase. The estimated total dollars in those rounds also soared, by 47%, from $23.55bn in 2018 to $34.62bn in 2019. However, the dollar figure includes the bailout of WeWork by SoftBank.
Deals
Corporates from the services sector invested in large multimillion-dollar rounds, raised by enterprises from primarily from the same sector. Only of the top 10 deals stood above the $1bn mark. The list also includes the $9.5bn bailout of WeWork.
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 with the company’s failed filing for an initial public offering. 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 will come out with a stake of 80%.
SoftBank’s Vision Fund also led a $1bn round for US-based online shipping platform Flexport that valued it at $3.2bn. Logistics service provider SF Express also participated in the round with investment firm DST Global and VC firms Founders Fund, Cherubic Ventures and Susa Ventures. Flexport’s business focuses on what it calls an operating system for global trade, a cloud-based platform where clients can book shipping through air, sea, land or rail, and which incorporates real-time tracking and analytics. The funding will be used to increase headcount, with a particular focus on engineers and experts in local markets.
US-based workspace provider Knotel closed a $400m financing round featuring real estate developer Mori Trust, media group Bloomberg, e-commerce holding company Rocket Internet and diversified trading group Itochu. Sovereign wealth fund Kuwait Investment Authority led the round through subsidiary Wafra and was joined by real estate advisory Newmark Knight Frank, private equity firm Mercuria and VC firm Norwest Venture Partners, while Bloomberg invested through its Bloomberg Beta unit. The round valued the company at more than $1bn and the proceeds will support an expansion into new markets and the strengthening of its presence in the world’s 30 largest cities. Knotel operates a network of more than 200 flexible workspaces, employing a team of architects, interior designers and office experts to tailor spaces for the needs of each of its corporate customers.
Lalamove, a China-based on-demand logistics service backed by design, engineering and manufacturing services provider Aria Group, closed a $300m series D round. The round had two tranches, with investment management firm Hillhouse Capital leading the D1 and venture capital firm Sequoia Capital leading the D2 close. Founded in 2013, Lalamove operates an on-demand logistics and delivery service aimed at enterprise clients. It oversees a fleet of more than 3 million car, motorbike and van drivers who cover more than 130 cities across China. The company has also expanded into 11 cities across Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.
US-based OpenDoor completed a $300m round featuring property developer Lennar and the SoftBank Vision fund, conglomerate Access Industries’ Access Technology Ventures and Alphabet unit GV, valuing it reportedly at $3.8bn. They joined General Atlantic, Hawk Equity, Fifth Wall Ventures, Norwest Venture Partners New Enterprise Associates, SV Angel, GGV Capital, Khosla Ventures and unnamed others. OpenDoor has built an online platform that enables homeowners to sell their property relatively quickly and easily, offering a price based on information provided by the seller. The company then carries out any repairs after a price is agreed, paying the money and selling the home through its app. It also offers prospective buyers help with scheduling viewings and making offers.
China-based short-term accommodation provider ChengHome Apartment closed a $300m series A round that included Huazhu Hotels Group, the hotel operator that co-founded the company. Private equity firm Boyu Capital led the round, which also featured serviced accommodation provider The Ascott, private equity firm YF Capital and CCB International, an investment subsidiary of financial services firm China Construction Bank. ChengHome was co-founded in 2015 by Huazhu, formerly known as China Lodging Group, and venture capital firm IDG Capital. The company operates brands that offer different types of short-term accommodation from a single room for a single day to longer term stays in apartments. ChengHome’s strategy involves sticking to a small number of major cities, such as Beijing and Shenzhen, and it works with a network of about 20,000 listings across 100 properties, with listings arranged through a smart management system.
Ouyeel, an online steel trading platform created by iron and steel producer China Baowu Steel, secured 2.02bn yuan ($294m) in funding from investors including its parent company. Logistics service Sinotrans, steel provider Benxi Group and industrial and mining group Beijing Jianlong Heavy Industry were joined by Citic Securities, China Merchants Group, government-owned China Structural Reform Fund, and Baoshan Iron and Steel, a subsidiary of Baowu Steel. Founded in 2016, Ouyeel operates a cross-border platform covering 27 countries and regions that allows users to trade steel and related products. The company also offers supply chain credit and credit insurance through partners, and services such as shipping, warehousing and processing. Customers can ensure their trades and orders are documented and accessible.
China-based supply chain services provider Shanghai Yimi Dida raised 1.8bn yuan ($266m) in series D funding from investors including property developer Prologis. Private equity firms Boyu Capital and Hopu Investments co-led the round, which included venture capital firm Source Code Capital. The company announced the deal on QQ that stated logistics service provider Global Logistics Properties, CDH Investments, Cathay Capital, K2VC, Pioneer Investment, CapHill Investments, China Development Bank and Sino-Ocean were among its investors without confirming their participation in this round. Yimi Dida was founded in 2015 by the merger of 14 regional logistics companies. It provides last-mile delivery services organised through a cloud-based software platform and delivers to a wide range of areas including rural centres.
China-based online education services provider Dada raised $255m in a series D featuring education company TAL Education. Private equity firm Warburg Pincus led the round and venture capital fund Yonghua Capital participated. Founded in 2013, Dada operates an online tutoring platform that teaches English to children aged four to 16 using native speakers. The company has partnered the American Tesol Institute and tailors its courses to existing curriculums.
US-based storage provider Clutter received $200m in series D funding from investors led by SoftBank Vision Fund. GV, a corporate venturing subsidiary of Alphabet, backed the round with investment firm Atomico and venture capital firms Sequoia Capital, Fifth Wall Ventures and Four Rivers Group. The round reportedly valued the company at $600m post-money. Reports had suggested Clutter was seeking $200m-$250m for the round. It runs an on-demand storage platform that sends movers to a user’s home to pick up or return their belongings. Items are stored in a secure facility and users access the service through a mobile app. The service is available in San Francisco, New York, Los Angeles, Orange County, San Diego, Chicago, New Jersey and Seattle.
There were other interesting deals in emerging services-focused businesses that received financial backing from corporate investors from other sectors.
China-based logistics services provider Cainiao Smart Logistics Network received 23.3bn yuan ($3.33bn) from Alibaba. The e-commerce group 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. Alibaba previously increased its stake in the business to 51% by investing $798m in 2017, which it co-founded in 2013 with diversified conglomerate Fosun and retailer Intime Retail Group. It owned a 48% stake at launch. Cainiao runs a logistics platform that connects delivery drivers, goods and warehouses with each other to facilitate e-commerce deliveries.
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 in the round. Venture capital firms Lightspeed Venture Partners and Sequoia Capital India participated in the round, which valuef Oyo at $10bn. Founded in 2013, Oyo operates a network of leased and franchised hotels where customers can book rooms that offer standardised amenities. It also has an offering called Townhouse, which is similar but chiefly aimed at millennials. Oyo initially concentrated on its domestic market but has since expanded to more than 1.2 million rooms across 800 cities spanning 18 countries.
Internet group Tencent committed $800m to lead a series D round for China-based real estate brokerage Ke.com. The round, sized at almost $1.2bn, 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. The round reportedly valued Ke.com at $9.5bn. It runs an online platform where users can buy new, second-hand and rental properties in 500 cities across China and uses virtual reality to help users inspect properties. It was spun off by real estate portal Lianjia in 2018.
The SoftBank Vision Fund invested $655m in UK-based business finance provider Greensill. The commitment was disclosed along with Greensill’s acquisition of FreeUp, a UK-based fintech company which makes it possible for workers to receive wages for work done before their payday. The company will use the fresh funding to boost international growth. SoftBank is a returning investor, having invested $800m earlier in 2019, and this transaction reportedly valued Greensill at nearly $4bn. The announcement came after the Vision Fund had to supply a $9.5bn financing package for WeWork. Founded in 2011, Greensill provides supply chain finance to a range of clients across North America, Europe, Africa and Asia, working with financial services firms and institutional investors to supply the capital. Greensill has extended more than $150bn in financing to date, covering more than 8 million clients across 60 countries. It also owns Germany-based commercial lender Greensill Bank, having acquired and rebranded financial services firm NordFinanz Bank in 2014. It has also set up a vehicle, Supply Chain Finance Fund, which has $3bn of assets under management.
US-based online food delivery service DoorDash procured $600m in series G financing from investors including the SoftBank’s Vision Fund at a $12.6bn post-money valuation. Hedge fund manager Darsana Capital Partners led the round and was joined by investment managers Sands Capital and Coatue Management, investment firms Dragoneer and DST Global, venture capital firm Sequoia Capital and the Singaporean state-owned Temasek. DoorDash runs an online platform that enables users to order food from local restaurants for home delivery. It has formed delivery partnerships with several big restaurant chains, and powers online delivery for Chipotle, Denny’s and Wingstop, among others. The company also oversees a subscription-based service that enables users to order food without delivery charges. It has a presence in more than 4,000 urban centres across North America.
FlixMobility, a Germany-based travel services provider backed by carmaker Daimler, scored a series F round sized at €500m ($561m). Growth equity firms TCV and Permira co-led the round, which also featured firm HV Holtzbrinck Ventures and European Investment Bank. Founded in 2013, FlixMobility operates inexpensive long-distance travel services by coach and rail. The company will use the cash to launch additional services, including ridesharing platform FlixCar. It hopes to strengthen its market position in the US, enter South American and Asian markets and expand FlixTrain into more EU member states in 2020.
Danke Apartment, a China-based operator of an online apartment rental platform, closed a $500m series C round co-led by Ant Financial, the financial services affiliate of Alibaba. Hedge fund Tiger Global Management co-led the round, which also included Primavera Capital, CMC Capital, Gaorong Capital and Joy Capital. The company was valued at more than $2bn. Founded in 2015, Danke manages approximately 320,000 apartments across Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Tianjin, Wuhan, Nanjing and Chengdu. The company splits up existing, large flats built into smaller units aimed at recent graduates and young professionals, making more exclusive neighbourhoods affordable to individual tenants. Danke takes care of housekeeping and maintenance and employs AI-driven technology to calculate housing prices.
Exits
Corporate venturers from the services sector completed 24 exits between January and December 2019 – 20 acquisitions, three initial public offerings (IPOs) and one merger. The total estimated exited capital in those transactions was $4.14bn, reflecting several large exits . On a year-on-year basis, the number of exits dropped from 28 transactions in 2018. So did the total estimated capital in those exits, climbing steeply down from $10.19bn, representing a 59% decrease.
Uber agreed to acquire United Arab Emirates-based ride hailing service Careem for $3.1bn, providing exits for corporates including travel agency Al Tayyar, e-commerce firm Rakuten, telecoms firm Saudi Telecom, ride hailing service provider Didi Chuxing and carmaker 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.
Gimlet Media, a US-based podcast publisher backed by marketing group WPP, was acquired by music streaming platform Spotify for $337m. Spotify’s interest in Gimlet was fed by a drive at the corporate to diversify its core offering with non-music content. It was the first acquisition of a content producer. Founded in 2014 as American Podcasting Corporation, Gimlet produces and hosts narrative and scripted podcasts, with the latter boasting high-profile actors such as David Schwimmer and Oscar Isaac. It also operates a branded division that creates sponsored content and has moved into television production with adaptations of two of its podcasts: psychological thriller Homecoming and StartUp, which focuses on co-founder Alex Blumberg’s journey launching the company.
SoftBank’s Vision Fund had invested $300m in US-based dog walking service Wag at a reported $650m valuation but agreed to sell a stake back to the company. The shares were reportedly sold at a loss after the company appeared to have failed to find an acquirer, as it faced negative publicity after reports of lost or injured pets. Founded in 2015, Wag has created an app-based on-demand dog walking service that gives owners access to insured and bonded walkers in their own communities, 24 hours a day, seven days a week.
Educational app developer Byju’s acquired US-based connected-toy maker Osmo in a $120m deal that will hand exits to several corporate investors. The all-stock deal will involve Osmo backers including educational publisher Houghton Mifflin Harcourt, real estate developer JF Shea, toy producer Mattel and television producer Sesame Workshop securing shares in Byju’s. Founded in 2013, Osmo builds and sells educational toys, puzzles, board games and robots that are connected to online apps to help children aged between five and 12 learn while playing.
Life360, the US-based family-tracking technology provider backed by real estate company Duchossois Group, home security product maker ADT and carmaker BMW, raised more than A$145m ($105m) in its IPO. Life360 issued 23.5 million chess depositary interests (CDIs) – with three representing one share – on the Australian Securities Exchange, priced at $3.46 each to raise $81.5m. Some existing shareholders sold another 6.8 million CDIs to bring the total proceeds from the offering to $105m. Founded in 2008, Life360 has developed web and mobile apps that enable family members to locate each other on a map and be notified when others arrive at a predefined location.
An affiliate of property development conglomerate Nan Fung was invested in Stealth BioTherapeutics, a US-based mitochondrial dysfunction drug developer that floated in a $78m IPO. The offering consisted of 6.5 million American Depositary Shares, each of which represent 12 ordinary shares, priced at $12.00 each, at the bottom of its $12 to $14 range. The company listed on the Nasdaq Global Market and its shares closed at $11.90. Stealth Bio is developing therapies for rare genetic and age-related diseases caused by dysfunction in the body’s mitochondria. It plans to use $25m of the proceeds to advance its lead candidate, elamipretide, through phase three clinical trials for a mitochondrial genetic disorder.
Storage hardware producer NetApp acquired Cognigo, a Israel-based data protection software developer backed by security services and technology provider Prosegur, for approximately $70m. Founded in 2016, Cognigo has developed software that uses AI and natural language processing technology to categorise and protect data in compliance with regulations such as the EU’s General Data Protection Regulation.
Whispir, the Australia-based messaging software provider backed by telecoms firms Telkom and Telstra, raised A$47m ($32.5m) in its IPO. The company priced its shares at A$16 each, at the bottom end of the offering’s A$16 to A$21 range, and floated with a market capitalisation of about $113m. Founded in 2002, Whispir has created a software platform that enables businesses to automate their web, email and social media communication. Customers can create templates and workflow and cater for different types of end users.
Semiconductor maker Intel, HR firm Recruit, telecoms firms Saudi Telecom and NTT Docomo, digital marketing company Allied Architects, consultancy Libertad and financial services firms Mistubishi UFJ and SBI Group exited Japan-based online translation service Gengo in an acquisition of undisclosed size by marketing agency Lionbridge. Founded in 2008, Gengo created an online platform that enables individuals and businesses to order translations from more than 20,000 translators. In addition to content services such as proofreading, transcription, content creation and copywriting, Gengo also provides AI training-data services from its contributors.
Aproplan, a Belgium-based construction management app developer backed by property developer Matexi, merged with GenieBelt, a Denmark-based construction data storage and sharing platform backed by energy system provider Danish Solar. The new company, LetsBuild, is reportedly being buoyed by an undisclosed amount of funding from investors including industrial equipment supplier Solar and Inventures, a subsidiary of association management and services firm SmithBucklin. Venture capital firm Enern, growth equity firm Fortino and seed-stage investor Nordic Makers also took part in the round. LetsBuild will operate a digital platform intended to improve communication and organisation on construction sites by unifying processes such as progress reporting, on-site planning, scheduling and auditing. The software will also enable users to visualise drawings on site, track contract-compliance checklists, manage project data and conduct inspections.
Global Corporate Venturing also several exits of emerging services-related enterprises that involved corporate investors from other sectors.
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 had initially provided $50m in funding in 2013 and invested $1.2bn two years later to hike its stake from 17.4% to 67.9%. This transaction involved it growing its share 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 runs 17 brands covering five continents, with 350 million monthly active users.
Communication software provider 8×8 acquired Wavecell, a Singapore-based cloud communications platform backed by telecoms group Telkom Indonesia, in a deal worth $125m. The deal consisted of $69m in cash, with the remaining $56m provided as stock in 8×8. Founded in 2010, Wavecell has a cloud-based platform that enables brands to integrate text messages, chat apps, video and voice applications into their customer service offerings. The acquisition helps 8×8 gain a market presence in Asia, with Wavecell based in Singapore, Indonesia, Philippines, Thailand and Hong Kong.
Online survey management platform SurveyMonkey agreed to acquire US-based online survey service GetFeedback in a $68m deal that will give an equity consideration to Salesforce’s investment arm, Salesforce Ventures. The price consisted of cash and equity. GetFeedback was acquired by marketing platform Campaign Monitor in 2014 but Salesforce Ventures, also an investor in SurveyMonkey, retained a stake. Founded in 2013, GetFeedback has developed an online tool that is available for the Salesforce platform, and which is used by more than 10,000 brands to create mobile-friendly surveys to help them capture real-time customer feedback. Customers include networking equipment producer Cisco, medical products group Johnson & Johnson, pharmacy chain Walgreens and Salesforce. SurveyMonkey expects the deal to accelerate the development of its enterprise offerings.
UK-based dog walking and sitting service HouseMyDog merged with Gudog, a Spain-based peer backed by telecoms company Telefónica’s Wayra accelerator. Founded in 2012, Gudog has developed an online marketplace in Spain, France and Germany that enables pet owners to find, book and pay for a sitter or walker for their dogs. HouseMyDog provides a similar online-based service that connects dog owners with service providers including dog sitters, walkers and day care providers. The merged company will cover the UK, Ireland, Spain, France, Germany, Switzerland, Austria and Belgium.
Portfolium, the US-based student portfolio publishing platform backed by student loans guarantor USA Loans, has been acquired by education software-as-a-service provider Instructure for an undisclosed sum. Founded in 2014, Portfolium runs an online social networking platform that enables students and recent graduates from more than 3,600 academic institutions to build a record of their achievements and connect to employers or placement opportunities. Users can showcase their development to contacts by uploading documents, images and other media files onto their profiles. Portfolium is already a partner of Instructure’s in-house personal development portal for schools and higher education institutions, Canvas, and their integration is expected to deepen following the acquisition.
Payment services firm American Express agreed to buy US-based airport lounge booking platform LoungeBuddy, which is backed by travel and expense management software producer Concur, for an undisclosed amount. The platform allows users to compare benefits of different airport lounge offers, as well as viewing or providing reviews of each facility. American Express initially partnered LoungeBuddy in 2017 to provide information on more than 1,200 lounges to premium card members, and the latter will become a wholly owned subsidiary of American Express once the deal closes. Founded in 2015, the website and app are used by travellers to find, book and gain access to airport lounges without needing membership or a first-class ticket.
Funds
Over 2019, corporate venturers and funds investing in the services sector secured over $11.32bn in capital via 27 funding initiatives, which included 20 VC funds, three new CVC subsidiaries, two incubators, one accelerator and one other initiative. The number of funding initiatives in the sector was only slightly up from the 25 registered in 2018. The total estimated capital, however, more than doubled from $5.29bn.
Germany-based insurance and asset management group Allianz increased the capital available to Allianz X, the digital investment vehicle it formed in 2013, from €430m to €1bn ($1.13bn). Allianz X targets growth-stage companies developing digital technologies relevant to its parent’s business, covering areas such as connected property, mobility, wealth management, cybersecurity, data analytics and health products. The firm said it has allocated more capital to Allianz X as a reflection of the unit’s success in its investments and partnerships as well as its importance to Allianz’s digital transformation plan.
Fifth Wall Ventures closed its second fund after raising $503m from more than 50 corporate limited partners (LPs) from 11 countries. Fifth Wall identified about half of the LPs in its announcement: real estate investment trusts Gecina, Merlin Properties, British Land, Segro, Equity Residential, Host Hotels & Resorts, Hudson Pacific Properties, Macerich and Kenedix. Commercial real estate company Cushman & Wakefield, home construction firms Lennar, PulteGroup, Toll Brothers and DR Horton, mortgage insurance provider Essent, infrastructure conglomerate Keppel, real estate services provider CBRE and media conglomerate News Corp have also backed the fund. LPs also include property developers Mitsubishi Estate, Related Companies and Hines, hotel group Marriott International and MetLife Investment Management, the investment arm of insurance provider MetLife. Fund II was oversubscribed and follows the firm’s $212m first vehicle, which closed in 2017. It will focus on real estate technologies and work closely with its corporate LPs to identify opportunities and support portfolio companies.
JD Logistics, the logistics provider spun off by China-based e-commerce group JD.com, raised 1.5bn yuan ($218m) for a strategic investment fund. JD Logistics and JD.com are among the LPs, along with several undisclosed public companies and government-led funds. The vehicle will focus on the logistics sector and complement JD.com’s existing team, which has a remit to invest in a wider array of industries. The entity also adds to a fund launched by JD.com’s property management arm in partnership with Singapore’s sovereign wealth fund, GIC, which secured $698m, according to a regulatory filing.
Alibaba’s Electronic World Trade Platform and online listings platform 58.com have co-anchored a $200m first close for a fund launched by China-based venture capital firm ATM Capital. The corporates were joined by private investors including Wang Xiaochuan, chief executive of search engine provider Sogou. The firm did not disclose its final target for the fund or when it expects to reach a final close. ATM Capital will focus on early and growth-stage investments in logistics, retail, media and financial technology developers operating in Southeast Asia. The firm’s founding partners are Tony Qu, an associate director at Alibaba Capital Partners for five years to 2012, who went on to CDH Investments before founding Bat Capital, and Jeeves Jiang, former chief executive of smartphone producer Coolpad Indonesia.
Investment manager Reliance Nippon Life Asset Management (RNAM) raised a $187m fund of funds that will be backed by several Japan and India-based corporates. The LPs for the vehicle, Indo-Japan Emerging Technology & Innovation, include insurance firm Nippon Life, automotive manufacturer Suzuki, financial services firm Mizuho Bank and state-owned financial institution Development Bank of Japan, according to an official familiar with the matter. RNAM is promoted by Japan-based Nippon Life and Reliance Capital, the financial services arm of India-headquartered conglomerate Reliance Group. It holds 85.8% of the fund’s share capital. The Indo-Japan Emerging Technology & Innovation will invest in 15 to 25 India-focused venture capital funds, with the resulting capital eventually boosting sectors such as the internet-of-things (IoT), AI, business-to-business software and robotics technology.
China-based appliance manufacturing group Midea raised $104m for an investment fund with a targeted close of 1bn yuan to 2bn yuan ($147m-$293m). Guangdong Midea Smart Technology Industrial Investment Fund’s initial raise includes a $44m commitment from an unnamed, wholly owned investment arm of Midea. Other LPs were not named. The fund will focus on areas such as intelligent manufacturing, smart home, retail and new energy. It will be managed by an asset management vehicle formed in 2018. Midea invested $1.4m in the entity to take a 49% stake, while the remaining 51% is owned by an undisclosed investment management firm which supplied $1.5m. Founded in 1968, Midea has grown into a conglomerate with more than 200 subsidiaries covering consumer appliances, heating, ventilation and air-conditioning systems, supply chain logistics and robotics and industrial automation.
Spain-based venture capital firm Adara Ventures achieved a €65m ($73m) first close for its third fund with LPs including Prosegur. Fond-ICO Global, a fund of funds set up by Spanish government-owned financial institution Instituto de Crédito Oficial is also among the LPs, as are Catalan state-owned financial institution Catalan Institute of Finance and the EU-owned European Investment Fund. Venture capital firm Draper Esprit has also backed the fund. Adara said it had more than 70 institutional and private investors across its three funds and a majority of them have backed all three vehicles, though it did not share their identities. The fund will seek out early-stage deep technology developers in the business-to-business products and services industry, with applications of interest including cybersecurity and data analytics. Adara III will retain the firm’s current focus on Spain but will also seek out opportunities in Portugal, France, the UK and Ireland.
India-based venture capital firm 3one4 Capital closed a Rs 4bn ($56.6m) growth-stage fund dubbed Continuum I with capital from LPs including diversified conglomerate Sojitz. The cornerstone investor is Emory Investment Management, the endowment fund for Emory University, which also invested. Investment firms Catamaran Ventures and Infina Finance were also among the LPs. Founded in 2015, 3one4 Capital targets deep technology, education, healthcare, media, enterprise automation and financial technology developers. The fund will concentrate on post-series B investments, supplying between $3m and $5m per deal.
Reefknot Investments, the Singapore-based joint venture formed by logistics firm Kuehne + Nagel and Singaporean government-owned investment firm Temasek, launched a $50m fund. The fund will invest in companies in and around the logistics and supply chain technology space at series A and B stage. Areas of interest include digital logistics technology, AI and trade finance, though Reefknot is yet to reveal an investment. It also has links to an ecosystem of logistics sector investors that include PSA Unboxed and Unilever Foundry, which invest on behalf of port operator PSA International and consumer goods producer Unilever, as well as Atlantic Bridge, NUS Enterprise and the Singapore state-owned Vertex Ventures, EDBI and SGInnovate.
Financial services firm Al Salam Bank-Bahrain partnered China-based venture capital firm MSA Capital on a $50m venture capital fund called MEC Ventures. The Bahrain-headquartered vehicle will make investments in Middle East and North Africa-based startups operating in the financial technology and e-commerce sectors, in addition to those in areas such as AI, big data, cloud computing, networking and logistics. MEC Ventures is being launched two years after Bahrain introduced the Investment Limited Partnerships Law, which allows limited partnerships to conduct financial services activities and make investments. The fund raised capital from Chinese entrepreneurs and China-based institutional investors as well as family offices located in the Gulf Cooperation Council region.
University backing
By the end of 2019, we tracked 27 rounds raised by university spinouts developing services-related technologies, similar to the 28 recorded in the previous year. The level of estimated total capital deployed in 2019 stood at $1.32bn, nearly double the $679m in 2018. This clearly suggests that valuations of such enterprises emerging from academia and interest in them are rising.
GetYourGuide, a Germany-based travel activity booking platform spun out of ETH Zurich, raised $484m in series E funding led by the SoftBank Vision Fund. The round also featured Swisscanto Invest, an asset management subsidiary of financial services firm Zürcher Kantonalbank, as well as Temasek, Lakestar, Korelya Capital and Heartcore Capital. The round boosted the spinout’s overall funding to $655m and valued it at $2bn, making it ETH’s first spinout to attain unicorn status. Founded in 2009, GetYourGuide runs an online platform where tourists can book tours and other attractions in destinations across 170 countries. The spinout plans to channel the funding into expanding its range of available tours, improving the platform’s search and booking capabilities and extending its marketing activities.
US-based online education platform Coursera secured $103m in a series E round led by online education and recruitment firm Seek Group. Future Fund, Australia’s sovereign wealth fund, also took part in the round, as did venture capital firm New Enterprise Associates. The round reportedly valued Coursera at more than $1bn. Coursera offers access to some 3,200 courses provided by more than 150 universities through its online platform. It has also added 14 full university degrees to its offering across areas such as business administration, data science and public health. The company also operates an enterprise version, Coursera for Business, which allows governments and companies to train their workers in new skills. It has attracted more than 1,800 clients to date.
FutureLearn, the UK-based massive open online courses provider set up by Open University (OU), obtained £50m ($65m) in funding from Seek Group. Seek Group now owns a 50% stake in the business, with the other half retained by the OU. The pair have put contractual arrangements into place to protect the former’s academic independence, teaching methods and curriculum. Founded in 2012, FutureLearn operates a digital education platform offering short courses, in-depth programs and full degrees from dozens of institutions around the world, such as Oxford, Tel Aviv, Monash and Purdue universities. The platform has also partnered a range of other organisations, such as the British Film Institute, Amnesty International, Macmillan Education and Cambridge University Press to give access to specialist expertise.
People
UK-headquartered law firm Ashurst appointed Tim Praill as head of Ashurst Digital Ventures (ADV), its development and investment arm. Praill was previously head of Navitas Ventures, the corporate venturing vehicle provided with approximately $29m by the Australia-based education provider. Navitas had hired Praill in 2016 as global head of strategy and transformation to focus on areas including corporate strategy, corporate transactions and cross-business growth schemes, before he was promoted to head of Navitas Ventures in April 2018. Praill conducted investments, partnerships and incubation investments in early-stage education technology developers on behalf of Navitas Ventures. Founded in May 2019, ADV is looking to build digital legal products in partnership with Ashurst employees and clients, before eventually collaborating with entrepreneurs. Co-CEOs Tara Waters and Jamie Ng lead teams in London and Sydney respectively, while Praill is set to oversee the unit globally.
Ian Folau, previously chief executive of open-source vulnerability management platform provider GitLinks, joined US-based non-profit government management consulting firm Logistics Management Institute (LMI), LMI Ventures. The new venturing fund, which hired Folau as a managing director, will finance early-stage startups developing technologies relevant to LMI’s customers’ needs, such as analytics, supply chain and healthcare management services. The unit intends to bridge its portfolio companies to US federal government agencies in the process. Folau co-founded GitLinks in 2015 while he was an MBA student at Cornell University’s Johnson Graduate School of Management. He remained chief executive until the company was acquired for an undisclosed amount by online business applications service provider Infor in 2018.
Eric Wittman, formerly chief operating officer at web interface design software developer Figma, joined JLL Spark, US-based property manager JLL’s corporate venturing arm, as chief growth officer. Spark was established in 2017, providing it with $100m in capital to invest in real estate and property management technology developers. The new role will involve Wittman joining Spark’s established growth team and implementing strategies to help portfolio companies expand using JLL’s resources. Figma hired Wittman in January 2017, and he built the company’s senior management team and client base. He also helped it secure $25m in series B funding from venture capital firms Kleiner Perkins Caufield & Byers, Index Ventures and Greylock Partners in February 2018.
Ladi Greenstreet, was promoted to head of UK and Ireland for Accenture Ventures, the corporate venturing arm of professional services firm Accenture, in June, and then to head of European strategic investments in October. Accenture hired Greenstreet in 2011 as a UK-based management consultant to oversee digital strategy, analytics and technology transformation, before transferring him to the US for a one-year stint at the Fjord design division for the firm’s digital marketing arm, Accenture Interactive, in 2014. Greenstreet joined Accenture Ventures the following year as head of healthcare to develop and implement market strategies for the unit’s health and public service group, plus leading digital health efforts and backing growth-stage enterprise technology developers. Greenstreet partnered startups focusing on areas including AI, blockchain, cybersecurity and augmented and virtual reality technology.
Chile-based energy and retail group Copec hired Brian Walsh to head its strategic venture capital unit, Wind Ventures. Walsh said the unit would “leverage Copec’s significant resources to accelerate startups and scaleups in realising new growth” across Latin America and the US. Walsh had been a senior expert for corporate startup engagement and corporate venturing at management consulting firm McKinsey after a brief stint overseeing office equipment supplier Konica Minolta’s innovation strategy and new venture development efforts for North America in 2017. He had previously been co-founder and chief executive of dairy data startup Vital Herd.
BCG Digital Ventures (BCGDV), a corporate venturing and incubation subsidiary of US-headquartered consulting firm Boston Consulting Group, hired Nathalie Gaveau as a UK-based managing director and partner. Gaveau has an entrepreneurial background, having founded fashion media and consumer platform Shopcade and co-founded online second-hand goods marketplace PriceMinister, which was acquired by Rakuten for $230m in 2010. BCGDV partners startups and provides mentoring on digital strategies, helping them build and scale their businesses. It also incubates digital technology developers, and its UK-based portfolio includes household utilities management platform WonderBill.
Brian Rothenberg, formerly vice-president of growth for event ticketing and technology platform developer Eventbrite, joined US-based venture capital firm Defy Partners as a partner. Rothenberg joined Eventbrite in 2013 and oversaw global revenue, managing departments such as finance, marketing and engineering. He had a six-month stint as chief marketing officer prior to taking the VP position. Defy focuses on series A deals sized at $3m to $10m, having raised a $262m second fund. Its portfolio companies include developers of logistics, IoT and fintech software. Rothenberg had previously been an angel investor and scouted deals for VC firm Sequoia Capital.
US-based corporate venturing advisory firm Venadar appointed its chairman, Keith Cowan, as chief executive. Cowan replaces Mark Kaiser, Vendar’s founder, who will remain in the firm as vice-chairman and adviser. Founded in 2005, Venadar has helped more than 40 corporate clients to conduct corporate venturing through strategic and transactional advice. Cowan has been CEO of strategic advisory firm Cowan Consulting since 2013, having come from SoftBank’s US-based telecoms business, Sprint, where he was president for five years.
Camber Creek, the venture capital arm of US-based property developer Berman Enterprises, hired Mitchell Schear as an executive partner. Prior to joining Camber Creek, Schear spent 15 years as president of Vornado/Charles E Smith, a division of real estate investment trust Vornado Realty Trust, where he helped manage Vornado’s portfolio in the Washington DC region. Schear’s role will involve him working alongside general partners Casey Berman, Jake Fingert and Jeffrey Berman to identify real estate technology-focused startups.
