Having historically taken over manufacturing and agriculture in importance, business services play a dominant role in most emerging and mature economies today. According to consulting firm Research and Market, the global professional services market was estimated at $5.02 trillion in 2020 and forecast to reach over $7 trillion in size by 2025 in the post-pandemic world, implying a compound annual growth rate (CAGR) of 7.03%.
Global Corporate Venturing’s broad definition of “services” covers a wide range of subsectors – from accommodation and travel and real estate through education, human resources and consulting to logistics and others. It is imperative to consider in each in order to properly understand the trends in the sector data.
With the covid-19 pandemic travel and tourism suffered an unprecedented decline in 2020. According to the UNWTO World Tourism Barometer, international tourist arrivals plummeted by 72% between January and October 2020. The report estimated that this had translated into a massive loss of $935bn in export revenues from international tourism, 10 times over the loss registered in 2009 after the global financial crisis. The drastic decline took international tourism to a level of 30 years ago, according to the report.
In 2021, the UNWTO Barometer estimated that global tourism “experienced a 4% upturn, compared to 2020” but international tourist arrivals (overnight visitors) were still 72% below the pre-pandemic year of 2019. The latest estimates regard this moderate rebound as a slow and uneven recovery across the globe from the worst hit for international tourism on record.
The UN remains cautious in forecasts with respect to the impact of the Omicron variant and surging covid-19 cases: “According to the latest UNWTO Panel of Experts, most tourism professionals (61%) see better prospects for 2022. While 58% expect a rebound in 2022, mostly during the third quarter, 42% point to a potential rebound only in 2023. A majority of experts (64%) now expect international arrivals to return to 2019 levels only in 2024 or later, up from 45% in the September survey.”
This panorama may be a mixed blessing for emerging businesses in the travel tech space in the near term. On the one hand, the ongoing recovery may be an opportunity to innovate. On the other, even in frothy markets as in most recent times, that may still mean relatively depressed valuations for such businesses, which may limit the amount of capital they could raise.
Another branch of services, sensitive to the business cycle, is the real estate space. Some subsectors in it such as retail and office space were severely affected by the pandemic but with the reopening and despite the emergence of the “future of work” and increase remote working, they have started to recover. This is partly due to the recovery but also thanks to the heightened levels of liquidity in markets stemming from accommodating monetary policy.
According to the DLA Piper’s Annual State of the Market survey on commercial real estate of 2021, optimism in commercial real estate began to come back, as the uncertainties of the pandemic started to fade with the global vaccination rollout in early 2021. The survey found that 74 of the responding industry experts awaited a bullish market, up from just 21% the previous year.
A joint report by PwC and the Urban Land Institute, “2022 Emerging Trends in Real Estate Report” also confirms the rather swift recovery of the real estate sector but point to future challenges related to climate change: “The sector is the largest contributor to greenhouse gasses and global warming. Buildings account for upwards of 40% of global energy use and carbon emissions. Sector leaders and investors are ideally positioned to play a leading role in muting climate change’s worst effects. But many are not convinced. Executives and investors often talk up environmental, social and governance (ESG) values, but many executives remain sceptical that ESG pays off in enhanced returns.” This challenge will surely inspire more innovation to come in the sector to tackle it.
The rise of e-commerce, driven by mobile technologies, sprang opportunities for logistics service providers, who have been forced to shift business models. The pandemic and nearly universal lockdowns also disrupted global supply chains, which made this space ever more noticeable and attractive. Going forward, the freight and logistics world market is expected to grow at a CAGR of 3.5% between 2022 and 2030, according to consultancy Market Research Future.
Recent developments in the sector have been undoubtedly shaped by supply chain disruptions, labour shortages, e-commerce and cross-border commerce. However, aside from these trends, logistics operator Mexicom Logistics also identified two other trends for 2022 centred on sustainability and advanced technology. The focus on sustainability is expected to increase as governments, consumers and other stakeholder take a stronger stance on sustainability and productivity enhancement in a push to cut greenhouse emissions. Supply chain technologies, on the other hand, are expected to incorporate more machine learning, blockchain and the internet of things (IoT) for efficiency gains. This will likely create ample opportunities for innovators and entrepreneurs and continue to attract the interest of strategic corporate venture investors.
Education services is another subsector of services that was affected in a relatively positive way by the pandemic and is expected to grow. The growth of education services has been underpinned by two major forces in the past decades – demographics and a growing need for reskilling and further professional development. The global education technology market was estimated at $254.80bn in 2021, according to the report “Edtech market – Global outlook and forecast 2022-2027”, and forecast to grow at a CAGR of 15.52% to $605bn between 2022 and 2027.
The report puts emphasis on the role of the digital revolution which has democratised educational services and their reach: “The global education technology market is constantly experiencing a digital revolution with the emergence of artificial intelligence and digitalisation. Technology has played a major role in education categories serving primary, secondary, and corporate training. The global edtech market holds an absolute growth of more than 130% during the forecasted period. The education shift from traditional to interactive and digitised formats has positively impacted the online education market with a new creative approach to delivering education and skills.” And further: “Advanced technologies like artificial intelligence (AI) and augmented reality (AR) are expected to drive the digital education market fostering education through means of game-based learning (gamification), hybrid models, mobile-based learning attracting many investors to inject funds during the forecasted period.”
The global market for consulting services is among the most mature subsectors of business services, though somewhat cyclical and linked to prevailing general market conditions. As far as innovation in it, advanced technologies like cloud computing, robotics, blockchain and big data have been and will likely continue to be key to improving business performance and streamlining operational processes.
The global market for management consulting services was estimated at $891.8bn in 2021, after a year of slow growth because of the pandemic, according to “Management Consulting Services Global Market Report 2022” – a report by Research and Markets. It is expected to grow at a CAGR of 7.9% to over $1.3 trillion by the end of 2026. The report attributes this expected growth to a number of factors in the pandemic and post-pandemic world: “The growth is mainly due to the companies rearranging their operations and recovering from the covid-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges.”
As we had noted in previous years, there has also been a drive for value-oriented revenue models in consulting markets that are taking over the traditional per-hour and per-month revenue model. Such value-oriented billing is easy to apply and the trend is expected to deepen over time. It will likely also drive more investments in consulting services tech startups as well.
Another subsector, very open to technological disruptions that may streamline work, is legal services. The recent “2021 Legal Market Report: How innovative technology is reshaping the business and practice of law” report examines how certain trends are shaping the sector. Among them are the transition to working from home, increased use of technology to improve efficiency and reduce costs, greater emphasis on work-life balance as well as employee well-being. Several factors are identified by the report, including the impact of expenses as well as an increase in technology spending. We are likely to continue seeing more innovation in legal tech, aimed at finding solutions that enable more efficient processes in legal firms’ everyday matters.
The human resources (HR) space is another business services subsector with many opportunities. The most palpable impact of covid-19 has been the emergence of remote working or what some loosely refer to as “the future of work”.
Another notable development is what some have dubbed as the “great resignation” or “big quit” that came along in the beginning of 2021, denoting the tendency of significant number of employees to voluntarily quit their jobs. We are yet to see the consequences of this and seek more thorough explanations for the phenomenon.
With this “exodus” in place and inflationary pressures not only in products and services but also in wages, recruiting talent may be challenging in the short or medium term, so internal recruitment may come to the fore. According to the Randstad RiseSmart’s Q3 2021 Career Mobility Outlook report, 63% of employees would like their current employer to consider them for new opportunities within the company but 54% distrust that their company gives enough consideration to their future interests.
HR tech is what may help to tackle these challenges. According to a report by consultancy Fortune Business Insights, the global HR technology market is projected to grow from an estimated $24bn in 2021 to $35.68bn by 2028 at an implied CAGR of 5.8% during the period. The expected rise is attributable to returning to pre-pandemic levels, on the one hand, and market demand for such technologies, on the other. This is, of course, all good news for entrepreneurs in this space and for corporate venture investors seeking to back them.
For the period between January and December 2021, we reported 535 venturing rounds involving corporate investors from the services sector. Many of them took place in the US (177) and Japan (154), while 34 were hosted in India, 29 in China and 19 in the UK.
Many of those commitments (132) went to emerging enterprises from the same sector (mostly logistics, edtech, HR tech and real estate tech) as well as into companies developing other technologies in synergies with services: 83 deals in the IT (mostly enterprise software, big data and cybersecurity), 71 in consumer (mostly food and beverages and e-commerce), 57 in health (primarily pharmaceuticals, medical devices and healthcare IT) and 56 in fintech (mostly payment tech and insurtech).
The network diagram, illustrating co-investments of services corporates, shows the broad spectrum of investment interests of the sector’s incumbents. The commitments ranged from logistics software and services (Haulio, Axelspace, Inceptio) through real estate and construction tech (HqO, Icon, Jones, Photosynth, Rentio and Share Village) to travel tech (LifeHouse), electric vehicles (Volta Trucks) and even cryptocurrency exchanges (DeCurrent).
The emerging services businesses in the portfolios of corporate venturers came from logistics and supply chain tech (Airspace, Tealbook, Barogo) through edtech (CollegeDekho, Go1, GoStudent) and HR tech (Beamery, Employment Hero) to proptech (Pacaso), travel tech (Oyo Rooms) as well as consulting and legaltech (Lynk, Notarize).
On a calendar year-on-year basis, total capital raised in corporate-backed rounds more than doubled from $9.36bn in 2020 to $23.37bn in 2021. The deal count increased by 31% to 535, up from the 408 rounds reported during the year of the pandemic.
As outlined further in this article, the 10 largest investments by corporate venturers from the services sector were concentrated mostly in the same sector as well as in transport.
The leading corporate investors from the services sector in terms of largest number were education services provider Globis, Freight forwarder Flexport and India-based internet services company InfoEdge. The list of services corporates committing capital in the largest rounds was headed also by real estate companies China Evergrande (before the infamous default on its bonds last year), Oxford Properties and online services company LY.com.
The most active corporate venture investors in the emerging services businesses were telecoms firm SoftBank, cloud computing services provider Salesforce and internet conglomerate Alphabet.
Overall, corporate investments in emerging services-focused enterprises went up significantly from 441 rounds in 2020 to 585 by the end of 2021, suggesting a 33% jump. The estimated total dollars in those rounds soared even more drastically, by 127%, from $14.94bn in 2020 to $33.96bn in 2021, returning to 2019 levels.
Sector specialist: Suzanna Chiu, head, Amadeus Ventures
Suzanna Chiu heads up Amadeus Ventures, the corporate venturing unit of Spain-based travel software and technology services provider Amadeus IT Group.
Based in Madrid, where the parent firm is headquartered, Chiu started as senior manager of strategic planning in 2012, until she was appointed to head of ventures in 2014.
Regarding her focus going forward, Chiu said: “Sustainability is a key topic that we want to focus on a bit more this year on how we can support the industry to achieve various net-zero growth goals. Another one will be safe travel and continue to explore how the health element interacts with travel being relevant to the industry on an ongoing basis and not just during the current pandemic.”
In addition to corporate venturing, Chiu is also helping Amadeus identify new opportunities.
“At the moment, on top of my responsibilities with Amadeus Ventures, I am also leading the discussion on diversification internally – to explore growth opportunity for ourselves for the mid to longer term.”
Sector specialist: Takeshi Kodama, executive manager, 31Ventures
Takeshi Kodama is a founding member, executive manager and head of investment at 31Ventures, Japan-based real estate developer Mitsui Fudosan’s corporate venture capital (CVC) arm with over $400m under management. He has been in this role since April 2015, concurrently serving as head of mergers and acquisitions and business strategy.
On what attracted him to CVC, Kodama said: “I would say I am one of the first penguins in the real estate industry because most developers and landlords usually focus on opening co-working and innovation spaces rather than operating CVCs.”
Kodama added: “As for the quantitative aspect, 31Ventures has three initial public offerings on the Tokyo Stock Exchange, three positive mergers and acquisitions from shy of 50 portfolio companies so far.
“Regarding strategic return, my team has arranged over 650 business meetings between business units at Mitsui Fudosan and startups, 20% of which result in proof of concept projects or official implementations. These business meetings bring stimulus and educational opportunities for Mitsui Fudosan’s business units.”
Deals
Corporates from the services sector invested in large multi-million-dollar rounds, raised by enterprises from primarily from a variety of sectors. Three of the top 10 deals stood above the $1bn mark.
US-based China-based community buying platform developer Xingsheng Youxuan secured approximately $2bn in a funding round featuring internet group Tencent and real estate developer China Evergrande Group. Sequoia Capital China led the round, which also featured FountainVest Partners, Primavera Capital Group, KKR and Temasek. It reportedly valued Xingsheng at $6bn pre-money. Xingsheng Youxuan runs an e-commerce business that allows local communities to club together to purchase items in bulk. The company processes more than 8 million daily orders and covers more than 30,000 towns across China.
US-headquartered cold chain services provider Lineage Logistics secured $1.9bn in equity funding from investors including Oxford Properties and investment bank Morgan Stanley’s MS Tactical Value and Conversant Capital vehicle. Real estate investment firms CenterSquare Investment Management, BentallGreenOak and Cohen & Steers, hedge fund manager D1 Capital Partners and pension fund manager OP Trust also participated in the round. Founded in 2008, Lineage provides chilled transportation for food in addition to temperature-controlled storage through a network of 340 warehouses across five continents, utilising technology to make its activities more efficient.
China-based ride hailing service T3 Chuxing has raised RMB7.7bn ($1.2bn) in series A funding from investors including smart cloud network service Yingtong Technology and LY.com (Tongcheng). Investment banking firm Citic Group led the round, which also featured private equity fund Redview Capital and investment firm Virtue Capital. T3 provides an on-demand ride app which has 54 million users and operates across 41 Chinese cities. It was incubated by automotive groups Changan Automobile, FAW Group and Dongfeng Motor, Tencent, e-commerce firm Alibaba and retailer Suning, which had provided about $1.45bn for the joint venture in early 2019.
Food delivery service DoorDash led a $750m series B round for Germany-based grocery ordering app operator Flink. Abu Dhabi state-owned investment vehicle Mubadala Capital and unnamed new and returning backers also took part in the round, which valued Flink at $2.85bn post-money. It also included debt financing from unnamed entities. Founded in late 2020, Flink has built an online platform that allows users to buy grocery items for delivery within 10 minutes. It operates in some 60 cities across its home country, Austria, the Netherlands and France.
US-based autonomous vehicle developer Nuro raised $600m in series D funding from investors including internet technology provider Google, grocery chain Kroger and SoftBank’s Vision Fund 1. Tiger Global Management led the round, which also featured automotive manufacturer Toyota’s Woven Capital fund, investment and financial services group Fidelity, Baillie Gifford, Gaorong Capital and funds and accounts advised by T Rowe Price. Nuro has developed autonomous electric vehicles used to deliver products such as groceries or medication. It will allocate the cash to technology development, hiring and expanding the commercial deployment of its technology.
Singapore-headquartered delivery services provider Ninja Van received $578m in a series E round featuring e-commerce group Alibaba and logistics services firm GeoPost’s DPD Group subsidiary. B Capital Group, the venture capital firm backed by consulting firm Boston Consulting Group, also took part in the round, as did VC firm Monk’s Hill Ventures and Zamrud, a Bruneian sovereign wealth fund. Founded in 2014, Ninja Van has built a Southeast Asia-focused e-commerce order fulfilment services platform covering markets including its home country, Malaysia, Indonesia, Thailand, Vietnam and the Philippines.
Satellite operator Eutelsat Communications invested $550m in UK-headquartered satellite internet technology developer One Web, in return for a stake sized at about 24%. OneWeb is building a 648-satellite constellation intended to provide broadband coverage to remote areas from low orbit. The initial system is expected to be operational by the end of this year and it said Eutelsat’s capital will take it most of the way towards its funding goal. The company had raised a total of $3.4bn from investors including SoftBank’s Vision Fund, conglomerate Bharti Enterprises and satellite services provider Hughes Network Systems before filing for bankruptcy in March 2020. Bharti subsequently joined the UK government to buy OneWeb’s assets for $1bn in July the same year. SoftBank paid $350m for a 30% stake in the resurrected company in January 2021 while Hughes Network Systems invested $50m.
Brazil-based rental e-commerce platform operator QuintoAndar secured $300m in series E funding from investors including SoftBank’s Innovation Fund. Venture capital firm Ribbit Capital led the round, which included Alta Park, Dragoneer Investment Group, Kaszek Ventures, LTS, Maverik, private investor Kevin Efrusy and an unnamed US-based asset management firm with more than $2 trillion under management. Founded in 2012, QuintoAndar has built an online real estate marketplace featuring over 100,000 properties for rent across some 40 Brazilian cities. Having added property brokerage services in 2020, it intends to now expand its offering into mortgage, title, insurance and escrow transactions.
Hesai, a China-based developer of light detection and radar (lidar) technology, received $300m in a series D round co-led by electronics producer Xiaomi and local services portal operator Meituan Dianping. The round was co-led with GL Ventures, the venture capital arm of hedge fund manager Hillhouse Capital, and CPE, a private equity subsidiary of investment banking group Citic. It included Lightspeed Venture Partners and its China-based affiliate, Lightspeed China Partners, as well as Qiming Venture Partners and Huatai Securities. Founded in 2014, Hesai provides lidar technology for use in autonomous driving and robotics systems in addition to handheld and drone-mounted methane leak detectors. The funding will support the mass production of hybrid solid-state lidar products for original equipment manufacturer customers.
US-based digital betting payments service Sightline Payments raised $270m in a funding round featuring resort and casino conglomerate Genting Group, at a valuation of over $1bn. Cannae Holdings led the round with a $240m investment, while the remainder was provided by investors including Point Break Capital Management and founder Walter Kortschak. Founded in 2010, Sightline provides a digital payments platform for cashless transactions across the sports betting, lottery, racing and casino segments. Its lead product, Play+, is a cashless payments service with 1.5 million registered accounts and more than 70 partners across the industry. GW of capacity by the end of 2023. It said the round is the largest so far disclosed by a Bitcoin miner.
There were other interesting deals in emerging services-focused businesses that received financial backing from corporate investors from the same and other sectors.
Indonesia-headquartered logistics provider J&T Express received $2.5bn in funding from investors including Tencent. Boyu Capital, Hillhouse Capital and Sequoia Capital China also contributed to the round while one of the sources named SIG China, a subsidiary of quantitative trading firm Susquehanna International Group, as an additional participant. The capital was raised at a $20bn valuation. J&T operates an express delivery and warehousing business focused on the e-commerce space, which has boomed in Indonesia with the entry of domestic online platforms such as Tokopedia, Bukalapak and Sociolla in recent years. J&T operates in several Southeast Asian countries as well as China, and is planning expansion there and in Latin America. The round preceded the company’s planned initial public offering (IPO) expected to take place in Hong Kong in early 2022.
SoftBank’s Vision Fund 2 supplied $1.7bn in funding for South Korea-based travel and accommodation services provider Yanolja. Yanolja will use the capital to invest in its technology and expand its technology-based services into new markets.Founded in 2005, Yanolja initially began as a short-term accommodation services provider before adding hospitality, food, leisure and transportation booking services to its offering, which is accessible through a mobile app. It intends to build a global travel platform that leverages artificial intelligence technology and big data to provide more automated and personalised services.
Byju’s, the India-based online education provider that counts corporates Tencent, Naspers and Bennett Coleman & Co (BCC) as investors, secured over $1bn in funding. Baron Funds, B Capital Group and XN Exponent Holding co-led the transaction, which included Silver Lake Management, Owl Ventures, T Rowe Price, Disruptive Technology Solutions, Footpath Ventures, Prudential Assurance Company, GSV and Olay and Investments. Founded in 2011, Byju’s offers a range of online learning programmes for students aged 4 to 18 through a freemium service. At the time of the deals It was reportedly closing in on a $150m acquisition of domestic peer Toppr.
SoftBank’s Vision Fund 2 has co-led a $650m funding round for India-based online adult education provider Eruditus with venture capital firm Accel. The round consisted of a mixture of $430m in primary funding and $220m in secondary investments, with Canada Pension Plan Investment Board supplying primary funding in addition to buying stock from existing shareholders. Selling shareholders included media group Bertelsmann, and the round valued the company at $3.2bn, up from about $700m from a September 2020 series D round sized at $113m. Launched in 2010, Eruditus runs an online platform which provides executive education and coaching through courses supplied by a range of higher education partners. The funding will go to product development and the expansion of its course range.
Spain-based temporary job portal operator Jobandtalent raised $500m in series E equity funding from investors including SoftBank’s Vision Fund 2. Investment firm Kinnevik led the round, which also featured Atomico, DN Capital, Infravia, Kibo Ventures and Quadrille Capital. It was supported by an additional $75m in debt financing from asset manager Blackrock, and valued Jobandtalent at $2.35bn. Founded in 2009, Jobandtalent runs an online staffing platform that helps temporary employment seekers find prospective job opportunities in industries such as logistics, e-commerce and manufacturing. The platform has some 10 million registered jobseekers and 150,000 businesses from nine markets across Europe and the Americas. The funding will be used to expand the company’s business in countries including the United States and increase the size of its executive, technology and sales teams.
India-based remote education software provider Unacademy secured $440m in series H funding featuring SoftBank’s Vision Fund 2. The round was led by Singaporean state-owned investment firm Temasek and backed by Mirae Asset, General Atlantic, Tiger Global, Deepinder Goyal and Ritesh Agarwal, valuing Unacademy at $3.44bn. Established in 2015, Unacademy has built an app targeting students preparing for tertiary education institutions’ entrance, providing learning materials including practice exams and live and pre-recorded classes. The funding will help it to increase its offerings beyond education technology, adding products in categories including professional training and recruitment.
SoftBank led a $415m series C round for Kitopi, the United Arab Emirates-headquartered provider of a cloud kitchen software platform, through its Vision Fund 2. Diversified conglomerate Dogus Group also took part in the round, along with B. Riley Financial, Chimera Investment, DisruptAD, Next Play Capital and Nordstar. The cash was reportedly secured at a valuation above $1bn. Launched in 2018, Kitopi operates an end-to-end cloud kitchen platform which partners local restaurants, taking orders, sourcing ingredients, recreating recipes and handling delivery on their behalf. The funding will support continued growth in the Middle East and entry into Southeast Asia in addition to enhancing the company’s technology and expanding its restaurant partnerships.
Exits
Corporate venturers from the services sector completed 80 exits between January and December 2021 – 55 acquisitions, 11 IPOs, 11 other transactions (including mergers with special purpose acquisition companies – Spacs) as well as three mergers of equals. The total estimated exited capital in those transactions was $31.82bn, reflecting several large exits described below. On a year-on-year basis, the number of exits went up 82% from 44 such transactions tracked in 2020, while the total estimated capital in those exits increased multi-fold from $6.15bn.
Online food ordering service DoorDash agreed to acquire Wolt, a Finland-based food and consumer delivery service that counts internet group Prosus as an investor, in a €7bn ($8.1bn) all-share deal. The transaction is expected to close in the first half of next year and it includes a retention pool sized at about €500m for Wolt’s 4,000 employees and its management team. The company had raised approximately $856m in funding. Founded in 2014, Wolt operates an online platform which allows customers in 23 countries to order food, groceries and other consumer goods from local shops to be delivered to them at home. The purchase will allow DoorDash to expand its reach to a host of new markets.
China-headquartered ride hailing service provider Didi Global went public in a $4.44bn IPO on the New York Stock Exchange (NYSE). The company counted multiple corporates among its backers, including internet SoftBank, Tencent, Alibaba, insurance firms China Life and Ping An electronics producer Apple, online travel agency Booking Holdings, car rental service eHi and social media company Sina Weibo. Shortly after the IPO and after its stock rose, it was announced that Didi was to delist from the NYSE. There was at the time pressure and investigation from Chinese authorities concerning national security and new users were not allowed to register in its app at the time. Formed after the merger of peers Didi Dache and Kuaidi Dache in 2015 and formerly known as Didi Chuxing, Didi operates an on-demand ride service spanning its home country of China but has presence in Russia, Africa, Latin America, Central Asia and the Asia Pacific regions as well. It also offers food and package delivery in addition to automotive and financial services.
Digital payment processor PayPal agreed to acquire its Japan-based consumer finance service portfolio company Paidy for about $2.7bn. The company was previously backed by payment operator Visa and Recruit Holdings. The deal is expected to definitively close during the fourth quarter of 2021. Paidy will continue to operate under the leadership of its founder and executive chairman Russell Cummer and president and CEO Riku Sugie. Launched in 2008, Paidy offers a buy-now-pay-later service that enables its customers to make instant credit purchases, which they can repay on a monthly basis. PayPal plans to use this acquisition to strengthen its capabilities and presence in the domestic payments market in Japan.
Payment services firm Visa agreed to acquire Sweden-based open banking software provider Tink for €1.8bn ($2.1bn), facilitating an exit for corporates Poste Italiane, SEB, PayPal, Nordnet, ABN Amro, BNP Paribas and Nordea. Tink has built an open banking platform that enables financial services companies to share customer data and build new features such as personal finance management tools. It has integrated its application programming interface with more than 3,400 banks and financial services organisations.
E-commerce marketplace Etsy agreed to buy UK-headquartered social commerce platform developer Depop, which counts consultancy group Lumar among its backers, for more than $1.62bn. The company had raised $100m by the time the acquisition was announced. Lumar had contributed to a $8.25m round in 2016. Founded in 2011, Depop runs an online marketplace with 30 million registered users, 90% of whom are reportedly under 26 years of age. Users of the platform can buy and sell second-hand and new fashion items in addition to offering styling services. The company had generated $70m in revenue during 2020.
Hippo Enterprises, a US-based online home insurance provider backed by corporates Comcast, Lennar, MS&AD, Munich Re and Standard Industries, agreed to a reverse merger with Spac Reinvent Technology Partners Z. Homebuilder Lennar joined fellow existing backers Dragoneer and Ribbit Capital to co-lead a $550m private investment in public equity (PIPE) together with Reinvent Capital and unnamed mutual funds. Hippo will have access to about $1.2bn in cash once the transaction closes, also including some $230m held in Reinvent’s trust account. Founded in 2015, Hippo uses real-time data and smart home technology to provide an end-to-end insurance platform. It has built an underwriting engine that relies on AI to prefill applications and to assess and price risk in under a minute.
Grab, a Singapore-headquartered ride hailing service backed by range of corporate investors, agreed a reverse takeover with Spac Altimeter Growth Corp at an initial pro-forma equity value of $39.6bn. The combined business will take the position secured by Altimeter Growth Corp, an affiliate of technology investment firm Altimeter Capital Management, when it floated in a $450m IPO in October 2020. Funds managed by Altimeter Capital are putting up $750m for a $4bn PIPE financing deal supporting the transaction that includes conglomerate Sinar Mas, clove cigarette producer Djarum and investment and financial services group Fidelity, among many other investors. Formerly known as GrabTaxi, Grab’s core business is its on-demand ride service but it has diversified into food and package delivery as well as financial services, through an offshoot that raised more than $300m in January 2021.
Faraday Future, theUS-based electric car and smart vehicle developer backed by real estate developer China Evergrande, agreed to a reverse merger with a Spac. The deal allowed Faraday to take the Nasdaq Capital Market listing secured by Property Solutions Acquisition Corp (PSAC), which had floated in July 2020 in a $200m IPO. The transaction was boosted by $775m in PIPE financing anchored by investors including undisclosed Faraday shareholders and an unnamed original equipment manufacturer and tier-1 Chinese city. Founded in 2014, Faraday has developed and launched an electric vehicle called the FF91 and also provides an intelligent driving software platform in addition to design and engineering services.
PB Fintech, the India-based, corporate-backed marketing and consulting group that owns insurance listings platform PolicyBazaar, floated in a Rs 56.3bn ($750m) IPO. The offering will be open until November 3 and each share is priced at Rs 980 ($13.10). PB Fintech issued 26.2 million new shares totalling $500m while existing shareholders including SoftBank and its Vision Fund (through SVF Python II) are divesting $250m. Founded in 2008, PB Fintech runs insurance policy comparison platform PolicyBazaar and PaisaBazaar, a similar tool focused on financial services products. The company received $343m in pre-IPO funding from 155 anchor investors including insurers ICICI Prudential, Nippon Life, Bajaj Allianz Life, HDFC Life, SBI Life and Max Life.
Retail group Schwarz Group acquired Israel-based cybersecurity technology provider XM Cyber in a deal sized at $700m, allowing stock exchange operator Nasdaq and IT services provider UST Global to exit. Founded in 2016, XM has developed an automated software platform that helps organisations to head off cyberattacks and proactively stop them by finding attack paths and closing them off before they compromise IT infrastructure. The company will continue to operate independently following the acquisition and will support Schwarz’s recently formed cloud software platform.
Global Corporate Venturing also reported several exits of emerging services-related enterprises that involved corporate investors from different sectors.
JD Logistics, the logistics offshoot of China-headquartered e-commerce group JD.com, floated on the Hong Kong Stock Exchange in a HK$24.6bn ($3.2bn) IPO. The offering consisted of approximately 609 million shares priced at HK$40.36 each, towards the lower end of the IPO’s HK$39.36 to HK$43.36 range set earlier. Formed by JD.com as its delivery services arm, JD Logistics combines artificial intelligence technology with a China-wide network of warehouses to deliver e-commerce products to customers within 24 hours. The IPO proceeds went to strengthening its logistics infrastructure, part of a drive that has involved it opening some 200 warehouses.
Full Truck Alliance, a China-based trucking services platform developer, raised nearly $1.57bn in an IPO, which gave an exit to internet conglomerates SoftBank, Alphabet, Baidu and Tencent. The IPO was comprised of 82.5 million American Depositary Shares, each representing 20 ordinary shares, issued on the New York Stock Exchange. The shares were priced at the top of its $17 to $19 range. The price subsequently rose above $20 per share, giving the company a market capitalisation of over $21bn. Full Truck Alliance was formed in 2017 when freight booking services Huochebang and Yunmanman merged to form Full Truck Alliance, also known as Manbang Group. The company runs a digital freight platform that provides shippers with access to a network of some 2.8 million trucks, employing artificial intelligence to increase efficiency.
WeWork, the US-headquartered workspace provider which counts SoftBank as its largest investor, agreed a reverse takeover with Spac BowX Acquisition Corp. The deal granted WeWork an initial enterprise value of about $9bn and it will acquire the place on secured by BowX through a $420m IPO on the Nasdaq Capital Market in August 2020. Financial and investment group Fidelity Management & Research is joining Insight Partners, funds managed by Starwood Capital Group, Centaurus Capital and funds and accounts managed by BlackRock in an $800m private placement supporting the transaction. Founded in 2010, WeWork runs a network of co-working spaces spanning 118 cities across the world. It failed in an attempt to go public in 2019 and required an extensive bailout from SoftBank to remain operational, but has since restructured and divested non-core holdings.
US-based customer relationship management (CRM) software developer Freshworks, backed by Alphabet, raised $1.03bn in an IPO on the Nasdaq Global Select Market. The company priced 28.5 million shares at $36 each, above the $32 to $34 range set earlier. Freshwork’s shares closed at $47.55, giving it a market capitalisation of $13.5bn on the first day of trading. Founded in India and previously known as Freshdesk, Freshworks develops a variety of software employed by companies for CRM, customer experience and IT service management processes. The company claims that more than 52,000 businesses use its software-as-a-service products. It had raised $400m in funding prior to the offering.
Kanzhun, a China-based online job portal operator backed by Tencent and insurance firm Sunshine Life, floated in a $912m IPO on the Nasdaq Global Select Market. The company issued 48 million American depositary shares (ADSs), each representing two ordinary shares, priced at the top of the IPO’s $17 to $19 range. Founded in 2014, Kanzhun is the developer of a big data-equipped social recruitment platform called Boss Zhipin which focuses on corporate reviews, employer branding and employee information sharing.
Monday.com, the US-based software development platform operator backed by Salesforce and video communication software provider Zoom, closed its IPO at $631m. The corporates each purchased $75m of shares in a private placement alongside the offering, which involved Monday issuing an initial 3.7 million shares on the Nasdaq Global Select Market priced at $155.00 each. The underwriters subsequently took up the option to buy another 370,000 shares to close the offering. Spun off by Wix in 2012, Monday provides software which helps businesses create their own applications and work management tools. It more than doubled revenue from $78.1m in 2019 to $161m in 2020, though its net loss increased from $91.6m to $152m during that period.
Doma, a US-based real estate technology provider backed by risk management technology producer Assurant, property developer Lennar and reinsurance providers Scor and HSCM Bermuda, agreed a reverse takeover. The deal will involve Doma merging with Spac Capitol Investment Corp V following the latter’s flotation on the New York Stock Exchange in a $300m IPO in December 2020, at an enterprise valuation of $3bn. The transaction will be boosted by $300m PIPE financing from investors including Lennar and SB Management, a subsidiary of SoftBank, among other investors. Founded in 2016 and formerly known as States Title, Doma provides machine intelligence-equipped technology that streamlines the real estate transaction process. Its shareholders will own at least 80% of the merged company.
Sonder, a US-based hospitality services provider backed by homebuilder Lennar, agreed to a reverse takeover with Spac Gores Metropoulos II at a pro forma enterprise value of $2.2bn. The merged business will take the position on the Nasdaq Capital Market acquired by Gores Metropoulos II, sponsored by affiliates of investment firm Gores Group and businessman Dean Metropoulos, when it floated in a $400m IPO in January 2021. A Gores Group affiliate is leading a $200m PIPE deal supporting the transaction that includes investment and financial services group Fidelity, Atreides Management, Principal Global Investors, Senator Investment Group, affiliates of Moore Capital Management and funds and accounts managed by BlackRock. Formerly known as Flatbook, Sonder runs an online platform that allows users to book accommodation in high-quality rooms and apartments run by the company in 35 cities across eight countries, with services available through guests’ mobile devices.
Enterprise education platform operator Skillsoft acquired Codecademy, a US-based online coding education provider backed by internet group Prosus and publisher O’Reilly’s respective corporate venturing arms Prosus Ventures (formerly Naspers Ventures) and O’Reilly AlphaTech, for about $525m in cash and stock. The company had raised more than $82m as of a $40m series D round closed in February this year. Founded in 2011, Codecademy provides an online education platform enabling users to learn computer coding languages such as Java, HTML and Python. It claims to have helped more than 50 million people across some 190 countries to learn coding through its platform.
DuoLingo, the US-based language learning platform developer backed by Alphabet, went public in a $521m IPO on the Nasdaq Global Select Market. The company issued 3.7 million class A shares while its shareholders sold just over 1.4 million class Bs. They were priced at $102.00 each, above a $95 to $100 range already increased from $85 to $95. It shares closed at $139.01 on their first day of trading. Founded in 2011, Duolingo built an app with 40 million monthly active users who can learn any one of 40 languages through the use of games. The platform uses artificial intelligence to assess each user and tailor the education to their abilities. The company’s net loss rose slightly to $15.8m in 2020 but its revenue more than doubled to nearly $162m in the same period.
Funds
For the period between January and December 2021, corporate venturers and funds investing in the services sector secured over $2.3bn in capital via 46 funding initiatives, which included 26 VC funds, 15 CVC units, four accelerators and one incubator. On a calendar year-to-year basis, the number of funding initiatives in the sector was comparable to the 47 registered in 2020, much like the total estimated capital which stood at $2.3bn, somewhat lower than the $2.65bn in the previous year.
V-Capital, the corporate venture capital arm of China-based cigarette packaging materials producer Huaxi Holding, reached a RMB1.5bn ($235m) first close for a fund. Formed in 2015, V-Capital has been conducting venture capital and mergers and transactions deals, investing alongside local governments and fund of funds. Local government-backed funds and corporations have committed capital as limited partners (LPs), as have new and returning other investors. The vehicle will target cultural services, developers of healthcare, telecommunications, semiconductors, IT, smart manufacturing and new energy technologies across China.
US-headquartered early-stage venture capital firm Moderne Ventures held a $200m final close for its second fund, with commitments from several real estate firms. The fund’s LP base includes real estate developer Greystar, real estate services firm Realogy, real estate investment trusts AvalonBay Communities, Camden Property Trust and JBG Smith and real estate association Leading Real Estate Companies of the World, as well as alternative asset manager Oaktree Capital Management. The fund invests in startups developing technology across the real estate, finance, insurance and home services sectors. It has already inked seven deals, deploying tickets between $4m and $7m in late seed to early series B rounds, targeting companies with revenue in the $2m to $10m range. Moderne Ventures was launched in 2015 by managing partner Constance Freedman, the founder of National Association of Realtors’ venture capital unit. The firm now has nearly $350m in total assets under management.
US-based venture capital firm RET Ventures’ second fund has reached a $165m final close with backing from real estate investment trusts Essex Property Trust, Invitation Homes, Mid-America Apartment Communities and UDR. 40 North America-based multifamily and single-family real estate owners, operators and developers including BH Management, Bozzuto, Cortland, Edward Rose & Sons, Greystar Real Estate Group, Starlight Capital, Starwood Capital Group and Waterton were also among the LPs for the fund. The firm’s debut fund closed at $108m in 2018 and also featured Essex Property Trust, Mid-America, UDR, Starwood Capital and Cortland among its LPs in addition to peers Aimco, Boardwalk and GID. Founded in 2017 and also known as Real Estate Technology Ventures, RET Ventures targets real estate technology developers with the potential to help LPs manage their investment portfolios.
US-based edtech-focused venture capital firm Reach Capital has raised $165m for its third fund from investors including children’s entertainment producer Sesame Workshop and scientific organisation National Geographic Society. Kaiser Foundation Hospitals, the medical care centre of health system Kaiser Permanente, is also among the LPs, as are philanthropic organisation Ford Foundation, wealth management firm Caprock and investment company Hall Capital. Unnamed employee retirement funds have also invested in the vehicle. Reach Capital focuses on educational technology developers that aim to remove barriers, particularly those faced by ethnic minorities, disabled students and under-resourced communities.
Kompas, a Denmark-headquartered venture capital partnership managed by former corporate venturers Sebastian Peck and Talia Rafaeli, formed a $160m first fund anchored by building materials manufacturer VKR Holding. Kompas’ Fund 1 will target late seed to series A-stage startups across Europe, Israel and the United States working on smart city, climate, enterprise software and industrial automation technologies applied in the real estate, construction and manufacturing sectors. The initial ticket size will be between $1m and $5m per deal. Netherlands-based Peck had previously been managing director for InMotion Ventures, the investment arm of automotive manufacturer Jaguar Land Rover, for nearly five years from 2016 in the UK. His deals there included ride-hailing service Lyft, roadside assistance provider Urgently and Zeelo, which operates an on-demand coach travel service.
2150, a venture capital firm incubated by Denmark-headquartered real estate developer NREP, reached the €130m ($158m) first close of a flagship fund anchored by NREP. Pharmaceutical company Novo, the Denmark state-backed Green Future Fund and investment firm Chr Augustinus Fabrikker have also committed to the fund together with unnamed family offices and investors from the real estate sector. 2150 is targeting developers of technology that can impact the efficiency and sustainability of urban environments, for example, those developing new materials for the construction sector or producing software to improve the safety of buildings. The firm is looking to raise €200m for the vehicle and expects to reach a final close by mid-2021. It plans to build a portfolio of 20 companies and will initially invest approximately $1.2m to $8.5m per deal, with the capacity to invest upwards of $48m per company in total.
New York-listed housing provider Invitation Homes and property manager Ivanhoé Cambridge committed to US-based venture capital firm Fifth Wall’s Climate Technology Fund. The fund will invest in technologies focusing on decarbonisation within real estate. It is stage agnostic and will target areas such as materials, construction, operations and revitalisation. Brendan Wallace, Fifth Wall’s co-founder and managing partner, said: “Decarbonising the residential sector is critical to the future of our environment.” Ivanhoé Cambridge has committed $85m in total across four Fifth Wall funds, including vehicles it manages that cover retail and real estate technology in North America and Europe.
India-based venture capital firm 3one4 Capital aims to increase the size of a third fund backed by game developer Krafton from its Rs 7.5bn target to Rs 15bn ($202m). The vehicle has raised approximately $135m since it was launched in December 2019 and 3one4 plans to extend an existing over-allotment option to reach its new target. Its LPs also include Nippon India Digital Innovation, CDC Group and undisclosed family offices, institutional investors and endowment funds. 3one4 invests in developers of technology in areas such as software-as-a-service, financial technology, digital media, deep technology, enterprise automation, health technology and direct-to-consumer products.
US-headquartered artificial intelligence researcher and technology developer OpenAI formed a $100m corporate venture capital vehicle to make early-stage strategic investments. OpenAI Startup Fund will provide funding for startups developing technology which will utilise AI in socially responsible areas such as healthcare, education or climate change in addition to products that harness AI to improve productivity. The fund will be managed by OpenAI but it has recruited several eternal backers as LPs. They include software producer Microsoft, which agreed in mid-2019 to invest $1bn in the company. Portfolio companies will also be able to access future OpenAI systems before they become commercially available, and will also receive support from the company’s staff in addition to credit for Microsoft’s cloud services platform, Azure.
Canada-headquartered news and information tools provider Thomson Reuters launched a $100m corporate venturing fund dubbed Thomson Reuters Ventures which will focus on technology capable of supporting ‘future professionals’. The unit will make investments in developers of technology which can enhance work in areas such as legal work, tax and accounting, fraud detection, regulatory compliance, news and media. Although it has not overseen a dedicated corporate venturing vehicle, Thomson Reuters has made selected early-stage investments over the past decade, in companies including data analysis software provider Tamr and distributed ledger technology developer Axoni.
University backing for services companies
By the end of 2021, we tracked 35 rounds raised by university spinouts developing services-related technologies, a considerable drop from the 43 and 54 recorded in the previous two years. The level of estimated total capital deployed in 2021, however, stood at $1.58bn, more than double the $604m from 2020. This clearly suggests that there has been some surge in valuations of such businesses coming from academia and, indeed, the top three deals we have outlined here were multi-million dollar rounds at unicorn valuations.
FlixMobility, the Germany-based public transport provider backed by UVC Partners, raised over $650m in debt and series G equity financing at a $3bn valuation. Investment firm Canyon Partners joined existing investors including General Atlantic, Permira, TCV, HV Capital, Blackrock, Baillie Gifford and Silver Lake in the round. Founded in 2013, FlixMobility runs an inter-city bus service called FlixBus which spans most of Europe and parts of the US, and which promises efficient onboard wifi and an easy-to-use online ticketing system. The capital will support growth in FlixBus’s existing markets as well as the expansion of the company’s FlixTrain service in Germany and Sweden.
Germany-based human resource and recruiting platform developer Personio, spun out of the Technical University of Munich, raised $270m in a series E funding round, reportedly at $6.3bn valuation. The round was led by Greenoaks Capital Partners, with new investors Altimeter Capital and Alkeon joining previous backers Index Ventures, Accel, Meritech, Lightspeed, Northzone and Global Founders Capital. The funds will be used by the company to launch a new people workflow automation software for SMEs that automates HR processes across departments. Founded in 2015, Personio provides recruiting and onboarding, payroll, absence tracking and other major HR functions in an all-in-one platform aimed at European SMEs, with between 10 and 2,000 employees. The company claims to have 5,000 customers.
Go1, an Australia-based corporate education provider backed by University of Oxford, secured $200m in a series D round co-led by SoftBank’s Vision Fund 2 and Salesforce’s investment arm, Salesforce Ventures. The round, which valued the company at more than $1bn, was co-led with venture capital firm AirTree Ventures and included human resources provider Seek and M12, the corporate venturing subsidiary of Microsoft. Founded in 2015, Go1 provides an AI and machine learning-powered online content platform for on-demand corporate education that supports more than 3.5 million learners. The company’s hub can integrate with Microsoft’s remote communication platform, Microsoft Teams, as well as products by enterprise software providers SAP and Workday.
People
We reported several notable people moves in the serices sector in 2021.
Raj Singh joined real estate services provider JLL’s corporate venturing subsidiary, JLL Spark, as managing partner, after five years as managing director at air carrier JetBlue’s Technology Ventures unit. US-headquartered JLL established its Spark unit in 2017 under co-CEOs Yishai Lerner and Mihir Shah. Both then set up JLL Technologies as a business unit to offer property clients modern tech. Singh was a joint GCV Powerlist award winner for 2020 at JetBlue Technology Ventures alongside Bonny Simi.
Tanja Kufner was appointed head of ventures and startups at Germany-based property design software provider Nemetschek Group. Nemetshcek functions as a holding company with Kufner as a central point for innovation. She had spent the past two years as a venture partner at venture capital firm Antler, and advising the European Commission to help impact, automotive and mobility startups grow. Until the end of 2019, Kufner had been partner and head of Dynamics.vc, part of carmaker Porsche’s MHP division. Her earlier corporate venturing roles had included telecoms firm Telefonica’s Wayra unit in Germany.
Greg Smithies left his partner position at Germany-headquartered carmaker BMW’s investment arm, BMW i Ventures, to head up a fund for US-based venture capital firm Fifth Wall. Fifth Wall invests in real estate technology developers and closed a $503m second fund in July 2019 with backing from 50 corporate LPs, before securing $100m for a retail-focused vehicle in February this year. Smithies will manage the firm’s Climate Tech fund, which will target developers of technology that can help decarbonise the real estate industry. The move came after a stint heading up climate investing at BMW i Ventures, which Smithies joined in 2019.
Donald Tucker, formerly head of venture Investments and corporate development for Cisco Collaboration and App Dynamics, an ecosystem building initiative for networking technology provider Cisco Systems, joined e-signature platform developer DocuSign. At DocuSign, he will work in corporate development and venture investments. While at Cisco, Tucker was involved as an investor in companies including Blind, Theta Lake, Parsable, Luma Health, Tagnos and Kustomer. Previously, Tucker had served as senior manager of finance at Responsys between 2013 and 2014, after a short stint as an equity analyst, specialising in communications equipment and technologies, at investment firm Jeffries.
Jeffrey Housenbold, formerly a managing partner at SoftBank Investment Advisers (SBIA), the fund management arm of SoftBank, has joined US-based home improvement service Leaf Home. Founded in 2019, Leaf Home provides direct-to-consumer home safety and enhancement products including gutter guards and accessibility equipment such as stairlifts, as well as water filtration systems. It has appointed Housenbold president and CEO, and he will help the company’s leadership team support its growth plans. Housenbold had joined SBIA in 2017 and helped launch and manage the unit’s investment activities through its SoftBank Vision Funds 1 and 2. He ranked fifth on Global Corporate Venturing’s Rising Stars roster in 2019. Investments led by Housenbold on behalf of the Vision Funds included food ordering service DoorDash, property transaction management service OpenDoor, logistics platform operator Rappi and Memphis Meats, which is developing cellular meat.
