It was another strong year for corporate venturing across the business-to-business services sector, as enterprise web and mobile apps became more integrated and consolidated. Salesforce, the enterprise cloud services provider, had a record year of activity, participating in more than 20 deals worth more than $500m.
The company has invested in more than 100 companies over the last five years, mainly focused on enterprise solutions that complement its leading CRM software. However, with the launch of dedicated venturing unit Salesforce Ventures in September, the company is broadening its focus and will also invest in other areas of innovation such as machine learning, wearables, retail, healthcare, financial and mobile, according to John Somorjai, executive vice-president of corporate development and strategy for Salesforce. It considers all those areas among the verticals relevant to Salesforce clients. “Our commitment to helping the next generation of startups grow and give back to their communities has never been stronger,” Somorjai said in September.
Advertising agencies continued to vie for ownership stakes in the top ad-tech and marketing technology. WPP again was the most active, taking part in at least 15 deals worth more than $200m. Publicis and Interpublic Group also invested in several startups, directly or indirectly, while smaller players Dentsu, OPT and Kirshenbaum Bond Senecal & Partners kept up with the larger firms. Omnicom did not announce any startup investments of its own in 2014, apparently leaving that job to Salesforce, its new strategic partner as of September.
Announcing the partnership, Jonathan Nelson, CEO of Omnicom Digital, said: “We will be able to span every consumer touch point, both online and offline, which is a real first-mover advantage for our clients.”
Human resources firms Randstad and Recruit Holdings expanded their venture activity by buying stakes in companies that aim to simplify the tasks of recruiting, developing and retaining talent. Meanwhile, consultancies such as Accenture, Cambridge Consultants and Transcosmos continue to look for ways to connect their clients with the latest technology to make their businesses more efficient.
Funds
In September, Salesforce launched its $100m Salesforce1 fund, the first dedicated fund from Salesforce Ventures, Salesforce’s corporate venturing arm. It will target startups developing apps and connected products that extend the capabilities of Salesforce1, the company’s app building platform.
Japan-based online marketing company OPT said in August that it plans to invest ¥15bn ($146.5m) in funding startup companies over the next three years. Startups operating in the advertising and education technology sectors will be targeted along with e-commerce companies and those providing cloud services for businesses. OPT will invest up to $3m in each company with the intention of taking a 51% stake.
In March, Netherlands-based human resources (HR) services provider Randstad launched the €50m ($60m) Randstad Innovation Fund, which will target HR technology companies. The fund is managed by Illonka Jankovich and Paul Jacquin.
Japan-based media, marketing and human resources company Recruit Holdings announced in May that it had established a ¥5bn corporate venturing fund to invest exclusively in international IT startups. The launch of the fund followed its creation of a US subsidiary in January.
US-based real estate company Simon Property Group launched its corporate venturing unit in March. Simon Venture Group invests in early-stage and high-growth businesses focused on retail innovation.
Deals
Salesforce investments included large deals, such as its backing of business-intelligence software provider Domo in a $125m round, performance-management company Anaplan in a $100m round, and in call center technology company New Voice Media in a $50m series E round. Other investments for Salesforce included a stake in customer success management platform Gainsight, conversion optimisation platform Qubit, cloud security software Skyhigh Networks, network monitoring software Thousand Eyes, and social media contest software Offerpop.
Online marketing optimisation platform HubSpot raised $125m in an upsized initial public offering (IPO) on the New York Stock Exchange in October. The company had raised over $100m in funding prior to the IPO from backers including Salesforce and Google Ventures, though they were not among HubSpot’s principal shareholders. Salesforce-backed online storage company Box raised $175m in its January IPO.
WPP once again led the advertising industry in investing in up-and-coming technology. “Cementing our leadership position in ad-tech, last year we injected part of Xaxis into AppNexus, the world’s largest independent operator in the field, and took a significant stake in the business,” said WPP chief executive Martin Sorrell, noting that Xaxis, claimed to be the world’s largest programmatic media platform, would be worth $4bn on its own. WPP reportedly paid $25m to increase its stake in AppNexus from 1% to 15% as part of a $100m funding round.
Other investments in tech services and ad-tech companies over the past year include eCommera, Percolate and Say Media. WPP also made previous investments in Mutual Mobile, Domo, and Globant, in which it still holds a 20.1% after it floated on the New York Stock Exchange in July, and took stakes in content studio Indigienous Media and YouTube network Fullscreen.
In September, WPP exited from US-based analytics software developer Visible Technologies when it was acquiredby public relations software providers Cision and Vocus for an undisclosed amount.
Publicis Groupe acquired mobile-focused ad platform Run for an undisclosed sum, keeping up with WPP and Omnicom, which each have in-house ad-tech units. It also invested in the $15m series C found for mobile location intelligence tools provider PlaceIQ, of which KBS+ was an earlier investor. Iris Capital, which is backed by Publicis, made at least nine investments in 2014.
Interpublic Group took stakes in outdoor advertising planning and buying platform Adstruck, and in Placed, which has an app that measures the impact of mobile advertisements on in-store visits. The size of the deals were not disclosed.
Dentsu Digital Fund made a $2m investment in internet infrastructure platform S-cubism, and took part in a series A round for Japanese messaging app developer Quan and a ¥1.5bn series B round of online accountancy service Money Forward.
KBS+ made new seed investments in native ads sales platform AdsNative in April and computer vision startsup Dextro in December, and consumer feedback tool Wedgies in January. It also increased its investment in Yieldbot by participating in its $18m series B round in June, and in CrowdTwist as part of a $9m series B round in July.
KBS+ was granted an exit in May when cloud marketing technology developer Unified acquired US-based social media measurement platform Awe.sm for an undisclosed amount. KBS+ had invested during the company’s seed and series A rounds.
Recruit Holdings made about 30 early-stage investments in 2014. Among those it backed were US-based vacation rental aggregator Tripping, and Germany-based online chauffeur-booking service Blacklane. It also took part in DocuSign’s $115m series E round, alongside NTT and Mitsui. Previous corporate investors include Salesforce, Google and Comcast.
Accenture made two later-stage investments in startups that came out of its Open Innovation programme. It took part in a $60m funding round in Apigee, a US-based developer of a technology platform for digital acceleration, and a $30m round in mobile app management software developer Crittercism.
Cambridge Consultants took part in a £6.75m ($10m) funding round for Aveillant, a company with technology that prevents wind farms from interfering with airport radar. The company spun out from Cambridge Consultants’ incubator.
Since its March launch, Randstad Innovation Fund has invested in four portfolio companies: mobile workforce management tools maker Gigwalk, employee referral platform Rolepoint, freelance marketplace Twago, and recruitment platform provider VONQ/Qandidate.com.
Japanese consulting and outsourcing firm Transcosmos is betting on the expansion of e-commerce in Asia. It invested undisclosed amounts in Thailand-based e-book store, Ookbee, and Singapore-based online beauty store Luxola.
People
In January, Joshua Engroff took on the role of managing director of KBS+ Ventures and chief digital media officer of MDC Partners media shop. He succeeded Darren Herman, who left to take a senior position at Firefox browser developer Mozilla. Engroff was previously general manager of mobile operations at ad-tech firm Dstillery.
J. Skyler Fernandes joined Simon Property Group in September to head its new venturing unit, Simon Venture Group. He was previously a partner at venture capital firm Centripetal Capital Partners, where he focused on consumer internet, retail and technology with commercial applications. He also founded seed fund One Match Ventures.
Company highlights
KBS+
Joshua Engroff, the new head of KBS+ Ventures, is full of excitement when talking about the possibilities of advances in ad-tech and marketing automation. He imagines a future where retailers will know the buying habits of a person and be able to serve them a tailored offer the moment they walk in the store.
“I see physical and digital overlapping, and probabilistic targeting across different media,” he says. While tools exist for marketers to retarget the same customer on their laptop, mobile phone and tablet, he envisions a future where that will extend to television and in-store experiences.
These are ideas Engroff has spent some time thinking about, having previously served as head of mobile at Dstillery, a company focused on cross-device audience targeting for brands.
Engroff took on the role of managing director at KBS+ Ventures last year, when previous director Darren Herman left to take a senior position at Firefox browser developer Mozilla.
Ad agency Kirshenbaum Bond Senecal & Partners is part of advertising holding company MDC Partners. It launched its venturing unit, KBS+ Ventures, three years ago, and typically invests in seed rounds between $250,000 and $1m. The unit has made 16 investments since 2011, including four last year and one in January this year.
After last year’s acquisition of London-based marketing services firm Albion, KBS+ Ventures will now start scouting for talent among UK startups, Engroff says, adding that Albion founder Jason Goodman will run the London-based KBS Albion, and is already well connected in the startup world.
“Albion was the core marketing partner for Skype. Their DNA is essentially startup DNA,” Engroff said. “They have access at a fantastic level to what is happening in the UK and in London.”
He said KBS+ considers London to be an ad-tech hub, much like New York. “While we do invest in companies in the west coast, our plan is to be New York and London focused,” he says.
Corporate venturing is a central part of the KBS+ strategy, and one where the company dedicates resources.
“We review about 1,000 deals each year, and have about 400 face-to-face conversations with startup founders,” Engroff says. “We also have about 120 affiliations with accelerators and other venture capitalists (VCs).”
While KBS+ is focused on getting good returns, it also invests for strategic reasons. “Our clients benefit when we can connect them with small tech companies they may not be aware of,” he says.
KBS+ invests in technology focused startups, who do not yet have a sales team. The firm brings value by helping them go to market. “I have been an entrepreneur myself. I have co-founded three companies, so I know what it is like to have a product and a team, and then having to try to go out and sell, and how much connections can help,” Engroff says.
He also runs a fellowship programme in which would-be entrepreneurs take part in a 10 to 12-week course, which he is transforming into a more hands-on experience where participants work on real projects that they pitch to VCs.
While KBS+ was long focused on ad-tech, Engroff says much of the space is now mature and the firm’s focus is broadening. “We focus more on areas where there is the opportunity for transformational change – for example, connecting the dots between offline, digital and physical. Those are the problems that have not been figured out.”
He says the widespread adoption of the smartphone has already transformed the way marketers interact with consumers, and new types of devices and operating systems will continue to open new doors.
Accenture
Since launching its open innovation programme in late 2013, Accenture has invested in at least two of the startups it helped bring to market – Crittercism, a mobile application performance management system, and Apigee, an API management and predictive analytics platform.
However, Jitendra Kavethakar, Accenture’s head of open innovation, said the technology consulting firm has no plans to return to its 1990s role as a major investor in budding IT firms. Instead, it aims to connect growth-stage startups with its vast client network.
“We do not rule out the opportunity to invest in companies, but its not our primary mission to do so,” says Kavethakar. “We will do those investments we think have some key value that we would not get through the open innovation programme, which is our primary way to engage with startups.”
The consultancy’s goal is to be the integration partner of choice for the latest enterprise technologies, connecting start-ups with its clients that span the full range of industries around the world. Those include 89 of the Fortune Global 100 and more than three-quarters of the Fortune Global 500.
“We are a large enough player with a large enough footprint of clients. We do not need to have a fund in order to attract startups to work with us. Instead, we look at how we can partner with them,” says Kavethakar.
Helping startups connect with major clients increases their revenue streams and valuations, while generating significant revenue for Accenture as well. “We do all the technical integration and technology consulting. For every dollar the startup makes, we might make two or three dollars. If you look at it from that perspective we do not need to have a corporate venture fund,” Kavethakar says.
Randstad
There were huge advances in HR tech in 2014, according to Illonka Jankovich, who heads the Randstad Innovation Fund, launched in March. “Companies received the highest amount of private investment funding of the past five years, while at the same time increasing the average size of deals from 2013,” she says, adding that radical changes are taking place in the recruiting landscape.
“Thanks to new technologies, innovative solutions allow recruiters to source, screen and select candidates faster and better, while algorithms are giving suggestions that match candidates and employers,” she says. “Improved user experience is one of the strongest reasons that drives the move to the cloud.”
Netherlands-based human resources services provider Randstad created its €50m fund to target HR technology companies, and so far it has invested in four companies. Part of the plan is to make several small investments over the next two years in startups involved in social sourcing, online platforms, mobile solutions, virtual solutions, gamification and big data analytics.
Jankovich says: “Big data and analytics tools are giving insights to knowledge that managers did not have in the past. The potential applications are numerous, varying from making recruiting smarter up to developing and retaining talent. We expect the analytics to extend to predictive, from just descriptive, meaning to use data, statistical analysis and patterns to predict the future instead of just describing the past.”
WPP
Sir Martin Sorrell, chief executive of WPP, says: “WPP leads the industry in the application of technology to marketing – both through our operating companies and strategic investments in innovative tech companies.
“Xaxis, a wholly-owned WPP company, is the world’s largest programmatic media platform. On the basis of current market valuations, it would be worth over $4bn by itself. Cementing our leadership position in ad-tech, last year we injected part of Xaxis into AppNexus, the world’s largest independent operator in the field, and took a significant stake in the business.
“We have been active in this area for some time. In 2007, WPP was the first company in the sector to invest in applied technology with the acquisition of 24/7 Real Media. Investments in tech services and ad-tech companies include Globant, Mutual Mobile, eCommera, Domo, Percolate and Say Media. We were also investors in Buddy Media, Jumptap and Omniture.
“Digital technologies have created an explosion in demand for high-quality content, and here too we are ahead of the pack. In 2014 we invested in next-generation digital content studio Indigenous Media – a new venture founded by award-winning film-makers Jon Avnet, Rodrigo Garcia and Jake Avnet.
“It joins other investments including Media Rights Capital, which, among many other things, developed the House of Cards series for Netflix, youth-focused online content company Vice, in which we have a stake valued at approximately $300m, and Fullscreen, the leading YouTube network with 375 million subscribers.
“Investment in sports marketing and content is also a significant part of our strategy. The latest example is that we are leading a syndicate investing $250m in Bruin Sports Capital, a global sports marketing firm launched by George Pyne, the former president of IMG Worldwide’s global sports and entertainment business.
