In the first quarter, GCV Analytics tracked a record 789 funding rounds involving corporate venturers, a 23% increase over the 644 recorded in the first quarter of 2018, driven by an increased appetite by first-time CVC investors over the past 15 months – a trend that might continue given the spate of new funding initiatives announced.
The estimated total investment was $35.73bn, down 4% from the $37.07bn recorded in the same period last year. The US hosted the largest number of funding rounds, nearly half of them (366), while China hosted 80 deals, India 48, the UK 45 and Japan 41.
The number of deals was higher in the first quarter than in the last quarter of 2018, when there were 672. Estimated total investment, however, went down by $23bn from $58.68bn – 39.1%.
Most of the corporate investors taking minority stakes in the first quarter were investors which have conducted at least one deal previously (80%). A fifth of corporates were disclosing their first minority stake deal. There appears to be a trend of newcomers to venturing – whether with a specific venturing unit or not. During 2017, first-time deals amounted to no more than 15% of the total number, but last year these deals took a bigger share – up to a quarter, according to GCV Analytics data.
The leading investors by number of deals were diversified internet conglomerate Alphabet, telecoms firm SoftBank, cloud-based enterprise software provider Salesforce and internet company Tencent. Corporate venturers involved in the largest deals by size were led by SoftBank, Alphabet and Tencent.
Emerging enterprises from the IT, health, financial, services and consumer sectors proved the most attractive for corporate venturers, accounting for at least 70 deals each. The top funding rounds by size, however, were raised mostly by companies in services and transport.
The most active corporate investors, in turn, came from the financial services, IT, media, health and services sectors, as illustrated by the deals heatmap.
Deals
Most of the funding from the biggest rounds reported in the first quarter went to emerging enterprises in transport and services. Five of the top 10 rounds were above $1bn and SoftBank and Tencent were most often involved in those top rounds.
SoftBank invested $2bn in US-based workspace provider WeWork, reportedly at a $47bn valuation. The funding came from SoftBank itself rather than the SoftBank Vision Fund. News of the deal came as WeWork restructured itself into a business known as the We Company which will consist of WeWork and residential accommodation-focused division WeLive and WeGrow, which is currently running an elementary school and coding academy. WeWork runs shared workspaces in 30 countries, where users can access office equipment, high-speed internet, meeting rooms and free coffee under short-term flexible agreements. It made a $1.22bn loss in the first nine months of 2018 from $1.25bn in revenue.
China-based automotive e-commerce platform Chehaoduo secured a $1.5bn investment from the SoftBank Vision Fund. Chehaoduo, a spinout of classified marketplace Ganji, operates used vehicle auction and trading platform Guazi and after-sales services subsidiary Maodou. The funding will go to drive technology, product and services development. Chehaoduo also plans to increase its marketing activities and bolster its offline presence. It has raised more than $3.3bn in total.
US-based satellite services provider OneWeb raised $1.25bn from a host of investors including SoftBank, diversified conglomerate Grupo Salinas and mobile semiconductor producer Qualcomm. The government of Rwanda also joined the corporates in a round that increased the total raised by OneWeb to about $3.4bn. Founded in 2012, OneWeb is developing a network of low earth orbit satellites meant to provide high-speed internet connectivity to underserved parts of the world. The satellites are built through a partnership with aerospace manufacturer Airbus. The latest funding will be used to accelerate production and increase satellite launches.
The SoftBank Vision Fund led a $1bn round for US-based online shipping platform Flexport that reportedly valued it at $3.2bn. Logistics service provider SF Express also participated in the round along with investment firm DST Global and venture capital firms Founders Fund, Cherubic Ventures and Susa Ventures. Flexport 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 for recruitment, with a focus on engineers and experts in local markets, growth of warehouse facilities and possible expansion in its air fleet.
Indonesia-based on-demand ride provider Go-Jek secured about $1bn from investors including Tencent, e-commerce firm JD.com and Alphabet, reportedly at a $10bn post-money valuation. The three corporates co-led the funding, the first close of Go-Jek’s series F round. They were joined by conglomerate Mitsubishi Corp and investment manager Provident Capital. Go-Jek owns a mobile ride-hailing and on-demand services app that reportedly had up to 25 million users by June 2018. It has expanded into Singapore and is in discussions with Philippine regulators.
Exits
GCV Analytics tracked 60 corporate-related exits during the first quarter of 2019, compared with 49 in the same period last year, including 45 acquisitions, nine IPOs, three mergers and two stake sales. Most of these exits took place in the US, eastern Asia, Israel and Europe.
Top exiting corporates last quarter include technology and internet companies like Alphabet, industrial conglomerate General Electric and pharmaceutical company Eli Lilly which reported at least three exits each. The total estimated value of the exits was $14.84bn. The top four recorded exits were above $1bn.
US-based ride-hailing service provider Uber announced its acquisition of United Arab Emirates-based peer Careem for $3.1bn. The transaction gave exits to ride provider Didi Chuxing, e-commerce firm Rakuten, telecoms firm Saudi Telecom, travel services provider Al Tayyar and automaker Daimler. The acquisition consisted of $1.4bn in cash and $1.7bn in notes reportedly convertible to Uber stock at $55 a share. Founded in 2012, Careem runs a ride-hailing platform in more than 100 cities in the Middle East, Turkey, Africa and Pakistan in addition to digital payment and last-mile delivery services.
US-based on-demand ride provider Lyft, which has received backing from several corporates, raised $2.34bn when it floated at the top of its $70 to $72 range. The company issued 32.5 million shares at $72 each, valuing Lyft at $24.3bn. Previous corporate backers of Lyft include Alphabet, e-commerce firms Alibaba and Rakuten, automotive parts maker Magna, automaker Jaguar Land Rover and financial services firm Fidelity. Founded in 2012, the company’s platform claims to have facilitated rides for some 30.7 million users in 2018 using nearly 1.9 million drivers.
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 invested $50m in Avito in 2013 and subsequently another $1.2bn two years later to take its stake from 17.4% to 67.9%. The latest investment involved it growing its share from 70.4% and values the company at $3.85bn. Avito’s platform, with 10.3 million daily visitors, covers property, consumer goods, vehicles, services and jobs.
China-based social media platform YY acquired its portfolio companies Bigo, a Singapore-based social video live-streaming platform, for over $1.45bn. The deal consisted of roughly $343m in cash, the rest in shares. Founded in 2015, Bigo runs platform Bigo Live, while also offering short-form video-based social media service Like as well as a range of other apps such as gaming-focused streaming platform CubeTV. Bigo uses artificial intelligence to eliminate sexually suggestive content from its platform.
US-based vertically integrated cannabis group Verano, previously backed by cannabinoid therapy developer Scythian Biosciences, was acquired by peer Harvest Health and Recreation for $850m. The all-stock transaction is subject to closing conditions including shareholder approval. Founded in 2018, Verano runs licensed cannabis cultivation and manufacturing facilities, having a wide range of cannabis products such as edibles, extracts and concentrates. The company owns dispensaries under the brand name Zen Leaf.
Funding initiatives
Corporate venturers supported 69 fundraising initiatives in the first quarter of 2019, comparable to the 64 initiatives reported during the same period of 2018. The estimated total capital raised, $10.68bn, was considerably higher (49%) than last year’s first-quarter figure of $7.14bn. The initiatives included 45 announced, open and closed VC funds with corporate limited partners, 14 new corporate venturing units, four corporate-backed accelerators and two incubators, among others.
SoftBank launched $5bn Latin America-focused technology vehicle SoftBank Innovation Fund with a $2bn investment. SoftBank will act as its general partner while raising additional capital externally. It has also formed the SoftBank Latin America Local Hub to aid the growth of local portfolio companies. The unit will invest across South America up to Mexico. Its target areas include e-commerce, healthcare, mobility, insurance and digital financial services. The SoftBank Innovation Fund will be headed by SoftBank’s chief operating officer, Marcelo Claure, who is also chief executive of Sprint, SoftBank’s US-based telecoms subsidiary.
Carmakers Chongqing Changan Automobile, Dongfeng Motor and FAW joined Alibaba, Tencent and retail conglomerate Suning to form a RMB9.76bn ($1.46bn) investment entity. The joint venture will invest in the on-demand ride service sector, with a particular focus on vehicles running on renewable energy. It also intends to establish its own as-yet unnamed China-based ride-hailing business. The corporates, all based in China, were joined by a range of unspecified funds, and Alibaba, Suning and Tencent provided their share of the capital through unnamed investment vehicles. Suning is the vehicle’s largest shareholder, with a 19% stake, while Chongqing Changan Automobile, Dongfeng Motor and FAW own 15% each. The new entity is expected to face stiff competition from Didi Chuxing, which reportedly takes 90% of all bookings in a Chinese ride-hailing market estimated by consulting firm Bain & Co to be worth roughly $23bn. Alibaba and Tencent are both also among Didi Chuxing’s investors.
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 mobility, wealth management, cybersecurity, data analytics, connected property and health products. The firm said it had allocated more capital to Allianz X as a reflection of the unit’s success and its importance to Allianz’s digital transformation plan. Iván de la Sota, Allianz’s chief business transformation officer, said: “We are very pleased with the progress Allianz X has made thus far and are committed to further invest and develop the next generation of digital growth companies related to Allianz’s core business.”
Verily, a US-based life sciences subsidiary of Alphabet, received a $1bn injection, and aims to expand its investment activities to include more startups. Partner Space, Verily’s investment and collaboration scheme, is set to increase the number of startups it hosts from between six and eight companies to up to 15 companies. The initiative typically invests in series A or B rounds and offers portfolio companies the opportunity to work at its San Francisco campus in a move to foster collaboration. The only two startups to have disclosed their participation in Partner Space are Freenome, which combines machine learning, computer science and biology to develop disease screening and diagnostic technology, and Culture Robotics, which is creating tools to automate the fermentation process.
South Korea-based financial services firm Hana Financial Group set up a ₩1 trillion ($894m) fund of funds that will provide debt financing to venture capital firms. Seoul-based Hana Ventures plans to deploy the capital by 2021, targeting VC firms investing in biotech and information, communication and technology product developers. The company has put up ₩100bn for a fourth Industrial Revolution Fund as part of the initiative. In addition to supplying loans, Hana will also make direct investments in funds.
SoftBank rebranded its SoftBank Ventures Korea unit as SoftBank Ventures Asia to reflect a wider geographical focus. Founded in 2000, SoftBank Ventures Korea initially formed part of a network of corporate venturing vehicles that included SoftBank China Venture Capital, the New York-based SoftBank Capital – since spun out as SBNY – and Softbank UK Ventures. The unit initially focused on investment in South Korea but expanded its remit in 2011 to take in deals elsewhere in Asia. It has now backed some 250 companies. The rebranded SoftBank Ventures Asia will also make early-stage investments in the US and Europe. It is currently operating from offices in China, Israel and the US as well as South Korea, and is hiring staff for a second Chinese office and a branch it plans to open in Singapore.
France-based venture capital firm Seventure Partners reached the first close of a €200m healthcare-focused fund with commitments from corporate limited partners including cheese producer Bel and food provider Danone. Pharmaceutical firm Novartis, yeast manufacturer Lesaffre, medical device producer Wright Medical and Unigrains, the investment arm of agricultural products supplier Unicéréales, have also backed the fund. Health for Life Capital II also signed up an unnamed US-based food ingredient provider, undisclosed financial services firms and assorted individual investors. The fund will invest globally, focusing on technologies centred on the human microbiome, but will also conduct opportunistic investments in areas such as digital therapeutics, digital health, digital nutritional advice, personalised diets, precision medicine and food technologies.
Netherlands-based investment firm Gilde Healthcare closed a €200m private equity fund ywith a contribution from financial services firm Rabobank’s Rabo Corporate Investments unit. Pension fund PGGM/Pensioenfonds Zorg en Welzijn has also backed the fund, as have a range of unnamed Netherlands-based institutional investors and international funds of funds. The fund, Gilde Healthcare Services III, closed at its hard cap. It will target healthcare and service providers as well as medical product suppliers, focusing on profitable businesses with earnings before interest, tax, depreciation and amortisation of $2.2m to $16.8m. The vehicle will particularly seek opportunities in Belgium, the Netherlands, Luxembourg, Germany, Austria and Switzerland. Apart from capital, it will offer portfolio companies access to its international network and support with growth strategies.
Alibaba’s Electronic World Trade Platform and online listings platform 58.com 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 Xiaochuan Wang, chief executive of search engine provider Sogou. The firm did not disclose its final target 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 unit Alibaba Capital Partners for five years up to 2012 who went on to CDH Investments before founding Bat Capital, and Jeeves Jiang, former CEO of smartphone producer Coolpad Indonesia.
SoftBank provided $200m of a $400m fund raised by Abu Dhabi-owned investment vehicle Mubadala. The fund will invest in Europe-based startups, and SoftBank’s involvement comes after Mubadala provided $15bn for the SoftBank Vision Fund, which is just short of $100bn, in 2017. The Abu Dhabi fund will invest between $5m and $30m in European startups.
This is our data snapshot based on investment activity over the past three months. To verify reported deals, we contact about 300 corporate investors each quarter – roughly 18% of the CVCs we cover, which account for most of the deals made public.