In the second quarter of 2018, GCV Analytics tracked 721 funding rounds involving corporate venturers, a 21% increase over the 598 rounds recorded in the same period of 2017. Estimated total investment also surged to just over $50bn, up 83% from the $27.3bn recorded in the second quarter last year.
The strong performance of corporate venturing naturally contributed to a notable results on a half-year basis. The first half of 2018 was the strongest we have registered in terms of both deal volume and value. Its 1,354 rounds outnumber deals recorded by GCV Analytics in any previous half, along with the estimated $85bn of capital deployed, also a historical high.
More than half of the funding rounds in the second quarter (388) took place in the US, while China was second with 87 deals, India third with 42, and the UK fourth with 38.
When comparing the second quarter with the first this year, there was a 14% increase in deal count, up from 633. Estimated total investment also went up from $36.31bn, representing a 38% rise.
Emerging enterprises from the health, IT and financial services sectors proved the most attractive for corporate venturers, accounting for at least 116 deals each. The top funding rounds by size, however, were raised mostly by companies from the transport and financial services sector.
The most active corporate investors came from the financial services, IT, health, media and industrial sectors, as illustrated by the heatmap overleaf.
The leading investors by number of deals were diversified internet conglomerate Alphabet, e-commerce firm Alibaba and telecoms firm SoftBank. The list of corporate venturers involved in the largest deals by size was topped by internet company Tencent, along with SoftBank and Alphabet.
Deals
Most of the funding from the biggest rounds reported in the second quarter went to emerging enterprises in the transport and financial services sectors. Four of the top 10 rounds were above $1bn.
China-based financial services firm Ant Financial – an affiliate of Alibaba – closed a $14bn series C round, backed by unnamed existing investors and Singapore’s sovereign wealth fund GIC. Spun out in 2011, Ant Financial offers various financial products developed by or related to Alibaba. The company’s major product is Alipay, which accounts for more than half of China’s mobile payments market.
China-based online group buying platform Pinduoduo closed a $3bn funding round led by Tencent. Venture capital firm Sequoia Capital reportedly also participated in the round, which valued Pinduoduo at $15bn. Founded in 2015, Pinduoduo operates an e-commerce offering that allows users to use social media platforms, such as messaging service WeChat, to share details of products they want to buy and form purchasing groups to secure discounts of up to 90%.
SoftBank provided $2.25bn in funding to GM Cruise Holdings, an autonomous-driving spinoff of automotive maker General Motors (GM). Founded in 2013, Cruise is developing autonomous vehicle technology that will be used in GM’s Bolt electric vehicles. The technology is expected to reach market in 2019. GM paid $1bn for the company in early 2016, giving an exit to semiconductor manufacturer Qualcomm.
China-based trucking services marketplace Manbang Group raised $1.9bn in a round featuring Tencent and subsidiaries of Alphabet and SoftBank. The round valued the company at $6.5bn. Alphabet’s investment came through its CapitalG unit, while SoftBank took part through the SoftBank Vision Fund. Formed in 2017 and previously known as Full Truck Alliance Group, Manbang has an online platform through which customers looking to ship goods can connect to truckers with surplus space in their vehicles.
Evergrande Health Industry, a health-related division of property developer Evergrande, paid $860m for a 45% stake in US-based electric vehicle developer Faraday Future. Founded in 2014, Faraday Future develops connected electric automobiles that will boast features such as autonomous parking capabilities and facial recognition.
Exits
GCV Analytics tracked 64 corporate-related exits during the second quarter of 2018, including 39 acquisitions, 23 initial public offerings (IPOs), a merger and a stake sale. The majority of these transactions took place in the US, China and Europe.
Top exiting corporates this quarter were financial services firm Fidelity, semiconductor manufacturers Intel and Qualcomm, and cloud working platform Salesforce, which reported at least five exits each.
The total estimated amount of exited capital in Q2 2018 was $33.9bn. However, a single transaction ($16bn) accounted for nearly half the total.
US-based retailer Walmart agreed to purchase a 77% stake in India-based e-commerce marketplace Flipkart for $16bn. The transaction gave several corporates billion-dollar exits and valued Flipkart at $20.8bn. The SoftBank Vision Fund reaped just over $4bn, after having invested $2.5bn for a stake of about 20% in 2017. Other exiting corporates included e-commerce and media company Naspers, media group Bennett, Coleman & Co, research firm International Data Group and financial services firm Morgan Stanley. Founded in 2007, Flipkart runs a diversified e-commerce platform that sells products spanning more than 80 categories.
China-based consumer electronics producer Xiaomi, whose backers included Qualcomm, raised $4.72bn in an IPO on the Hong Kong Stock Exchange. Xiaomi issued roughly 2.18 billion shares at the low end of the HK$17 to HK$22 ($2.17 to $2.80) range it had set. Founded in 2010, Xiaomi manufactures electronics products, such as smartphones, smart home devices, tablets and television sets running on its proprietary operating system.
Local services platform Meituan-Dianping agreed to buy China-based bike rental service Mobike for $2.7bn. The transaction was reportedly brokered by Pony Ma, chief executive of Tencent, which also owns a stake in Meituan-Dianping. Founded in 2015, Mobike operates an app-based dockless bike-sharing service that has attracted hundreds of millions of registered users.
Online payment platform PayPal agreed to acquire Sweden-based mobile payment technology developer iZettle for $2.2bn, allowing a host of corporate investors to exit. The corporates in question included Intel, payment services firms Mastercard and American Express as well as financial services firm Santander. Founded in 2010, iZettle has built a small card reader that enables small businesses to accept contactless and mobile payments, plus software for taking payments using smartphones.
Adaptive Insights, a US-based business planning software provider backed by Salesforce, was bought for $1.55bn by cloud-based human resources management platform Workday. Founded in 2003 as Adaptive Planning, Adaptive Insights runs a cloud-based platform which enables organisations to build models of their operations and collaborate on planning.
Funding initiatives
Corporate venturers supported a total of 74 fundraising initiatives in the second quarter of 2018, down from the 85 initiatives reported during the same period in 2017. The estimated total capital raised, $8.54bn, was also lower than last year’s second-quarter figure of $10.22bn.
The initiatives include 38 announced, open and closed VC funds with corporate limited partners (LPs), 19 corporate venturing units, nine corporate-backed accelerators and three corporate-backed incubators, among others.
Singapore-based logistics provider GLP launched a $1.6bn investment fund targeting the logistics ecosystem in China. The fund will be managed by Hidden Hill Capital, the private equity arm of its local subsidiary, GLP China, and its limited partners include unnamed insurance providers and long-term institutional investors, such as investment firm China Post Capital. Hidden Hill Modern Logistics Private Equity Fund will be the only fund in China dedicated entirely to the logistics sector, according to GLP, and will target innovative companies in the space.
China-based cryptocurrency exchange Binance set up a $1bn fund to invest in blockchain and cryptocurrency startups. The Community Influence fund will be denominated in Binance’s own cryptocurrency, BNB, and will invest both directly and through other funds. Rather than invest in existing funds, however, Binance will seek experienced fund managers – defined by the company as those who have managed at least $100m in assets – to create new funds. The company also hopes to launch a Binance Ecosystem Fund with 20 as yet unnamed partners.
China-based venture capital firm Qiming Venture Partners closed a $935m fund, securing capital from limited partners including medical practice and research group Mayo Clinic. Qiming Venture USD Fund VI’s LPs include Princeton University, Massachusetts Institute of Technology and Duke University, among others. The vehicle was announced alongside two other funds – the Chinese yuan-denominated Qiming Venture RMB Fund V, which has attracted RMB2.1bn ($334m) in commitments, and Qiming US Healthcare Fund I, which has secured $120m.
Pharmaceutical firm Pfizer revealed plans to invest $600m in biotech and other emerging technologies through new corporate venturing division Pfizer Ventures. Early-stage neuroscience companies will be a key focus, with approximately $150m allocated to such startups. Initial areas of interest will include neuro-degeneration, neuro-inflammation and neuro-metabolic disorders. The $600m comes as part of a restructuring effort that combines Pfizer Venture Investments, the company’s existing corporate venturing arm, with research and development equity investment vehicle R&D Innovate. Pfizer Venture Investments, founded in 2004, has grown to a portfolio of more than 40 companies. It has invested about $500m to date, bringing the size of Pfizer’s corporate venturing efforts to more than $1bn.
Trade organisation Electronic World Trade Platform (EWTP) launched a $600m investment fund featuring Alibaba and Ant Financial as anchor investors. EWTP was first proposed by Alibaba co-founder and chairman Jack Ma in 2016 to help lower trade barriers and support the international expansion of small and medium-sized enterprises by helping them operate online. The EWTP Technology and Innovation Fund will seek to invest in companies expanding internationally and will support technology startups across the world. Alibaba will provide expertise on logistics, payment and e-commerce.
China-based internet group Baidu formed $500m growth-stage fund Changcheng Investment Partners to back internet and artificial intelligence technology developers. The $500m figure represents the fund’s first phase, though it did not reveal plans for a final close nor whether Baidu was providing the entirety of the capital. Li Xinzhe, Baidu’s former chief financial officer, will run the fund as chief executive. Changcheng will operate as an independent entity and will invest $20m to $30m in each deal. Its formation follows Baidu’s launch of two other funds, Baidu Ventures and Baidu Capital, in 2016.
VC firm Sofinnova Partners launched a €275m ($340m) fund with commitments from insurance provider CNP Assurances and an undisclosed China-based biopharmaceutical company. Limited partners include French state-owned investment bank BPIFrance and the government-owned Danish Growth Fund. Other investors in the Crossover Fund I feature family offices, such as Fidim and KCK, and other unnamed entities. Sofinnova originally targeted a €250m close for the fund, which will focus on the biopharmaceutical and medical device sectors. It will invest in about 15 late-stage private and public companies, with 80% of capital going to Europe-based businesses.
China-based venture capital firm AlphaX Partners closed its first fund at RMB2bn with backing from online lending platform CreditEase, outdoor advertising firm Focus Media and cybersecurity software producer Qihoo 360. Venture capital and startup services provider Zero2IPO Group and government guidance fund China International Capital Corporation also contributed to the fund. The fund is dollar and renminbi-denominated. Founded in 2016, AlphaX targets China-based high-growth companies developing technologies in the online, consumer, enterprise software, artificial intelligence, sports and culture sectors.
Idinvest Partners, a France-based growth equity firm backed by several corporate LPs in the past, raised €180m for the first close of Idinvest Digital Fund III. The firm did not disclose the investors, revealing only that they consisted of “a number of existing and new European LPs”, including some corporates. This third fund is digital-focused, targeting €300m for its final close. Idinvest’s past corporate backers include networking technology manufacturer Cisco, insurance group Allianz, media company Lagardère and marketing and public relations firm Up Group.
Aerospace and defence company Lockheed Martin doubled the amount of funding its corporate venturing arm Lockheed Martin Ventures has under management to $200m. The additional $100m follows recent tax reform legislation in the US and will primarily go to early-stage startups in the areas of sensor technologies, autonomy, artificial intelligence and cybertechnology.
