The consumer sector is undergoing significant transformation. There are pressures on the demand side, changing what goes into products and packaging. There are also significant disruptors on the supply side, where e-commerce, pioneered by e-commerce company Amazon in book-selling, has been extended on a global scale to many types of product – from food and beverages through durable consumer goods to fashion and apparel.
The advance of e-commerce inevitably impacts the entire traditional retail value chain – from distribution and delivery to payment and customer service. This is clearly captured by our GCV Analytics data, as the major subsectors featuring emerging consumer business are e-commerce platforms, food and beverage companies and fashion and apparel innovators.
Consumer sector corporates have been investing in both their own sector and other areas that form part of the retail value chain, such as logistics, online payment technologies, consumer lending, big data technologies and transport.
A recent McKinsey report – Trends that will shape the consumer industry – identified key trends that are “likely to have large impact on industry profits”.
The first key macro trend is the expected rise of new middle-class consumers. Economic growth in emerging economies is forecast to generate over a billion new consumers, spending between $10 and $100 a day, by 2020. More than 85% of this middle-class growth is set to take place in the Asia-Pacific region. These new consumers will drive demand for online sales in the same vein as developed and mature markets.
The second important trend is the new type of digital consumer. The report notes that many consumer packaged goods (CPG) companies “face some major strategic questions – including how to build a successful business through online retail channels, how to build brands and categories in a socially networked world, and how to exploit technology-driven opportunities to understand consumers more deeply and connect with them more often”. This trend explains the interest and investments in big data, allowing companies to study in-depth customer profiles.
The report also points to the growing adoption of online purchases of products by consumers in the largest and most significant western markets – e-commerce in the US is estimated to be a $155bn market, in the UK, approximately a third of adults claim to shop regularly for food online, and about as many claim to buy apparel online in Germany. It is, thus, hardly surprising that e-commerce companies tend to invest in “cloud hosting (38%), content marketing (38%), email automation (33%), business Intelligence (31%) and marketplaces (31%)”, according to a report by e-commerce software developer Divante. The findings of our data on corporate investments in VC rounds appear consistent with this statement.
The fourth key global trend is the consumer “shift to value” – that is, the orientation of consumers towards cheaper CPG brands, including private labels. While value offerings are predictably expected to attract large segments of consumers in emerging markets, which still lack high purchasing power, this is a trend also in mature developed markets, where the recent recession has driven consumers to be thriftier than before. McKinsey research, cited in the report, actually suggests that “70% of US consumers are looking for ways to save money” and are content with cheaper brands.
This trend is expected to put pressure on marketing and branding efforts and significantly erode profit margins. This has been already evidenced in the corporate venturing space, where in 2016, for example, US-based retailer Walmart acquired for $3.3bn Jet.com, an e-commerce platform offering customers the chance to save money on a wide range of consumer products.
As a counterpoint to the shift to “value offerings”, however, there are changes in consumers’ perceptions and desires which open opportunities for higher profit margins. Health and wellness are two important factors in consumers’ minds. Nowhere is this more visible than in the rise of plant-based foods across the globe. According to the 2018 Food & Beverage Trend Report by food and hospitality consultancy Baum & Whiteman, while only 6% of consumers follow vegetarian diets and 3% consider themselves vegan, about 83% include plant-based foods in their diets to improve nutrition and health and 62% for weight management.
This food trend is also intertwined with consumers’ growing environmental awareness and their aspiration to be “greener”, as meat-based diets are considered to be bigger contributors to climate change. This new consumer mindset is fertile ground for rising brands in the food and beverage space in order to offset downward pressures on profits from the increasing preference for value offerings.
Another key global trend involves demographic changes across all markets. The world’s population is ageing quickly, with over a billion people expected to be above age 65 in the next two decades, as the McKinsey report points out. This implies that CPG corporations will be forced to innovate to fulfil the needs of ageing consumers.
On the supply side, consumer goods companies must also be mindful of more volatile input costs due to “the emergence of bigger, fewer suppliers and natural-resource shortages”. The report notes how concentrated are the supplies of certain key natural resources. “For example, 57% of the world’s sugarcane is now produced in Brazil and India, while China and Russia together account for close to half of the world’s aluminium production.” Given this concentration, political crises or natural disasters can lead easily to upward pressure on global commodity prices and disruptions in supply chains.
Aside from e-commerce and the food and beverage space, there are notable trends in the clothing and apparel subsector, where digitisation of consumption is also a key disrupting factor. The State of Fashion 2018 report, by The Business of Fashion and McKinsey, notes that the fashion industry is undergoing transformative shifts, including “consumers’ adoption of digital” with “raised expectations of customer experience and a higher scrutiny on convenience, price, quality, newness and a personal touch. Leading players are therefore creating innovative business models, using granular customer insights as a source of differentiation and pushing the limits of their end-to-end product development”.
The report also highlights the role big data plays in new business models in fashion, not only in omnichannel marketing but across the entire value chain. “The proliferation of data and exponential increases in technology performance have opened the door to the use of big data. The use of rich data and granular customer insights to inform decisions offers business opportunities across the fashion value chain, in areas ranging from dynamic pricing to optimised product replenishment.” However, omnichannel integration, investing in e-commerce and digital marketing are cited in the report as top priorities by executives of leading fashion brands.
GCV reported 215 venturing rounds involving corporate investors from the consumer sector for the period between March 2017 and February 2018. A large part of those (97) took place in the US, while 36 were hosted in China, 19 in Germany and 14 in India.
The majority of these commitments (68) went to emerging enterprises in the consumer sector, with the remainder going to companies in a range of related sectors – 29 deals in services, mostly in logistics and supply chain services, 26 in financial, primarily in payment technologies and alternative consumer lenders, 23 deals in IT, big data technologies and software, as well as 23 rounds in transport, mostly in vehicle marketplaces as well as ride-hailing and car-sharing businesses. The network diagram, which shows co-investments of consumer corporates, illustrates the variety of enterprises that have received financial backing from consumer sector incumbents – from food delivery service Ele.me and e-commerce platforms like Snapdeal through on-demand transport services like Lyft and Go-Jek to vegan food products developer Beyond Meat and green chemicals producer Avantium.
On a calendar year-on-year basis total capital raised in corporate-backed investment rounds went down 65% from $23.38bn in 2016 to $15.19bn in 2017. The deal count, however, rose 9% increase from 174 deals in 2016 to 190 in 2017.
The 10 largest investments by corporate venturers from the consumer sector over the past year were mostly within the consumer and transport space.
The leading corporate investors from the consumer sector were e-commerce companies Alibaba and Rakuten, along with consumer products manufacturer Unilever. Alibaba and Rakuten also topped the list of consumer corporates committing capital in the largest rounds, along with e-commerce firms eBay and Amazon. The most active corporate investors in emerging consumer companies were media company Comcast, media and research company International Data Group (IDG), internet company Tencent and diversified internet conglomerate Alphabet.
The presence of corporate venturers from the media sector among top investors in rising consumer businesses is notable. On the one hand, this could be attributed to downward pressure on marketing spending due to current disruptions in advertising. In 2015, the world’s largest advertiser, WPP, warned of “unsustainable” and “inane” low prices putting a strain on its revenues and profits. These developments favour both consumer sector incumbents and rising enterprises, enabling them to cut promotion costs. On the other hand, this may also be an attempt by media companies to engage consumers more directly.
The rising consumer businesses in the portfolio of these non-traditional investors were concentrated primarily in food delivery and e-commerce platforms. The network diagram, representing corporate co-investments in consumer enterprises illustrates that.
Overall, corporate investment in emerging consumer-focused enterprises decreased slightly from 2016 to 2017 in terms of volume but increased in estimated value. According to GCV Analytics data, $15.84bn was invested over 212 rounds in 2017, up from the $14.15bn invested over 247 deals in 2016.
Deals
Consumer sector corporates invested in a number of large rounds, raised primarily by consumer, transport and media-focused businesses. Six of the top rounds were $1bn or more.
Alibaba bought $3bn worth of shares in China-based bicycle rental platform Ofo from investor Allen Zhu. Alibaba acquired the shares at a $10bn valuation, though the stake was probably held by GSR Ventures, the venture capital firm that backed Ofo at series A, B and C stages – Zhu is managing director at GSR. Founded in 2014, Ofo runs an app-based bicycle rental platform that had 200 million registered users worldwide at the end of 2017. It has 10 million bikes in service across 250 cities in 22 countries.
Alibaba also paid approximately $857m for a 15% stake in China-based furniture retailer Beijing Easyhome Furnishing Chain Store Group as part of a RMB13bn ($2.04bn) funding round which also featured insurance firm Taikang and private equity firms Yunfeng Capital and Harvest Capital – the last reportedly invested $228m. Founded in 1999, EasyHome operates a chain of 223 stores across 29 Chinese provinces and municipalities that sell furniture, home improvement and building materials. It also provides home design and renovation services.
US-based ride-hailing platform Lyft expanded a round led by CapitalG, Aplphabet’s growth equity arm, from $500m to $1.5bn. Rakuten took part in the round, among other investors. The transaction valued the company at $11.5bn post-money. Founded in 2012, Lyft runs an on-demand ride-ordering platform in the US and Canada that has completed more than 500 million rides and competes with Uber.
India-based e-commerce firm Flipkart raised $1.4bn from Tencent, eBay and software provider Microsoft at a post-money valuation of $11.6bn. Flipkart runs India’s largest e-commerce marketplace by sales, carrying a wide range of consumer goods. However, profitability proved hard to come by as it faced fierce competition from domestic rivals like Snapdeal as well as foreign competitors such as Amazon. The funding was announced alongside news that it had acquired eBay India, the local branch of eBay, which will operate as an independent subsidiary.
Internet and telecoms conglomerate SoftBank, through the near-$100bn SoftBank Vision Fund, led a $1bn round in US-based sports e-commerce platform Fanatics. The round, first rumoured a month ago, also included sports bodies National Football League and Major League Baseball. The round valued the company at approximately $4.5bn. Fanatics runs an e-commerce platform that sells official sports team merchandise and apparel.
China-based on-demand bicycle rental service Ofo raised $1bn from investors including Alibaba. The other participants in the round, which valued Ofo at $3bn, were not disclosed but a report in July 2017 suggested SoftBank was in talks to lead the round with backing from ride-hailing service Didi Chuxing.
Grail, a US-based oncology diagnostics spinout of genomics technology producer Illumina, achieved a first close of its series B round at $900m. Tencent and Amazon invested in the round, which featured other corporates, mostly pharmaceuticals, such as Johnson & Johnson Innovation, which invested through its subsidiary Johnson & Johnson UK Treasury. Pharmaceutical firms Bristol-Myers Squibb, Celgene and Merck & Co, medical technology producer Varian Medical Systems, and pharmaceuticals supplier McKesson’s corporate venturing unit McKesson Ventures, also contributed. Founded in 2016, Grail develops a blood test for early-stage detection of cancer that combines high-intensity sequencing technology with data obtained through computer science and population-scale clinical studies.
Alibaba agreed to pay RMB5.3bn to raise its stake in China-based logistics affiliate Cainiao Smart Logistics Network from 47% to 51%. Cainiao was formed in 2013 by Alibaba, which held a 48% stake at the time of its formation, along with diversified conglomerate Fosun and retail chain Intime Retail Group. The company operates a logistics platform that coordinates delivery and warehousing for e-commerce operators including Alibaba, and uses third-party partners to fulfil the groundwork.
Lyft also closed a $600m series G round featuring Rakuten that valued it at $7.5bn. The round included investment firm KKR’s Next Generation Technology Fund, investment firms Janus Capital Group and Baillie Gifford, investment and research management firm AllianceBernstein as well as pension fund PSP Investments.
US-based augmented reality technology producer Magic Leap raised $502m in a series D round, featuring Alibaba, media company Grupo Globo and Alphabet. Singaporean state-owned investment firm Temasek led the round. Founded in 2011, Magic Leap develops an augmented reality headset with a dedicated operating system. Magic Leap’s goggles are capable of superimposing animated computer graphics over a user’s view of reality. Its light-field technology could be used for a variety of other purposes.
There were other interesting deals in emerging consumer-focused business that received financial backing from corporate investors from other sectors.
Tencent led a $4bn round for China-based online services provider Meituan-Dianping that valued it at $30bn. Travel services provider Priceline Group also participated in the round, as did Singaporean wealth fund GIC. Meituan-Dianping runs a local services and e-commerce platform that processes about 21 million orders a day, for items such as food, event tickets and flights, connecting 280 million customers each year with a network of some 5 million local businesses.
The SoftBank Vision Fund invested an amount reported to be “at least” $2.5bn in India-based e-commerce company Flipkart. An earlier report suggested hedge fund manager Tiger Global Management was set to sell shares to SoftBank as part of a prospective deal.
Alibaba led a $1.1bn round for Indonesia-based e-commerce platform Tokopedia. The round included undisclosed existing investors, and although they were not named, reports suggested SoftBank and venture capital firm Sequoia Capital took part. Tokopedia runs an online marketplace where merchants and local brands sell a range of consumer products spanning categories such as fashion, software, electronics, cars and lifestyle products.
Deliveroo, a UK-based on-demand food delivery service that counts communications technology provider Nokia as an investor, closed a $482m series F round which featured DST Global, an investment arm spun out of Russia-based internet company Mail.ru. Investment firm T Rowe Price Associates and financial services group Fidelity Management & Research co-led the round. Deliveroo operates an app-based service for users to order food for delivery.
E-commerce firm JD.com invested $397m in UK-based luxury online fashion seller Farfetch as part of a strategic partnership. JD.com will supply Farfetch with marketing, logistics and technology assistance to help it develop its service in China, where it already partners about 200 luxury brands and more than 500 retailers. Farfetch operates an platform that sells goods supplied by more than 700 luxury brands, and it has also developed an e-commerce technology product as well as in-store retail technology for bricks-and-mortar fashion sellers.
US-based fitness company Peloton completed a $325m series E round, which included Comcast NBCUniversal. Wellington Management, Fidelity Investments, Kleiner Perkins Caulfield & Byers and True Ventures co-led the round. Founded in 2012, Peloton operates a home fitness offering that combines its custom-made exercise bike with an app-based subscription service providing video access to live classes and performance-tracking metrics.
Access Technology Ventures, the corporate venturing vehicle of industrial conglomerate Access Industries, invested $100m in US-based smartphone producer Essential Products as part of a $300m funding round. Amazon also participated in the round, through its Alexa Fund, as did Tencent. The round reportedly valued Essential at between $900m and $1bn. Essential Products’ core product is a smartphone with a high-spec 360-degree camera, an edge-to-edge display and a magnetic connector with wireless data transfer for accessories.
Alibaba led a $300m round for India-based online grocery BigBasket that included private equity firm Abraaj Group and venture capital firm Bessemer Venture Partners. Alibaba invested $146m in the round, which reportedly valued BigBasket at $950m. Founded in 2011, BigBasket runs an e-commerce platform that sells fresh produce, packaged food and beverages, spices and a range of household goods. It has 6 million registered users spanning 26 Indian cities.
Exits
Corporate venturers from the consumer sector completed 34 exits between March last year and February this year, including 21 acquisitions, nine initial public offerings (IPOs), two mergers and one business shutdown.
On a calendar year-on-year basis, there was only a slight decrease to 30 exits in 2017, down from the 35 in 2016. The estimated exited capital, however, fell more substantially to $8.13bn in 2017, down from $13.48bn in 2016 – a 40% drop.
US-based visual media platform Snap closed its IPO at $3.91bn, after its underwriters took up the option to buy an extra 30 million shares. Snap issued 145 million shares at $17 each, plus 55 million shares divested by existing backers, to raise an initial $3.4bn, giving exits to investors including Alibaba, Tencent and internet company Yahoo. NBCUniversal subsequently revealed it had invested $500m in Snap through the offering, giving it a 2.1% stake. Snap is best known for the Snapchat platform but its IPO filing indicates its long-term plans involve expanding into an all-purpose visual media company that will also delve into hardware.
Germany-based online food-ordering platform Delivery Hero went public in a €996m ($1.13bn) IPO that gave a partial exit to e-commerce holding company Rocket Internet. The IPO consisted of 18.95 million new shares, 15 million shares held by existing investors and 5.09 million shares held by the Rocket Internet-founded Global Online Takeaway Group. all at €25.50 each, at the top of the €22 to €25.50 range. Delivery Hero has built an online food-ordering and delivery platform that serves customers in more than 40 countries.
Yixin Group, a China-based e-commerce marketplace operator spun out of automotive transaction services provider BitAuto, raised HK$6.77bn ($867m) in an IPO. The company issued almost 879 million shares on the Hong Kong Stock Exchange at the top of the IPO’s HK$6.60 to HK$7.70 range. Its stock opened at HK$10 but closed at HK$8.12, giving it a market cap of about $6.54bn. Yixin runs an online platform that functions as a marketplace for vehicles, and also operates a financial services operation that provides leasing as well as financing for car purchases.
Giosis, the Singapore-based parent company of e-commerce platform Qoo10 which is backed by eBay, agreed to sell Qoo10’s Japanese operations to eBay for $700m. The corporate will give up its stake in Giosis as part of the transaction. Founded in 2010 as a joint venture between eBay and online marketplace Gmarket’s founder Ku Young Bae, Giosis operates six e-commerce marketplaces under the Qoo10 name across Singapore, Indonesia, Malaysia, China, Hong Kong and Japan.
Amazon agreed to acquire United Arab Emirates-based online marketplace Souq.com for $650m, giving media and e-commerce firm Naspers an exit. Founded in 2005, Souq operates the largest online marketplace in the Middle East by customer size, linking to about 75,000 businesses and offering some 2 million consumer items for sale. As a result of the purchase, Amazon will gain a foothold in a region where it has never operated.
Best Logistics, a China-based logistics service backed by Alibaba and manufacturing services provider Foxconn, raised $450m in IPO in the US. The company priced 45 million American depositary shares on the New York Stock Exchange at $10 each, at the foot of the $10 to $11 range it had set. Founded in 2007, Best Logistics offers a range of services including express and freight delivery, business consulting, cross-border logistics, warehousing and inventory management. It serves more than 500 corporate customers as well as a range of small and medium-sized businesses.
Despegar, an Argentina-based travel and accommodation booking marketplace backed by tourism services provider Expedia, raised $332m in an IPO on the New York Stock Exchange. The company issued almost 12.8 million shares at the top of the $23 to $26 range it had set. Founded in 1999, Despegar runs an online platform that sells flights and holiday accommodation package holidays on behalf of third parties. The platform, known as Decolar in Brazil, was responsible for $3.3bn in bookings in 2016.
Big box retailer Walmart agreed to buy US-based men’s fashion e-commerce company Bonobos in a deal that would allow retail chains Nordstrom and Coppel to exit. Walmart is reportedly likely to pay about $300m for Bonobos. Founded in 2007, Bonobos specialised in chinos but has since expanded its clothing range to include suits, shirts, shorts and golf apparel.
Financial services firm JP Morgan Chase completed an acquisition of US-based payment processing platform WePay, giving an exit to Rakuten. JP Morgan Chase will pay just over $300m for WePay, though the price could rise to $400m including retention bonuses and earnouts related to certain targets. WePay has built a payment processing tool for online merchants that includes tools for risk compliance, onboarding and e-commerce support.
Rocket Internet sold about 5.7 million shares in Delivery Hero, the Germany-based food-ordering platform that had gone public earlier for approximately €197m in total. The sale valued the shares at roughly €34.50 each, a substantial jump from the IPO price of €25.50. The company increased the number of orders on its platform by 48% to almost 292 million in 2017 and its revenue by 60% year on year.
There were also a number exits from emerging consumer-related enterprises that involved corporate investors from other sectors.
Waimai, a food delivery service launched by China-based internet company Baidu, was acquired by Rajax, the operator of food delivery company Ele.me. Baidu will now own only a small stake in the business. The transaction reportedly valued Waimai at about $800m, though the company’s worth had been estimated at as much as $2.5bn previously. Waimai operates an online platform for ordering food from local restaurants and fast food outlets. The company will continue operations as an independent entity.
Food and beverage producer Nestlé agreed to acquire a majority stake in Blue Bottle Coffee, a coffee roaster and retailer backed by Alphabet. Nestlé declined to provide details of the deal, but the size of the transaction was reported to be around $500m. Founded in 2002, Blue Bottle has built a premium coffee brand with a presence in the US and Japan. It also sells roasted, ground and ready-to-drink coffee online and in stores, and intends to expand its outlets.
Television streaming service Roku closed an IPO that granted exits to several media companies at $253m, after the underwriters took up the full overallotment option. Media groups 21st Century Fox, News Corp and Viacom were investors in Roku, as were financial services firm Fidelity and also, reportedly, online streaming service Netflix. Roku sells set-top boxes that allow subscribers to stream televisual content from a range of TV and online sources. It had more than 15 million active subscribers by June 2017 and made a net loss of $42.8m from revenue of $399m in 2016.
Fintech company Blackhawk Network acquired CashStar, a US-based digital gift card service backed by semiconductor technology producer Intel, for approximately $175m in an all-cash transaction. CashStar develops a platform for buying personalised digital and physical gift cards. Retailers can use the service to manage gift voucher-based promotions and marketing efforts.
Huami, a China-based wearable device producer with electronics manufacturer Xiaomi as backer, raised $110m in an IPO in the US. The offering consisted of 10 million American depositary shares issued on the New York Stock Exchange at $11 each, in the middle of the IPO’s $10 to $12 range. Founded in 2013, Huami makes smart, wearable biometric devices that track a user’s physical activity, monitoring heart rate, steps, length of sleep, weight and body fat composition. Its sole partner is Xiaomi, for which it creates products such as watches or smart bands.
Funds
Between March 2017 and February 2018, corporate venturers and corporate-backed VC firms investing in the consumer sector secured over $3.67bn via 39 funding initiatives, which included 18 corporate-backed VC funds, 10 new venturing units, five accelerators and four incubators.
On a calendar year-on-year basis, funding initiatives fell slightly in number– from 49 in 2016 to 46 last year. Total capital also went down from an estimated $105bn in 2016, which included the record-breaking $97.7bn SoftBank Vision Fund, to $18.35bn last year.
ClearVue Partners, a China-based venture capital firm focused on the local consumer food and drinks market, raised $362m for its second fund, featuring undisclosed corporate limited partners. The firm had previously raised $262m for its first fund in 2014, focused on food and beverage, consumer brands, internet and mobile deals.
US-based Union Square Hospitality Group (USHG) closed oversubscribed investment fund Enlightened Hospitality Investments (EHI) at more than $200m. The growth-stage equity vehicle included commitments from USHG and third-party investors, though the identities of those backers and the specific sums they provided were not disclosed. USHG operates a range of restaurants, cafes and bars, such as burger chain Shake Shack, together with a catering and events business and a consultancy arm. EHI will focus primarily on businesses in casual dining and hospitality technology, investing between $10m and $20m each time.
Germany-based industrial and consumer product manufacturer Henkel formed corporate venture capital subsidiary Henkel Ventures and plans to invest up to €150m through it. Henkel has so far invested €25m in its corporate venturing activities, supplying capital to barrier technology manufacturer Vitriflex and coating material producer DropWise as well as funds raised by VC firms Emerald Technology Ventures and Pangaea Ventures. However, the launch of Henkel Ventures will mean all the corporate’s VC activities will be overseen by a single entity.
China-based cybersecurity technology provider Qihoo 360 Technology partnered the municipal government-owned Beijing Cultural Centre Fund to set up a RMB1bn investment fund. The fund will target early and growth-stage companies in the internet and cultural sectors, including businesses focusing on the areas of entertainment and new media information.
Packaged food producer Danone provided an undisclosed amount of capital to AccelFoods, a US-based venture capital fund that targets emerging food and beverage brands. AccelFoods closed its first fund in 2014 and is now expanding its second fund, which was formed in partnership with undisclosed corporates, to $35m. Danone’s investment, made through its corporate venturing unit Danone Ventures, was part of the second close. Acre Venture Partners, a VC fund affiliated with another food producer, Campbell Soup, is also a limited partner.
Food producer Juewei Food and Ele.me formed RMB205m China-based joint venture Juele Investment Fund to invest in catering companies. Ele.me and Juewei subsidiary Shenzhen Wangju Investment will each put RMB100m into the venture. The fund will invest in consumer-focused catering businesses capable of growing rapidly with access to funding, as well as companies with quickly scalable business models. Juewei, which sells products such as duck necks and chicken feet, and Ele.me are also seeking portfolio companies with which they can work to develop food-based products.
Diversified group Hero Enterprise provided Rs1bn ($15.5m) for Aavishkaar Bharat Fund, which is being raised by India-based impact investment firm Aavishkaar Venture Management. Aavishkaar is seeking about $310m for the fund, which will promote grassroots entrepreneurship, financial inclusion and employment, supporting companies providing services in areas such as agriculture, financial services, healthcare, renewables, waste and sanitation.
Unilever and Amazon partnered venture capital firm IDG Ventures India for an accelerator scheme. The IDG Ventures India 2017 Innovation Program will target startups in consumer technology, software, healthcare technology and fintech that are looking to raise between $500,000 and $5m in seed or series A funding. Unilever and Amazon participated through respective subsidiaries Unilever Ventures and Amazon Internet Services.
Brazil-based marketing and retail consulting firm Gouvêa de Souza formed a partnership with venture capital firm Bossa Nova Investimentos to form what they refer to as a startup potentialiser. The unit, GS&UP, is equipped with R$6m ($1.9m) and will work with retail, consumer and tourism technology startups, providing funding and industry expertise.
Beverage producer PepsiCo formed a Russia-based accelerator, PepsiCo Lab, to work with startups in the food and drink industry. Developers of technology in areas such as customer interaction, data collection and analysis, human resources management, sales facilitation and automation of operational processes will be considered.
Rabo Private Equity, an investment subsidiary of financial services firm Rabobank, launched subsidiary Rabo Food and Agri Innovation Fund that will back early-stage food and agriculture technology developers. The unit, which is connected to Rabobank’s Banking for Food initiative, will invest in companies in the US and Western Europe that will help to promote food security. The new subsidiary will supply funding as well as industry knowledge and access to its network.
Meat processor and supplier Tyson Foods forged partnerships with innovation platform Plug and Play and startup hub 1871. Tyson will be able to form connections with early-stage companies operating near Silicon Valley-based Plug and Play and Chicago-based 1871.
People
Martin Tschopp was appointed chief operating officer of Naspers Ventures, the corporate venture capital arm of Naspers. The South-Africa-based media group launched its Silicon Valley-based Naspers Ventures in May 2016 to diversify its venture capital activities, which had been concentrated on traditional internet-focused areas such as e-commerce, classified listings and payment services. Tschopp comes from Kiva, a US-based operator of an online platform for lending money to students and low-income entrepreneurs in about 80 countries. He joined the company as CEO in April 2015.
Reese Schroeder joined food producer Tyson’s new corporate venturing unit. Schroeder said: “I have joined Tyson Ventures [as managing director] and am now working for Mary Kay James, our vice-president and general manager.” James, formerly managing director at DuPont Ventures, the corporate venturing unit of the chemicals company, last year announced her move to Tyson Foods to run its $150m fund. Tyson Ventures invests in alternative proteins, food security and use of the internet in the food chain.
Skyler Fernandes, founding managing director of Simon Ventures, the corporate venturing vehicle of US-based real estate developer Simon, joined private equity and venture capital fund Cleveland Avenue as managing director of investments. Cleveland Avenue focuses on restaurants, food and beverage brands, and was founded by Don Thompson, a former CEO of fast-food chain McDonald’s, in late 2015. When he left Simon, managing director Natalie Hwang, co-head of Simon Ventures since 2015, took over.
After a decade with Sweden-based furniture retailer Ikea, Matt Stanley became an investment manager in the group’s “new venture investment unit responsible for investing in innovative companies that are building a more sustainable, connected and affordable life at home”. Ikea already had its €60m GreenTech corporate venturing company, led by Christian Ehrenborg, making equity investments in green technology companies. The transfer for Stanley followed renewed focus by retailers and consumer products groups on innovation, following Amazon’s acquisition of Whole Foods.
Jeff Allen, Mastercard’s former vice-president for strategic investments, became principal for strategic business development at Amazon. Allen joined credit card operator Mastercard in August 2009 from investment bank Sagent Advisors and was a noted thought-leader in the industry, having published in Global Corporate Venturing his “five success factors in strategic investing”.
Rob Rosenberg joined Prolog Ventures as a partner. He had previously spent two years as senior vice-president of business and corporate development at vision-testing technology developer EyeNetra. Switzerland-headquartered biotechnology and chemicals supplier Lonza Group formed a corporate venturing fund in partnership with US-based venture capital firm Prolog Ventures. Prolog Lonza Consumer Fund will invest in North America-based consumer healthcare technology developers working on products that can improve or maintain the health of people and their pets. In particular, it will target areas such as personal and home care, medical food, dietary supplements, and functional food and beverages.
University and government backing
Over the past year, university investments and commitments to university spinouts in the consumer sector reported by our sister publication, Global University Venturing, were concentrated primarily in fashion-related enterprises. University spinouts tend to foment innovation in the apparel space due to academic research on novel materials and smart clothing. It appears that much less research pertaining to food and beverage or other consumer products is being commercialised. Some of the largest funding rounds for consumer spinouts supported apparel-related businesses.
StretchSense, a New Zealand-based wearable sensor manufacturer spun out from University of Auckland, revealed that it had agreed a call option to be acquired by e-commerce portal StartToday, which already owned a 39.9% stake and would pay $72m for the remaining shares. The option, which costs $20m, is valid until September 2018 pending regulatory approval. StretchSense manufactures malleable sensors for clothing. They are marketed to smart apparel vendors as a business-to-business service.
E-commerce and internet company Amazon acquired Body Labs, a US-based body scanner developer based on research at Brown University, in a deal reportedly worth between $70m and $100m. Founded in 2013, Body Labs develops a body scanner, Soma, which can generate a 3D representation of people based on photograph or videos. The technology could help customers determine accurate measurements when they buy clothes online.
Government investments in the consumer sector, reported by our sister publication Global Government Venturing, followed a somewhat different pattern. Over the past year, governments and government-backed investors tended to bet on a wider range of e-commerce enterprises as well as last-mile food delivery businesses. This was achieved either through direct commitments or via other funds.
One of the best examples of a government-backed fund to target consumer enterprises over the past year came from Malaysia. Venture capital firm Gobi Partners achieved a $50m close for its $200m Meranti Asean Growth Fund on behalf of Malaysian government-owned investment firm Malaysia Venture Capital Management (Mavcap). Apart from Mavcap, electronics company Bosch, networking equipment maker Cisco Systems and Unilever also backed the fund. The fund will focus on cloud services, e-commerce and fintech, as well as supporting startups founded by Muslim entrepreneurs.
Poshmark, a US-based online fashion marketplace backed by property development group JF Shea, secured $87.5m in series D funding from a consortium led by Singapore state-owned investment firm Temasek. Founded in 2011, Poshmark operates a social marketplace focused on fashion that enables users to sell, buy and curate styles. The platform was initially geared towards women but is increasingly attracting men to its user base.
Aside from the potential all types of investors see in e-commerce and food delivery in general, such investments on the part of governments may also be attributed to practical policy considerations, such as boosting domestic consumption, which is widely regarded as the driving force of the economy under Keynesian economics. E-commerce, on the other hand, also presupposes a larger volume of electronic transactions, which facilitates control over the monetary units of exchange for public authorities. Strict oversight of the monetary supply is believed to be the key to successful economic policy by monetarists, the other dominant economic school of thought among policymakers.
GCV Analytics defines the consumer sector as encompassing e-commerce, food and beverages, fashion and apparel, consumer electronics, hygiene and beauty products and services, and other durable consumer goods.
