GCV Analytics tracked 2,320 deals worth an estimated total of $109.23bn raised through 2017. The deal count was a minor increase on a year-to-year basis (6%) compared with the 2,173 transactions of 2016. The total value of corporate-backed VC rounds reached a new high, surpassing the $100bn mark.
Nearly half of corporate-backed transactions in 2017 took place in the US (1,140). Other notable innovation geographies on a global scale were China (264), India (147), the UK (128), Japan (71) and Israel (61). East Asia still accounts for almost half the disclosed US dealflow but its often behemoth multibillion-dollar investment rounds actually account for good portion of the estimated total value of the entire corporate venturing world.
Emerging businesses from five sectors raised the largest number of corporate-backed rounds – health with 420 deals, IT with 411, financial services with 313, media with 266 and services with 263. These figures do not necessarily coincide with the sectors that have drawn most attention in the media or raised most capital.
On a quarterly basis, there was a gradual decrease in total deal count from the first quarter, when we tracked 599 transactions, to the fourth, when 557 transactions were recorded. In terms of total value, there was a trend upward until the third quarter, which featured the highest estimated total capital involved in corporate-backed rounds at $34.79bn. However, values dropped by 14% to $29.75bn in the fourth quarter.
US and Asia-based investors vied to be the top corporate investors in 2017 – diversified internet conglomerate Alphabet (Google) with 81 deals, telecoms company SoftBank with 58 investments, media and research firm International Data Group (IDG) with 51, internet company Tencent (50), semiconductor manufacturer Intel (42) and cloud service provide Salesforce (41), among others. The top three investors involved in the largest rounds were SoftBank, Tencent and IDG.
Deals
GCV Analytics tracked many large deals through 2017. All of the top deals stood well above the $1bn mark. These sizeable rounds were raised mostly by emerging businesses in the ride hailing, e-commerce and media space. The most often found corporate backer of these top rounds was SoftBank and its $97bn Vision fund.
China-based ride hailing service Didi Chuxing raised $5.5bn in funding from investors including SoftBank. The round also included Silver Lake Kraftwerk, part of private equity group Silver Lake, and financial services firms China Merchants Bank and Bank of Communications. Didi Chuxing runs a Chinese ride hailing platform with 450 million registered users. In addition to taxis, it also offers car rental, carpooling, luxury and business transport, designated driver and urban bus services. The company revealed its “active internationalisation plans” and is working on intelligent driving and smart transportation projects.
Later on Didi Chuxing closed a $4bn funding round that featured SoftBank and Abu Dhabi’s Mubadala Investment Company. The participants were disclosed by a person familiar with the investment. The company said part of the funding will be used for an international expansion that will start with Taiwan, where it has licensed its brand to local operator Ledi Technology. Additional capital will go to the development of Didi Chuxing’s artificial intelligence technology and the exploration of new business directions, including charging and service networks for electric vehicles.
SoftBank and its Vision Fund agreed to invest a total of $4.4bn in US-based working space operator WeWork. The two paid $3bn to acquire a mixture of primary and secondary shares, and committed to provide $1.4bn in funding for three new regional WeWork subsidiaries in Asia. Founded in 2010, WeWork oversees a network of 160 co-working spaces, stretching across 50 cities in 16 countries. Customers can rent desks or full offices and have access to rapid-speed internet, office supplies and equipment, and other perks such as free coffee. WeWork plans to move heavily into Asia through its new subsidiaries WeWork China, WeWork Japan and WeWork Pacific.
Tencent led a $4bn round for China-based online services provider Meituan-Dianping, which reportedly valued the latter at $30bn. Travel services provider Priceline Group also participated in the round, among a host of other institutional and traditional venture investors. Meituan-Dianping runs a local services and e-commerce platform that processes about 21 million orders each 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. Flipkart confirmed the investment in a statement without stating the figure, which was revealed by other sources, who added that the transaction involved the purchase of primary and secondary shares. Founded in 2007, Flipkart has built the largest e-commerce marketplace in India by estimated market share. It currently lists about 80 million products across over 80 consumer categories including electronics, fashion, appliances and furniture.
Earlier, Flipkart had raised $1.4bn from Tencent, online marketplace operator eBay and software provider Microsoft at a post-money valuation of $11.6bn. The funding was announced by the company alongside news that it had acquired eBay India, the local branch of eBay, which is to continue to run as an independent Flipkart subsidiary.
Exits
GCV tracked 203 exits involving corporate venturers and companies backed by such investors – a 10% drop from the previous year’s 224. The US hosted more than half (123) of these transactions, followed by China (21). The total estimated capital involved in exits was $43.16bn, a modest 8% increase over the $41.81bn in 2016. Most of the top exits last year were initial public offerings (IPOs), though the overall share of IPOs remained stable compared with previous years. Last year also featured the largest acquisition of a tech company that had previously received corporate backing.
The largest acquisition of a corporate-backed company so far recorded was completed by Intel, which acquired Israel and US-based developer of vision driver assistance systems Mobileye for $15.3bn by purchasing 84% of the company´s outstanding ordinary shares.
Mobileye had previously received backing from financial firms Goldman Sachs and Morgan Stanley in the 2000s as well as by car rental services Enterprise Rent-a-Car and financial firm Fidelity in 2013 before it floated on the New York Stock Exchange in 2014. Founded in 1999, Mobileye develops a collision avoidance system, offering computer vision and machine learning, data analysis, localisation and mapping for advanced driver assistance systems and autonomous driving.
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, which were augmented by 55 million shares divested by existing backers to raise an initial $3.4bn, giving exits to investors including Alibaba, Tencent and Yahoo. NBCUniversal subsequently revealed it had invested $500m in Snap through the offering, giving it a stake of about 2.1%.
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.
SoftBank invested $500m in China-based online insurance platform ZhongAn Online Property and Casualty Insurance as part of the latter’s $1.5bn IPO. ZhongAn issued approximately 199 million new shares on the Hong Kong Stock Exchange at HK$59.70 ($7.64) each, at the top of the HK$53.70 to HK$59.70 range it had set. SoftBank acquired a stake of just under 5% for its investment. ZhongAn’s online platform provides more than 300 specialised insurance packages, with its most popular option being to append insurance to e-commerce purchases to cover the cost of returning the goods.
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 €22.00 to €25.50 range set earlier. The shares, issued in Germany and Luxembourg, equated to 18.8% of Delivery Hero’s overall share capital, giving it a valuation of $5.3bn.
Delivery Hero has built an online food ordering and delivery platform that serves customers in more than 40 countries across Europe, Latin America and the Middle East, North Africa, and Asia-Pacific.
NeoTract, a US-based medical device manufacturer backed by pharmaceutical firm Johnson & Johnson, agreed to an acquisition by medical device maker Teleflex for a total consideration of $1.1bn. Teleflex paid $725m in cash on closing of the deal. The remaining $375m are payments contingent on certain commercial milestones related to sales uo to the end of 2020. Founded in 2004,
NeoTract has developed a minimally invasive device, UroLift, to treat lower urinary tract symptoms caused by an enlarged prostate gland, a condition known as benign prostatic hyperplasia.
Funding initiatives
We tracked 297 funding initiatives with corporate backing last year, including 150 venture funds, 55 new units, 42 corporate-backed accelerators, 17 incubators and 33 other initiatives. Most of these initiatives were set up in Asia (105), North America (101) and Europe (63). The countries that hosted the most were the US (92), China (45), India (20) and France (19).
The overall number of such initiatives were down 10% compared with the 332 in 2016. The total estimated value of the initiatives ($43.34bn) was much lower than the 2016 figure of $137.44bn but this was largely due to the effect of the unusually large $97bn SoftBank Vision Fund, which was announced in 2016. Discounting that fund, the 2016 figure would have been $40.44bn. However, Asia accounted for $31.55bn or about 73% of the total capital raised in these initiatives in 2017, which indicates the leading role of this region.
The largest fundraising initiative in 2017 featured the government of China. China’s premier Li Keqiang attended the fifth meeting of the heads of government of Central and Eastern European countries in Riga, Latvia, and launched Sino-CEE Financial Holdings, which was set to manage a €10bn ($11bn) investment fund that will focus initially on businesses in Central and Eastern Europe.
The fund was also supported by two China-based corporate investors – insurance provider China Life Insurance and conglomerate Fosun. The targeted sectors include high-tech manufacturing, consumer goods and infrastructure projects. Sino-CEE Financial Holdings was actually set up earlier by state-owned financial institution Industrial and Commercial Bank of China – by some accounts the largest financial services firm in the world by total assets and market capitalisation.
The Chinese government also set up a fund backed by several state-owned firms that will invest in the country’s internet sector. The targeted size of the fund was RMB100bn ($14.5bn), though by the time it was announced the fund had raised $4.35bn in capital. The China Internet Investment Fund will be overseen by state agencies the Cyberspace Administration of China and the Ministry of Finance. It forms part of the Chinese government’s Internet Plus initiative, which aims to strengthen traditional industries through the introduction of internet technology. Financial services firm Industrial and Commercial Bank of China (ICBC), its largest limited partner, supplied $1.45bn. Other LPs include telecoms companies China Mobile and China Unicom, insurance provider China Post Insurance and Citic Guoan Group, part of investment firm Citic Group Corporation.
China-based smartphone manufacturer Xiaomi agreed to form a RMB12bn strategic investment fund in partnership with the government of the Chinese province of Hubei. Xiaomi, Hubei’s guidance fund Yangzte River Industry Fund, and the government of Hubei’s largest city, Wuhan, agreed to each provide 33% of the capital for Xiaomi Yangtze Industry Fund, with the RMB12bn figure representing the overall target. The fund will invest in companies able to expand the Mi ecosystem Xiaomi is building around its connected devices. The ecosystem would include a wide variety of connected hardware products ranging from appliances and TVs to robots and component makers.
China-based internet company Baidu announced the RMB10bn Apollo Fund, which will be focused on the autonomous driving sector. The fund was established to back 100 self-driving car projects over the next three years, seeking opportunities across the globe in the areas of software, hardware, vertical services and data providers. It drew its name from Baidu’s open-source autonomous driving platform Apollo, which has attracted 70 industry partners so far, including car manufacturers like Hyundai. Baidu announced the latest iteration of the platform, Apollo 1.5, in conjunction with the Apollo Fund. Portfolio startups will gain access to the Apollo platform, which offers features such as high-definition maps, day and night obstacle detection and end-to-end deep learning.
China-based manufacturing services provider Foxconn partnered venture capital group IDG Capital, the Asian subsidiary of IDG, to form a RMB10bn investment fund focused on transport technology. Foxconn and IDG supplied 10% of the capital as well as experts to run the fund. The unnamed fund will target a range of technologies including autonomous driving software and advanced batteries, and will invest in companies based in China, Japan and the US. The fund is expected to be active for seven years, and to “encompass early and mature-stage financing, combining VC and private equity models”.
On-demand chauffeured travel platform UCar formed a $1.47bn investment subsidiary. The strategic investment fund is to cover the whole automotive value chain. Ucar’s chairman and CEO Lu Zhengyao said: “We are already the single largest vehicle buyer in the country and we have a strong sales network and rich service offerings for people using cars.” The fund’s first commitment as a lead investor was in China-based electric vehicle developer Xiaopeng Motors, which raised RMB2.2bn in a series B round. Founded in 2014, Xiaopeng is working on an all-electric sports utility vehicle that can be mass-produced relatively quickly.
