AAA WeWork rescue skews October figures

WeWork rescue skews October figures

The number of reported corporate-backed deals from around the world in October was 235, up 5% from the 223 funding rounds from the same month last year. Investment value also increased by 30%, to $16.8bn – up from $12.97bn in October 2018.

October appears to have registered the lowest monthly result of the year in terms of deal count, but the highest level of total estimated capital invested this year. The latter is largely due to the $9.5bn rescue package of telecoms and internet conglomerate SoftBank for WeWork. The increase is, therefore, not due to bullishness or exuberance among corporate investors but because one very significant investor has had to do damage management on a portfolio company which it continues to believe in despite the pulled IPO and other well-publicised problems.

The US came first in the number of corporate-backed deals, hosting 91 rounds, while Japan was second with 28 and China third with 19.

The leading corporate investors by number of deals were diversified internet conglomerate Alphabet, financial services firm Goldman Sachs and cloud-based enterprise solution provider Salesforce. In terms of involvement in the largest deals, SoftBank and internet company Tencent topped the list along with financial services firm Citi.

GCV Analytics reported 24 corporate-backed funding initiatives in October, including VC funds, new venturing units, incubators, accelerators and others. This figure suggested an increase over September which registered 19. The estimated capital raised in those initiatives, however, stood at $2.57bn, much lower than the $9.82bn in September – which was due to a reported corporate commitment from insurance firm Taiwan Life to an unusually large multi-billion fund.

Deals

Emerging businesses from the IT, financial services, business services, health and consumer sectors led in raising largest number of rounds during the month. The most active corporate venturers came from the financial services, IT and consumer sectors.

SoftBank agreed to provide $9.5bn for a rescue package for US-based workspace provider and portfolio company We Company, whose valuation dropped sharply from $47bn to less than $10bn. The deal will involve $3bn for a tender offer allowing all the other investors to sell their shares, a $1.5bn funding commitment that will be brought forward from April 2020, and $5bn in debt financing. SoftBank said it will come out with a stake sized at approximately 80%, and recent reports had suggested the transaction would revise We Co’s valuation to between $7.5bn and $8bn. The corporate will buy about $1bn of the shares held by founder and former chief executive Adam Neumann, who is also in line for a $185m consulting fee and an advance of $500m of loans.

WeWork runs over 530 shared workspaces in cities across 30 countries, where users can access office equipment, high-speed internet, meeting rooms and free coffee under short-term flexible agreements.

The SoftBank Vision Fund, the company’s $98.6bn investment vehicle, supplied $655m of funding for UK-based business finance provider Greensill. The deal reportedly valued the company at almost $4bn and it came in the wake of an $800m investment by the Vision Fund earlier this year at a $3.5bn valuation. Founded in 2011, Greensill extends working capital and supply chain finance to businesses, tapping capital markets to access the money as opposed to lending off its own balance sheet. It has provided $150bn of financing this year and will spend part of the new funding on international growth.

India-based business e-commerce marketplace Udaan secured $585m in a series D round featuring internet group Tencent and financial services firm Citi. Venture firms Altimeter Capital, Footpath Ventures, Hillhouse Capital, GGV Capital, Lightspeed Venture Partners and DST Global also took part in the round, which reportedly valued the company somewhere between $2.3bn to $2.7bn. Citi invested through its Citi Ventures unit. Udaan operates an e-commerce platform that connects a network of about 25,000 large wholesalers and traders to a customer base of about three million smaller businesses, such as restaurants, farmers or local shops, facilitating the distribution of a wide range of consumer goods. Buyers and sellers can also access credit and working capital through the platform, and Udaan runs a supply chain network that supports delivery.

US-based data analytics software producer Databricks raised $400m in a series F round featuring software provider Microsoft that valued it at $6.2bn. Andreessen Horowitz led the round, investing along with Alkeon Capital Management, Coatue Management, Dragoneer Investment Group, Geodesic Capital, Green Bay Ventures, New Enterprise Associates, Tiger Global Management and funds and accounts managed by BlackRock and T Rowe Price. Founded in 2013, Databricks has built a data management software platform that helps clients prepare data for analytics and processing on a vast scale. The technology is built on open-source data analytics platform Apache Spark, itself also developed by the Databricks’ co-founders at University of California, Berkeley’s AMPLab. The series F funding will allow Databricks to scale its research and development activities and accelerate its international expansion efforts.

Reinsurance provider Munich Re supplied $250m in series C funding for US-based online insurance platform Next Insurance at a valuation of more than $1bn. The investment increased the provider’s stake to approximately 27.5%. Founded in 2016, Next operates an online insurance service that focuses on policies for small businesses. Its coverage areas include general and professional liability, business insurance, commercial auto insurance and worker’s compensation insurance. The platform generates quotes within five minutes and issues customers with a certificate of insurance in real time. It also allows clients to extend their policy to cover their place of work, for instance, allowing a self-employed fitness instructor to cover services they offer in a gym.

China-based groceries e-commerce group Benlai collected $200m in a series D1 round on led by Mingde Holdings, the majority shareholder of logistics firm SF Express. CDH Investments, Beishang Capital and Gaorong Capital also participated in the round. Benlai will collaborate with SF Express to bolster its logistics and supply chain capabilities while the funding will go towards the further development of its online-to-offline and business-to-consumer services. Founded in 2012, Benlai sells fresh fruit and vegetables to consumers through its Benlai Life e-commerce platform. It also operates an online-to-offline offering called Benlai Fresh, retailer Benlaijishi and cold chain logistics service Vtepai. The company has grown to more than 25 million customers across 550 cities.

US-based computing technology startup Pensando Systems emerged from stealth, after having raised up to $145m in a series C round co-led by enterprise technology producer Hewlett Packard Enterprise. Venture capital firm Lightspeed Venture Partners co-led the round, which included data centre operator Equinix, and which reportedly valued Pensando at $645m post-money. Founded in 2017, Pensando has created a software-defined edge services platform that offers cloud services providers networking, storage, compute and security services, enabling organisations to convert their current network infrastructure into a cloud-like environment.

Tencent co-led a RMB1bn ($141m) series B round for China-based digital invoicing services provider Hainan Golden Technology. Venture capital firm Shenzhen Capital Group, alternative asset manager CDH Investment and a vehicle called China Investment and China Finance Fund co-led the round, which also included conglomerate Wanda Group, Hillhouse Capital, IDG Capital and Prometheus Capital. Hainan Golden provides electronic invoicing services, using big data technology to issue, receive, manage and verify invoices based on transaction paperwork, payment vouchers, invoice documents and identification cards, and has built a dedicated software platform, WeTax.

China-based clinical research software provider Taimei Technology raised a $132m series E-plus round led by Tencent. The round also featured SoftBank China Venture Capital, a corporate venturing vehicle for SoftBank. Morningside Venture Capital, Cowin Venture, SAIF Partners, Zheshang Venture Capital and Ivy Capital also contributed to the funding. Taimei produces cloud software and other technology that helps life sciences companies conduct clinical research and collect and manage information concerning adverse effects of drugs in the development stage. The company’s offering also facilitates collaboration between multiple stakeholders in the drug development stage including clinical research organisations, drug developers, regulators and patients.

India-based online video streaming platform MX Player secured about $111m in a series A round led by Tencent. Times Internet, the digital-focused subsidiary of media conglomerate Bennett Coleman, also contributed to the round, after having purchased a majority stake in MX Player for $140m in 2018. The series A round reportedly valued it at $500m post-money. MX Player launched as a video player enabling users to watch locally stored files on mobile device, but it has evolved into an over-the-top streaming service with original and licensed films, TV shows, web series and music videos.

Exits

GCV Analytics tracked 15 exits involving corporate venturers as either acquirers or exiting investors in October. The transactions included nine acquisitions and six initial public offerings (IPOs) and one other transaction.

The exit count figure decreased compared with September, which registered 25 exits. The total estimated exited capital also went down to $1.03bn from the $3.35bn in the previous month, representing a significant 69% decrease. In comparison, during the same month of 2018, the exit count was slightly higher (28 transactions) and the estimated total capital in exits much higher – $4.56bn. Notably, most of the top exits were IPOs of pharmaceutical businesses.

Phathom Pharmaceuticals, a US-based company that has licensed a gastrointestinal disease medicine from pharmaceutical firm and investor Takeda, closed its IPO at $209m. The company issued approximately 9.56 million shares on the Nasdaq Global Select Market priced at $19 each. Its shares closed at $23.59, leading the underwriters to take up the over-allotment option and buy another 1.43 million shares.  Founded in 2018, Phathom has licensed the US, Canadian and European rights to Vonoprazan, a small molecule treatment for gastrointestinal disease Takeda has marketed in its home country of Japan since 2014. The IPO proceeds will fund US clinical trials for the drug.

US-based autoimmune and severe inflammatory disease drug developer Viela Bio floated in a $150m IPO after being spun off by pharmaceutical company AstraZeneca in 2018. The offering consisted of 7.9 million shares issued on the Nasdaq Global Select Market. The company increased the number of shares from 7.5 million but priced them at $19 each, at the bottom of the $19 to $21 range. Viela is developing treatments for autoimmune and severe inflammatory diseases. It will put $50m of the IPO cash into supporting a Biologics License Application it has submitted to the US Food and Drug Administration on behalf of its lead drug candidate, Inebilizuma, a monoclonal antibody being developed to treat neuromyelitis optica spectrum disorder, a condition that causes blindness and paralysis.

BioNTech, a Germany-based immuno-oncology therapy developer backed by pharmaceutical companies Pfizer, Eli Lilly and Sanofi, went public on the Nasdaq Global Select Market in a $150m IPO. The company priced 10 million American Depositary Shares (ADSs), each equating to one normal share, at $15, giving it a fully diluted valuation of $3.9bn. It had originally intended to issue 13.2 million ADSs priced between $18 and $20 per share before cutting the range to $15 to $16. Founded in 2008 as a spinout from Johannes Gutenberg University Mainz, BioNTech is developing cancer treatments based on the proposition that each patient’s cancer is unique and therefore requires individualised treatment. About $100m of the IPO proceeds will fund clinical trials for three drug candidates – for advanced melanoma, HPV and head and neck cancer, and breast cancer respectively – which are being developed from the company’s FixVac platform, utilising a combination of cancer antigens.

Television streaming box provider Roku agreed to acquire Dataxu, the US-based operator of a programmatic video ad buying platform, in a $150m deal that will allow broadcaster Sky to exit. The transaction is a combination of cash and shares but marks a significant fall in value from a $1bn valuation at which the platform last raised money in 2016. It is also reportedly half the size of the deal the company had been seeking a year ago. Dataxu has developed automated demand-side video advertising buying software that allows ads to be managed across television and over-the-top video platforms. The product includes media planning options specialised for each type of video as well as data science tools. The technology will support Roku’s OTT advertising service and enable it to provide a service where advertising spending can be optimised across both TV and OTT programming.

Vir Biotechnology, a US-based immunology drug developer backed by SoftBank, floated in a $143m IPO on the Nasdaq Global Select Market. The company priced approximately 7.14 million shares on the low end of the IPO’s $20 to $22 range, valuing it at about $2.19bn. Founded in 2016, Vir is developing immunology drugs to treat infectious diseases and will channel $45m of the IPO proceeds into a phase 1/2 clinical trial for a hepatitis B virus (HBV) treatment called VIR-2218. About $75m will fund the progress of a monoclonal antibody dubbed VIR-2482 through its own phase 1/2 trial, for influenza, while $30m will support a phase 1 trial for a second HBV candidate, VIR-3434.

Progyny, a US-based fertility benefits platform backed by pharmaceutical firms GlaxoSmithKline and Merck Group, went public in a $130m IPO. The company issued 6.7 million of new shares on the Nasdaq Global Select Market priced at $13 each while existing backers including Merck sold a combined 3.3 million shares. It had originally set a range of $14 to $16 and its shares rose to close at $15.94 on the first day of trading giving it a market cap of more than $1.3bn. Founded in 2015 through the merger of reproductive health technology producers Auxogyn and Fertility Authority, Progyny offers fertility-related health benefits to some 1.4 million employees across more than 80 corporations. The company’s services include access to a dedicated specialist who guides prospective parents through the clinical process and provides emotional support, as well as an integrated pharmacy, Progyny Rx, that carries fertility treatment medication.

Aprea Therapeutics, the US-based cancer treatment developer backed by healthcare provider Praktikertjänst, raised nearly $97.8m in its IPO after underwriters took up the over-allotment option in full. The company had issued 5.7 million shares priced at $15 each, raising $85m and seeing shares rise more than a third to close at $20.50 on the first day of trading. Joint bookrunners JPMorgan Securities, Morgan Stanley and RBC Capital Markets exercised their option to acquire all additional 850,000 shares. Spun out of Karolinska Institute in 2003, Aprea is working on cancer drugs trying to reactivate the mutant p53 tumour suppressor, which is able to halt the formation of tumours. Lead asset APR-246 targets haematologic malignancies and ovarian cancer. APR-246 has secured orphan drug designation from the US Food and Drug Administration (FDA) and the European Medical Agency for acute myeloid leukaemia, myelodysplastic syndromes (MDS) and ovarian cancer, and fast-track designation from the FDA for MDS.

Drivemode, a US-based connected driving assistant technology developer backed by electronics manufacturer Panasonic, insurance company Mitsui Sumitomo Insurance and NEC, was acquired by the R&D division of Honda. The carmaker’s R&D team and Drivemode will collaborate on connected mobility technologies, working from the corporate’s new Digital Solution Center. Honda paid an undisclosed sum and is now Drivemode’s sole shareholder. Founded in 2014, the company develops products which give motorists the ability to send text messages, find directions and select music through voice commands or swiping in order to help the user focus on driving. Drivemode also offers bespoke functionality for select car models through agreements with automotive manufacturers.

PopSugar, a US-based women’s lifestyle media brand potentially backed by mass media group Comcast NBCUniversal, was bought by digital media holding company Group Nine Media. The deal came in the wake of a corporate-backed $50m round for Group Nine that was earmarked for strategic acquisitions. Founded in 2006 as Sugar Publishing, PopSugar runs an online news portal anchored by celebrity, lifestyle and fashion-oriented articles. It also provides software tools enabling its marketing partners to send out mobile content and promotional offers. Group Nine Media owns five digital media brands which, it claims, are followed by 200 million social media accounts and with a potential market reach of about 70% of US millennials. The merger is expected to add PopSugar’s strengths in commerce strategy and producing experiential content.

US-based television adverting optimisation platform Clypd was purchased by telecoms firm AT&T’s Xandr subsidiary in a deal of undisclosed size, enabling media corporates Tivo and RTL to exit. AT&T launched Xandr in September 2018 as a dedicated advertising subsidiary, and it will use Clypd’s technology in its own TV advertising business, particularly for Xandr Monetize, its ad buying and selling platform. Founded in 2012, Clypd offers a data analytics software platform used by more than 100 cable and broadcast TV networks to more accurately target audiences when allocating advertising time. The software provides granular information on TV audiences, as opposed to the broader demographics broadcasters have historically used to form advertising decisions.

Note: Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.

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