The total count of corporate-backed deals we reported from around the globe in July and August was 535 – up slightly from the 503 registered during the same months last year. We tracked 277 in July, up 10% from the 251 funding rounds in July last year, and 258 deals in August, slightly more than the 252 the year before.
Total investment value was lower than in the summer months of year – $12.95bn in July and $7.77bn in August, down from $13.8bn and $11.43 during the same months last year, representing decreases of 6% and 32%, respectively.
In comparison with preceding months of 2019, July registered the second highest monthly result in terms of deal count, surpassed by the 291 deals in April, while August was the lowest for this year.
The US came first in the number of corporate-backed deals, hosting 176 rounds, while Japan was second with 90, China third with 64 and India fourth with 37.
The leading corporate investors by number of deals were internet company Tencent, financial services firm Goldman Sachs and semiconductor producer Intel. In terms of involvement in the largest deals, Tencent topped the list along with telecoms conglomerate SoftBank and investment bank China Renaissance.
GCV Analytics reported 38 corporate-backed funding initiatives in July and 17 in August, including VC funds, new venturing units, incubators, accelerators and other. These figures suggested an increase in July and an expected drop in activity in August. The estimated capital raised in those initiatives stood at over $111bn, due to the outlier effect of SoftBank’s unusually large second Vision Fund, at $108bn.
Deals
Emerging businesses from the IT, health, services, financial and media sectors led in raising the largest number of rounds during the seventh and eighth month of 2019. The most active corporate venturers came from the financial services, IT, media and industrial sectors.
Tencent invested $800m to lead a series D round for China-based real estate brokerage Ke.com sized at almost $1.2bn, which also included a $50m commitment from property developer Country Garden.
Private equity fund manager Gaw Capital Partners supplied $100m for the round, while venture capital firm Gaochun Capital invested $80m, Source Code Capital $52m, New Horizon $30m, China Renaissance unit Huaxing Capital $20m and Strait Capital $5m.Undisclosed additional investors put up a total of $113m.
The transaction valued Ke.com at $9.5bn. Spun off by online real estate portal Lianjia in 2018, Ke.com runs an online platform where users can buy new, second-hand and rental properties in some 500 cities across China and utilises virtual reality technology to help users inspect properties. The fresh cash will support an ongoing expansion in Ke.com’s research and development and marketing costs in addition to increased management investment.
Software provider Microsoft invested $1bn in US-based artificial intelligence (AI) research technology provider OpenAI in a bid to enhance its own work on artificial general intelligence (AGI) technology. Microsoft intends to leverage the partnership to enhance its cloud computing platform, Azure, making it better equipped for use in supercomputing and large-scale AI systems, and allowing it to create and deploy more advanced AI models.
Founded in 2015 and overseen by a non-profit organisation, OpenAI is working on research that is intended to harness AI in responsible ways. The company is most focused on AGI, which could hypothetically combine extremely high-level knowledge of many fields to devise solutions to unanticipated complex problems.
US-based autonomous driving software developer Argo AI received $2.6bn in capital and assets from Volkswagen, valuing the company at more than $7bn. The investment forms part of autonomous and electric vehicle alliance between VW Group and Ford. Both will own an equal stake in Argo AI, although the size was not disclosed. VW has invested $1bn directly and agreed to purchase secondary shares from its peer Ford for $500m over the next three years. Argo AI has taken ownership of VW’s autonomous vehicle unit, Autonomous Intelligent Driving (AID), which is valued at $1.6bn.
Ford will invest the remaining $600m of its existing $1bn commitment with both of the carmarkers using Argo AI’s technology in their self-driving vehicles. Founded in 2016, Argo AI is developing virtual driver systems and high-definition maps that are used to power and navigate self-driving vehicles. It will use AID to expand its team and establish a European headquarters in Munich.
China-based ride hailing services provider Didi Chuxing raised $600m from Toyota as part of a joint venture. The deal reportedly valued it at about $62bn. The joint venture will also involve automotive manufacturer GAC Toyota Motor –a partnership between Toyota and logistics service provider GAC – and will offer vehicular-related services aimed at drivers for ride hailing platforms, such as car leasing options. Didi Chuxing operates a series of transportation services, including on-demand ride hailing, buses, car rental, food delivery and e-bikes. It has also created a financial services platform. The company was formed through the merger of Didi Dache and Kuaidi Dache in 2015 and then acquired competitor Uber’s local subsidiary. Having initially focused on the Chinese market, it has since expanded internationally into markets including Mexico.
FlixMobility, a Germany-based travel services provider backed by automotive manufacturer Daimler, scored a series F round reportedly sized at €500m ($561m). Growth equity firms TCV and Permira co-led the round, which also featured HV Holtzbrinck Ventures and European Investment Bank. Founded in 2013, FlixMobility operates inexpensive long-distance travel services – a coach service called FlixBus and a railway offering called FlixTrain. The company will use the cash to launch additional services, including ridesharing platform FlixCar. FlixMobility also hopes to strengthen its market position in the US, enter South American and Asian markets next year and expand FlixTrain into additional EU member states in 2020.
Babylon Health, a UK-based developer of AI applications for the healthcare sector, raised a $550m series C round, featuring reinsurance provider Munich Re. Health insurance provider Centene put up $50m for the round, while Munich Re reportedly invested $7m through its Ergo Fund while the Saudi Arabian government’s Public Investment Fund supplied $200m. Investment firms Kinnevik and Vostok New Ventures also participated in the round, which valued Babylon at more than $2bn post-money. Babylon has built a range of AI-based health services, including a chatbot used by the UK’s National Health Service to help diagnose minor ailments. Its partnerships also include a telehealth app created for private health insurer Bupa.
China-based electric vehicle developer Lixiang completed a $530m series C round, featuring a $30m investment by digital media company Bytedance. The round was led by Wang Xing, chief executive of local services provider Meituan Dianping, who invested almost $300m. Lixiang founder and chief exeuctive Li Xiang committed nearly $100m to the round, which reportedly valued the developer at approximately $2.9bn. Known as Chehejia and then CHJ Automotive, Lixiang is developing a hybrid electric sports utility vehicle known as Lixiang One, which is slated to begin commercial production in October 2019. The company has received almost 10,000 pre-orders for the vehicle, which is expected to begin shipping in November, ahead of the planned date.
Sweden-based payment technology provider Klarna secured $460m in funding from investors including financial services provider Commonwealth Bank of Australia. Investment firm Dragoneer Investment Group led the round, which included pension fund manager Första AP-Fonden, IVP, HMI Capital, Merian Chrysalis Investment Company, IPGL and funds and accounts managed by BlackRock. The round reportedly valued Klarna at $5.5bn post-money. Founded in 2005 as Kreditor, the company operates a payments platform for online merchants that enables consumers to pay for items immediately, at a later date or in instalments. It secured a full banking licence in Sweden in 2017 and is active in 14 countries. The company has partnered more than 130,000 merchants and processes 1 million transactions each day, having served more than 60 million consumers to date.
Livestreaming platform developer Kuaishou led a $434m series F round for China-based online question-and-answer service Zhihu. Internet groups Baidu and Tencent also contributed to the round with private equity firm Capital Today. It valued the company at almost $3.5bn. Founded in 2011, Zhihu runs an online platform where users can source answers to questions from an online community made up of some 220 million registered users. The company also hosts forums, an online publishing service and livestreamed Q and A sessions from verified experts and business partners. It sells online education products but still generates most of its revenue from advertising.
Brazil-based mobile financial services provider Nubank collected $400m in series F capital from a consortium led by growth equity firm TCV that featured Tencent. DST Global, Sequoia Capital, Dragoneer Investment Group, Ribbit Capital and Thrive Capital also took part in the round, which reportedly valued Nubank at more than $10bn. Founded in 2013, the firm started out by providing a fee-free credit card that users manage through a mobile app. It has since added current and savings accounts for consumers, entrepreneurs and small and medium-sized enterprises, a loyalty rewards program and a personal loans product. It is preparing an international expansion this year, having already hired teams for Argentina and Mexico.
Exits
In July and August, GCV Analytics tracked a total of 39 exits (22 in the former and 16 in the latter) involving corporate venturers as acquirers or exiting investors. The transactions included 29 acquisitions and nine initial public offerings (IPOs).
The exit count figure – 23 – remained the same in July as June. August suffered a slight deceleration, registering only 16 transactions. It is important to note that this type of slowdown is expected during the summer months. The total estimated exited capital also dropped, from $6.01bn in June to $3.22bn in July and to $1.61bn in August, representing a 73% cumulative decrease. In comparison with the same months of 2018, the exit count was similar to July (24) but higher than August (10). The levels of estimated exited capital were also heading downwards in this period last year, though the estimated amounts were higher – $4.93bn in July and $2.99bn in August.
Douyu, a China-based video game livestreaming platform operator backed by Tencent, priced its shares at the low end of its range at $11.50 and raised $775m in its IPO. The company issued 44.9 million new American Depositary Shares (ADS), in addition to 22.5 million of existing stock sold by existing shareholders. Douyu itself raised $517m and the remainder went to exiting shareholders. The company had hoped to price ADSs at up to $14 and raise as much as $944m in proceeds. It had also hoped to list on the New York Stock Exchange but delayed and altered the plans amid economic tensions between the US and China. Founded in 2014, the company has attracted more than 159 million active users and achieved a $5m net profit in the first quarter of this year, after making a $122m net loss in 2018.
Private equity firm Blackstone agreed to buy Vungle, a US-based advertising technology developer backed by internet conglomerate Alphabet and telecoms firm Verizon, in a deal reported to be worth $750m. Financial terms were not confirmed by either party. Vungle has developed a suite of digital tools that help developers monetise their mobile apps through customer data-powered advertising campaigns. The technology accounts for more than four billion video views per month.
Pharmaceutical and chemical producer Bayer acquired US-based stem cell treatment developer and portfolio company BlueRock Therapeutics which reportedly valued the company at nearly $1bn. The terms of the transaction involve Bayer paying a total of up to $600m to acquire the shares in BlueRock it did not own, investing up $240m upfront that will be followed by pre-clinical and clinical milestone payments that could reach $360m. BlueRock is looking to engineer stem cells using its proprietary induced stem cell (iPSC) platform to treat neurological, immunological and heart diseases. Its drug candidates include a potential Parkinson’s disease treatment it aims to advance into the clinic by the end of 2019. The company was founded by venture capital firm Versant Ventures in 2016 and emerged from stealth the same year with $225m in series A funding from Versant and Bayer’s Lifescience Center, which owned a 40.8% stake prior to the acquisition deal.
Banking software producer Temenos agreed to pay at least $559m to acquire Kony, a US-based mobile banking software developer backed by telecoms firms SoftBank and Telstra. The deal consisted of $559m upfront and a $21m earn-out. Founded in 2008, the company operates a cloud-based platform that allows enterprise clients to develop and deploy applications that enable customers to perform functions such as signing up for accounts, accessing loans and making payments. Its offering includes Kony Quantum, an app development tool for financial services providers that requires minimal coding.
Amal Therapeutics, a Switzerland-based cancer-focused biotechnology spinout from University of Geneva, agreed to an acquisition worth up to €325m ($365m) by one of its existing investors, pharmaceutical firm Boehringer Ingelheim. The latter will make an upfront payment of undisclosed size, with the remainder due once clinical, developmental and regulatory milestones are hit. A total of $112m will be paid out if treatments reach certain commercial milestones. Founded in 2012, Amal Therapeutics is working on peptide-based therapeutic vaccines using a technology platform called Kisima. Its lead asset, ATP128, is aimed at stage 4 colorectal cancer. The spinout previously signed a collaboration agreement with Boehringer Ingelheim to enter ATP128 into a phase 1b clinical trial that will evaluate the candidate in combination with one of the corporate’s compounds, BI754091. Boehringer Ingelheim plans on developing additional therapies by combining its own assets with Kisima’s capabilities.
Livongo Health, a US-based health management technology developer backed by corporates including pharmaceutical firm Merck and care provider Humana, went public in an IPO sized at more than $355m. The IPO consisted of approximately 12.7 million shares priced at $28 each, significantly above the $20 to $23 range it had set earlier, with the number of shares also having increased from 10.7 million. Founded in 2014, Livongo helps patients living with a chronic condition manage their health through a data-driven platform that relies on smart devices and offers users personalised digital guidance and around-the-clock access to health professionals. The company is targeting users dealing with diabetes, hypertension, weight management and behavioural health. It had raised $222m in funding ahead of its initial public offering.
Health Catalyst, a US-based healthcare data analytics software provider backed by care consortium Kaiser Permanente and healthcare and insurance provider UPMC, raised $182m in its IPO. The company increased the number of shares in the offering from 6 million to 7 million and priced them at $26 each, above the $20 to $23 range it had set. They surged more than 50% on its first day of trading on the Nasdaq Global Select Market, reaching a $39.17 close and a market cap of $1.1bn. Founded in 2008, Health Catalyst has created an analytics platform that relies on AI and big data technologies to link disparate healthcare data, such as electronic health records and insurance claims, to identify potential clinical, financial and operational improvements.
US-based patient engagement technology provider Phreesia priced its shares at $18 and raised more than $167m in proceeds when it began trading on the New York Stock Exchange. The IPO provided exits to three corporate investors: BlueCross BlueShield Venture Partners, which invests on behalf of multiple BlueCross BlueShield insurers; Ascension Ventures, venturing subsidiary of care provider Ascension Health; and Echo Health Venture, a vehicle created by hospital manager Cambia Health Solutions with health insurer Blue Cross Blue Shield of North Carolina’s Mosaic Health Solutions vehicle. The company sold approximately 9.3 million shares, made up of 7.8 million newly issued stock and up to 1.5 million shares sold by certain investors owning more than 5%. Phreesia has developed cloud-based software for hospitals and care providers to manage their patient intake. The platform enables organisations to optimise staffing while improving clinical care and boosting profitability. The company has allocated approximately $18.1m to paying a cash dividend to shareholders of senior convertible preferred stock and will use another $17.7m to repay its revolving credit line with Silicon Valley Bank.
Medical technology supplier Hillrom agreed to acquire Breathe Technologies, the US-based respiratory aid developer backed by medical products group Johnson & Johnson, for $130m in cash. The former already owns a number of respiratory care technologies, including portable airway-clearance vests and a non-invasive cough support system. It also offers technologies that help respiratory disease patients regain mobility earlier in the recovery process by supporting them in physical activity. Founded in 2005, Breathe has developed a device called the Life2000 Ventilation System. It features a handheld, battery-powered ventilator that undocks from the main tabletop unit to help a patient breathe while they move through indoor environments such as households or hospitals. Life2000 has received market clearance from the US Food and Drug Administration but Breathe owns more than 100 patents for concepts that would mainly help treat respiratory disease.
Communication software provider 8 times 8 has acquired Wavecell, a Singapore-based cloud communications platform backed by telecoms group Telkom Indonesia, in a deal worth $125m. The deal consisted of $69m in cash, with the remaining $56m provided as stock in 8 times 8. Founded in 2010, Wavecell has developed a cloud-based platform that enables brands to integrate text messages, chat apps, video and voice applications into their customer service offerings. The acquisition helps 8 times 8 gain a market presence in Asia, with Wavecell based in Singapore, Indonesia, the Philippines, Thailand and Hong Kong.
Note: This is our data snapshot based on the last two months’ investment activity. The charts and tables have been generated by our data platform GCV Analytics. Monthly data can fluctuate as additional data are reported after each issue of GCV magazine goes to press.