Corporate Venture Capital in 2016: The Trends, Part Two

2016 truly seemed like a year when reality took a big step toward the future of science fiction, as virtual and augmented reality suddenly began attracting significant venture capital while carmakers began putting significant funding into the autonomous driving technology of Total Recall and Demolition Man (no word on actual Johnny Cab drivers yet though). Elsewhere, corporate venturing money was directed to areas that represented a continuation or offshoot of existing sectors.

Virtual And Augmented Reality

Facebook’s $2bn acquisition of Oculus VR in 2014 marked the resurrection of VR technology as a viable route for VC money but 2016 was the year when serious cash started flowing into the sector.

Smartphone maker HTC was the most active corporate as it looked to build an ecosystem around its Vive headset. It announced a $100m corporate venturing fund and accelerator called Vive X in April, and two months later it had formed a coalition of 28 firms, including mobile game publisher Colopl and conglomerate Legend Holdings’ Legend Capital unit, dubbed Virtual Reality Venture Capital Alliance. HTC rounded off the year by launching a $1.45bn investment initiative with Shenzhen Municipal Government in China.

Other corporates got in on the action too. Cinema operator Imax launched the $50m Imax VR Content Fund in October with support from Acer, CAA, Enlight Media and WPP, while gaming company Gree announced the $12m GVR Fund in April. Open-Source Virtual Reality, the initiative headed by gaming product maker Razer, announced a $5m fund in June.

In terms of rounds, nothing came close to the $790m series C round closed by AR technology developer Magic Leap in February, which featured Alibaba, Google, Qualcomm, Legendary Entertainment and Warner Bros.

However, GCV data indicates nine AR or VR companies closed rounds sized at $40m or more, the pick being the $120m raised by gesture control company Thalmic Labs in a June round co-led by Intel Capital and Amazon Alexa Fund, and a $100m Hinduja Group-led round closed by VR and AR computing platform MindMaze in February.

Autonomous car technology

Driverless car technology was barely a blip on the radar before the end of 2015 when autonomous car GPS developer Swift Navigation secured $11m in a Qualcomm Ventures-backed round, but after that the floodgates seemed to open, and much of the investment was driven by corporates, even as the likes of Tesla, Alphabet and Apple worked to trial their own systems.

General Motors moved first, paying $1bn to acquire Cruise Automation in a March deal that gave an exit to Qualcomm Ventures, the deal coming shortly after GM had acquired ride hailing service Sidecar and invested $500m in its competitor, Lyft. The combination of ride ordering and driverless car technology pointed the way to a future where, theoretically, carmakers would partner ride sharing services and software companies to essentially run transport in its entirety.

Ford behaved similarly, investing $182m in data analytics technology provider Pivotal Software as part of a $653m round, backing 3D mapping technology startup Civil Maps’ $6.6m seed round and teaming with Baidu to provide $150m for Veldoyne Lidar, a US-based producer of the light, detection and ranging (lidar) technology essential for autonomous vehicles. Those investments were made as Ford also led car sharing service Zoomcar’s series B round and acquired shuttle service Chariot for $65m.

Intel meanwhile pledged to invest $250m in the technology over the next two years while Toyota and BMW backed autonomous car technology startup Nauto, the latter forming a $530m fund and citing driverless car tech as a priority. Elsewhere, smart car developer Le Supercar secured almost $1.1bn in funding and lidar sensor developer Quanergy raised $90m in a Sensata Technologies, Delphi Automotive and Samsung-backed series B round that valued it at more than $1bn.

Artificial Intelligence/Machine Learning

It seems every year there’s a buzzword or phrase that startups routinely insert into their press releases and websites to secure funding. If 2014 was the year of big data and 2015 artificial intelligence, 2016 was the year machine learning came to the forefront, and both it and AI proved a major destination for venture capital.

The list of deals is too long to go into detail but some of the funding highlights included Zymergen, a company that uses machine learning to engineer microbes, closing a $130m SoftBank-led series B round in October; Intel buying deep learning software company Nervana Systems for $408m in August; AI software producer Voyager Labs securing $100m in an Oracle-backed round in October; and machine learning-based data analysis company Gridsum raising $87m in a September IPO.

Microsoft Ventures announced a specialised AI fund earlier this month, while Siemens, Baidu, BMW, Lenovo, Sberbank, Santander and HP all cited AI and/or machine learning as a sector of interest when they announced new funds over the course of the year.

Insurtech

Although not as widely funded or as innovative as some other sectors, insurance technology did pick up substantially in 2016 and is perhaps worth mentioning because the increase can be seen as a result of the influx of insurance firms establishing corporate venturing units over the past two years.

Insurance groups to have entered the space since the beginning of 2015 include AXA, Massachusetts Mutual Life Insurance, Ping An, American Family, Liberty Mutual, Annexus and XL Catlin while old hands like Allianz and Blue Cross and Blue Shield Association have continued to invest.

Health insurance platform Oscar Health Insurance raised $400m in a GV-backed round in February that valued it at $2.7bn while pay-per-mile auto insurance provider MetroMile revealed in September it had raised $191m from investors including Mitsui and insurer China Pacific Insurance Group over a two-year period. Other online insurance platforms and software developers to receive corporate investment included Lemonade, Trov, One, PolicyGenius, Hixme and Alan.

In terms of more direct investment in online insurance, Tencent is teaming with seven other investors to form an online life insurance venture called HeTai Life Insurance with $217m of funding, while Ant Financial was part of a consortium that put $150m into newly formed mutual insurance association Xinmei Life Mutual Insurance in June.