Deceleration in September

The number of corporate-backed deals we reported from around the world in September was 250, up 2% from the 244 funding rounds in the same month last year. Investment value, however, decreased by 27%, to $7.63bn, down from $9.76bn in September 2018.

Compared with the rest of the third quarter, September registered the lowest monthly result in terms of deal count, with July and August registering closer to 300. The same holds true for the total estimated capital invested, which was lowest in Q3 2019.

The US came first in the number of corporate-backed deals, hosting 124 rounds, while China was second with 27 and Japan third with 17.

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, internet company Tencent topped the list along with Goldman Sachs, Salesforce and internet and telecoms firm SoftBank.

GCV Analytics reported 22 corporate-backed funding initiatives in September, including VC funds, new venturing units, incubators, accelerators and other. This figure suggested a slight increase over August which had 19 initiatives. The estimated capital raised in those initiatives, however, stood at $9.78bn, due to a reported corporate commitment from insurance firm Taiwan Life to a multi-billion fund in the works.

Deals

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

Cox Automotive, the transport-focused division of media, automotive and telecommunications group Cox Enterprises invested $350m in US-based electric off-road vehicle developer Rivian. The cash was provided at a reported $3.5bn valuation and increased the company’s total funding to $2.35bn. Rivian is working on plug-in electric trucks and sports utility vehicles that will be capable of a 400-mile range from a single charge. It has three development centres across the US and UK and a production plant. It has scheduled the release of its first two vehicles for late 2020.

US-based online publishing and e-commerce group Automattic raised $300m in series D funding from Salesforce Ventures, Salesforce’s corporate venturing arm, at a reported $3bn valuation. The investment will be used to strengthen the ecosystem for content management system WordPress, which Automattic claims powers more than 34% of all websites. The companies will also explore opportunities to work with each other. Automattic is best known for WordPress but also oversees affiliated offerings such as open-source e-commerce tool WooCommerce and cybersecurity and site management product Jetpack.

Short-term accommodation provider ChengHome Apartment, which is based in China, closed a $300m series A round featuring Huazhu Hotels Group, the hotel operator that co-founded the company. Private equity firm Boyu Capital led the round, which included serviced accommodation provider The Ascott, private equity firm YF Capital and CCB International, an investment subsidiary of financial services firm China Construction Bank. ChengHome was co-founded in 2015 by Huazhu, which was known as China Lodging Group and venture capital firm IDG Capital. The company operates a number of brands that offer different types of short-term accommodation from a single room for a single day to longer term stays in full apartments and hotels.

GitLab, a US-based software development platform backed by Alphabet, closed a $268m series E round co-led by Goldman Sachs and multi-family office Iconiq Capital. Y Combinator took part through its Continuity Fund and was joined by Adage Capital Management, Alkeon Capital, Altimeter Capital, Coatue Management, D1 Capital Partners, Franklin Templeton, Light Street Capital, Tiger Global Management and Two Sigma Ventures. Founded in 2014, GitLab provides a development and operations platform that supports the entire lifecycle of software development from creating, to monitoring and configuring code. The platform is used by more than 100,000 clients, and GitLab plans to use the series E capital to develop the product further, concentrating on planning and monitoring code as well as security.

SoftBank led a $250m series D round for Quintoandar, a Brazil-based operator of an online marketplace for rental properties. The round also featured investment firm Dragoneer, growth equity firm General Atlantic and venture capital firm Kaszek Ventures, and reportedly valued the company at more than $1bn. Quintoandar runs an online platform where users can search for rental properties and book viewings. The company oversees communication between prospective tenants and landlords, processes payments and retains a digital copy of the rental agreement. It has also created a credit analysis tool that lessens the needs for references, insurance or hefty deposits.

China-based retail and logistics services provider Huimin raised RMB1.6bn ($225m) in funding from investors including Fosun Capital, an investment arm of diversified conglomerate Fosun International. State-owned private equity firm Jinan Industry Development Fund led the round, which included Fortune Capital, GP Capital and China Renaissance. Founded in 2013, Huimin has built a digital platform of four businesses that tailor to retail outlets, their suppliers and local residents. The company’s products include an intelligent business management system and a business-to-business marketplace through which shop managers can order stock. Huimin also operates syndicates where retailers club together to purchase products with fast turnover in their stores.

Cybersecurity technology provider Qi An Xin, also based in China, closed RMB1.5bn ($210m) in funding from investors including furniture store operator Red Star Macalline. Venture capital group IDG Capital, VC firm 10Fund, private equity firm Xicheng Jinrui, an undisclosed investment platform of investment holding firm Oriza and a range of unnamed participants also contributed to the round. The company was founded in 2014 as a subsidiary of antivirus software vendor Qihoo 360 and markets a range of cybersecurity products that protect assets for government agencies and businesses in sectors such as finance, energy and telecoms from denial of service attacks, malware and phishing attempts. Its grown its headcount to more than 6,500 staff and has expanded into Indonesia, Singapore and Canada.

US-based business payment platform developer Fundbox raised $326m in equity and debt financing from investors including internet company GMO, and financial services provider Synchrony. Human resources provider Recruit, financial services firm Mitsubishi UFJ and Insurance group Allianz participated through Recruit Strategic Partners, MUFG Innovation Partners and Allianz X respectively. The transaction was comprised of $176m of series C equity portion with another $150m secured in the form of a credit facility. Fundbox runs a business-to-business credit network that allows companies to access financing to cover payment delays. Companies can use the service to offer structured payments to customers, once they have been assessed by Fundbox, and receive the full amount immediately.

Checkr, a US-based recruitment-auditing software provider backed by Alphabet, received $160m in a funding round led by unnamed accounts advised by T Rowe Price Associates. The round also featured venture capital firms Accel and IVP, Y Combinator, growth equity firm Bond Capital and hedge fund manager Coatue Management. It reportedly valued the company at $2.2bn. Founded in 2014, Checkr markets a software platform used by employers and recruitment agencies to improve the quality and fairness of their hiring campaigns by reducing the scope for fraudulent applications or manual selection bias. Checkr also updates users on any criminal records that would disqualify an applicant from a role and verifies their identity with facial biometrics to help prevent identity fraud.

Exits

GCV Analytics tracked 24 exits involving corporate venturers as either acquirers or exiting investors in September. The transactions included 18 acquisitions, five initial public offerings (IPOs) and one other transaction.

The exit count figure decreased compared with August, which had 28 exits. The total estimated exited capital went up, to $3.35bn from the $1.6bn in the previous month, representing a two-fold increase. During the same month of 2018, the exits count was similar (25 transactions) but the estimated total capital in exits was much higher at $9.29bn.

Peloton Interactive, the exercise equipment and class provider backed by mass media group Comcast NBCUniversal and cosmetics distributor Grace Beauty, went public in a $1.16bn IPO. The company floated on the Nasdaq Global Select Market after pricing 40 million class A shares at the top of the IPO’s $26 to $29 range. Growth equity firm TCV paid $100m for almost 3.45 million class A shares, which have the same value but 5% of the voting rights of the class B shares owned by Peloton’s existing shareholders. Founded in 2012, the company sells advanced exercise bikes and treadmills with attached video screens that broadcast live video gym classes that are available through a paid subscription plan. The company’s community has some 1.4 million members, and it more than doubled revenue to $935m in the first half of 2019, though its net loss also increased, from $47.9m in the first half of 2018 to nearly $196m a year on.

Cloudflare, the US-based cloud services provider backed by software provider Microsoft, Alphabet, internet company Baidu and semiconductor maker Qualcomm, went public in a $525m IPO. The offering consisted of 35 million shares issued on the New York Stock Exchange priced at $15 each. The company increased the upper end of the IPO’s range from $12 to $14 but still floated above it. Cloudflare offers a range of services for web property operators that helps them increase performance of their sites, host video content and protect themselves from distributed denial of service attacks and other cyber threats. It made a $36.8m net loss from $129m in revenue over the first six months of 2019.

E-commerce software producer Shopify agreed to acquire US-based warehousing and fulfilment technology provider 6 River Systems in a $450m deal allowing domestic robot producer iRobot to exit. The transaction will be made up of approximately $270m in cash, with the rest in shares in publicly traded Shopify. Founded in 2015, 6 River has created a fulfilment system that combines robotics technology and cloud software to help warehouse workers fulfil orders and replenish warehouse stock levels more quickly and efficiently. Although the company’s technology will support a fulfilment network launched by Shopify, 6 River will also continue to sell its systems to warehouses post-acquisition.

SoftBank’s Vision Fund sold approximately $377m of shares in US-based, publicly listed oncology diagnostics technology developer Guardant Health, according to a regulatory filing. The fund sold 4.9 million shares at $77, more than four times the price at which Guardant floated in October 2018, though below their $110.30 peak. SoftBank and its affiliates held almost 27.9 million shares at IPO. Guardant is developing blood tests to detect early signs of cancer in high-risk populations or returning cancer in existing patients. It increased revenue 178% year on year to $54m for the second quarter of 2019, while almost halving its losses to $11.6m over the same period.

Data management software producer Commvault agreed to acquire US-based software-defined storage technology (SDS) developer Hedvig in a $225m deal that will allow enterprise technology provider Hewlett Packard Enterprise to exit. The acquisition price reportedly includes costs associated with employee retention. Founded in 2012, Hedvig has created a software platform called Hedvig Distributed Storage Platform, which provides SDS for organisations developing their own private, hybrid or multi-cloud environments.

US-based cancer therapy developer IGM Biosciences went public in a $175m IPO that scored an exit for catalyst producer Haldor Topsøe. The company priced more than 10.9 million shares on the Nasdaq Global Select Market at $16 each, in the middle of the IPO’s $15 to $17 range, giving it a market capitalisation of approximately $463m. IGM was formerly known as Palingen before rebranding in 2010 to focus on a platform that produces engineered immunoglobulin M antibodies to treat cancer.

Rare disease and cancer drug developer SpringWorks Therapeutics, based in the US, priced its shares at $18 each to raise $162m in an IPO that provided exits to pharmaceutical firms Pfizer and GlaxoSmithKline. The company issued 9 million shares on the Nasdaq Global Select Market at the top of the $16 to $18 range. They opened at $24.50 and reached a peak of $26.44 before closing at $22.63 on gthe first day of trading, giving it a market cap of more than $744m. Spun off from Pfizer in 2017, SpringWorks is advancing the development of certain clinical-stage drug candidates for rare diseases and rare, genetically defined cancers developed by its parent company.

Streamlabs, a US-based live streaming software producer backed by record label Universal Music Group, agreed to an acquisition by computer peripherals vendor Logitech International for up to $118m. Logitech will pay $89m in cash with an additional $29m in stock subject to revenue growth targets for Streamlabs. Founded in 2014, Streamlabs has created an all-in-one software for desktop and mobile that allows users to manage live streams across third-party platforms such as Twitch, YouTube and Facebook, monetise content and grow audiences.

Satsuma Pharmaceuticals, a migraine therapy developer backed by research services provider Shin Nippon Biomedical Laboratories, raised $82.5m in its IPO. The company, based in the US, issued 5.5 million shares on the Nasdaq Global Market priced at $15.50 each, above the IPO’s $14 to $15 range. They reached a peak of $19.90 before closing at $16.90, giving Satsuma a market cap of about $280m. Spun off from Shin Nippon in 2016, Satsuma is working on an acute migraine treatment, STS101, that consists of a dry-powder formulation of a chemical compound called dihydroergotamine mesylate administered through a nasal spray. Proceeds from the IPO were allocated to phase 3 clinical trials and manufacturing activities for STS101.

Cybersecurity software provider Palo Alto Networks agreed to acquire internet-of-things (IoT) security technology developer Zingbox in a $75m transaction that will enable computing technology producer Dell to exit. Palo Alto Networks will incorporate the company’s technology into its Cortex and Next-Generation Firewall products. Founded in 2014, Zingbox has created a software platform that uses artificial intelligence and machine learning to detect cyber threats to connected devices and systems and help secure them against attacks.