Slowdown continues through January

The number of corporate-backed deals we reported from around the world in January was 253, down 8% from the 274 funding rounds from in same month last year.

Investment value also decreased by 17%, to $7.64bn – down from $10.52bn from January 2019. January 2020 registered the lowest monthly result of the year in terms of the total estimated capital invested since October but not in terms of total deal count.

The US came first in the number of corporate-backed deals, hosting 105 rounds, while Japan was second with 36 and China and India third with 19.

The leading corporate investors by number of deals were diversified internet conglomerate Alphabet, cloud computing software developer Salesforce and telecoms and internet conglomerate SoftBank. In terms of involvement in the largest deals, SoftBank topped the list along with chip and semiconductor manufacturer Intel and airline operator JetBlue.

GCV Analytics reported 16 corporate-backed funding initiatives in January, including VC funds, newly launched venturing units, incubators, accelerators and other. This figure suggests a decrease compared with December which registered 24 initiatives. The estimated capital raised in those initiatives, however, amounted to $4.04bn, lower than the $3.82bn in December.

Deals

Emerging businesses from the health, IT, services, financial and media sectors led in raising the largest number of rounds during the first month of 2020. The most active corporate venturers came from the financial services, IT, health and media sectors.

Automotive manufacturer Toyota Motor Corporation led a $590m series C round for US-based airborne taxi developer Joby Aviation with an investment reportedly sized at $394m. The round also featured Toyota’s strategic investment vehicle, Toyota AI Ventures, as well as Intel Capital and JetBlue Technology Ventures, investing on behalf of Intel and JetBlue respectively. Asset manager Sparx Group, investment firm Capricorn Investment Group, venture capital firm AME Cloud Ventures, investment management firm Baillie Gifford and family office Global Oryx filled out the round’s participants. Joby is working on a five-seat vertical take-off and landing vehicle that will be able to carry passengers over short distances in urban areas. It will be electric-powered and is expected to be able to travel 240 kilometres on a single charge.

US-based robotic fulfilment systems developer Berkshire Grey secured $263m in a series B round led by SoftBank. Khosla Ventures, New Enterprise Associates and Canaan also contributed to the round. The company does not appear to have disclosed earlier funding rounds. It emerged from stealth in December 2018, when it named Khosla Ventures, New Enterprise Associate, Canaan and private investor Jeff Immelt as shareholders. Berkshire Grey has developed technology that combines robotics and artificial intelligence to automate retail, e-commerce and logistics fulfilment. Applications include sorting small packages for online businesses and just-in-time stock replenishment for stores. The money will support global expansion efforts and drive recruitment. The company will also look to make acquisitions, though it did not reveal further details.

US-based marketing data analytics platform AppsFlyer picked up $210m in a series D round, featuring Deutsche Telekom Capital Partners, the corporate venturing arm of telecomms firm Deutsche Telekom. General Atlantic led the round, which also included investment bank Goldman Sachs’s Growth division as well as Qumra Capital, Pitango Venture Capital and Magma Venture Partners. AppsFlyer has created a platform that offers comprehensive measurement and analytics tools for marketing teams to more precisely target customers, while respecting users’ privacy. The company serves more than 12,000 clients, such as retailer Macy’s and broadcaster HBO. It has not revealed what it intends to do with the funding, but the round comes on the heels of a fivefold increase in annual recurring revenue.

US-based biosimilar medicine developer EQRx launched with $200m secured in a series A round featuring healthcare software provider Nextech and GV, a corporate venturing subsidiary of internet technology conglomerate Alphabet. The corporates were joined by healthcare investment firm Casdin Capital and venture capital firms Arch Venture Partners, Andreessen Horowitz, Section 32 and Arboretum Ventures. EQRx aims to help bring down the high cost of medicines by using innovative technology and science to create more affordable patent-protected versions of existing treatments for chronic and life-threatening diseases. The approach will involve the application of technology to accelerate the drug development process, though the treatments will copy existing approved medications.

Financial services firm Commonwealth Bank of Australia invested $200m in Sweden-based digital payment technology provider Klarna. The investment followed a $100m contribution by Commonwealth to the $460m funding round closed by the company in August 2019. It increased the bank’s stake in Klarna to 5.5%. Formerly known as Kreditor, Klarna provides a range of payment services including in-store payment technology, instalment payment options for consumers and an app that shoppers will be able to use to manage their retail purchases. The deal was made alongside Klarna’s entry into Commonwealth’s home country. The bank’s customers will be able to connect their accounts to the Klarna app and it will own 50% of the company’s Australian and New Zealand businesses.

US-based crop enhancement technology developer Indigo Agriculture received $175m of convertible equity financing from investors that included courier services provider FedEx. The round was also backed by unnamed existing shareholders and was raised alongside $25m in debt financing from financial services firms including Pacific Western Bank. The funding will go towards continued international expansion of the company’s Grain Marketplace, an e-commerce platform that connects farmers with buyers of their crops. Indigo markets a range of products to help farmers grow food sustainably while increasing profitability, including microbial crop treatments, an agricultural data platform and a produce shipping service. The company has also launched the Terraton Initiative, a global program through which it hopes to remove a trillion tonnes of carbon dioxide from the atmosphere by absorbing it in soil.

Industrial technology and appliance manufacturer Robert Bosch co-led a $173m series C round for China-based light detection and radar (lidar) technology developer Hesai with venture capital firm Lightspeed China Partners. Semiconductor and sensor manufacturer ON Semiconductor also took part, as did VC firm Qiming Venture Partners, private equity firm Detong Capital and fund manager Axiom Asia Private Capital. Hesai provides lidar equipment that will use light to map the surroundings of a vehicle operating with an autonomous driving system. It was founded in the US in 2013 before relocating to China the following year and oversees two manufacturing facilities and research hubs in both countries.

US-based cellular meat developer Memphis Meats completed a $161m series B round that was co-led by SoftBank. Venture capital firm Norwest Venture Partners and Singaporean state-owned investment firm Temasek co-led the round, which included agribusiness Cargill and meat product supplier Tyson Foods. The round was filled out by Threshold Ventures, Finistere, Future Ventures, Fifty Years, CPT Capital and individual investors Richard Branson, Bill Gates and Kimbal Musk. Memphis is developing meat that is generated directly from cells, having released a meatball in 2016 and chicken the following year. The cash will fund more products, hiring and the construction of a pilot production plant.

Salesforce Ventures, the corporate venturing subsidiary of cloud computing company Salesforce, helped close a $150m funding round for UK-based software debugging tool developer Snyk. Private equity firm Stripes led the transaction, while Coatue Management, Tiger Global Management, Boldstart Ventures, Trend Forward and Amity filled out the round. Snyk is now reportedly valued at more than $1bn. Founded in 2015, the company has built a cybersecurity platform that automatically scans open source code for vulnerabilities. The tool is also able to identify licensing violations.

Ant Financial, the financial services affiliate of e-commerce group Alibaba, invested $150m in India-based food listings and ordering service Zomato. The funding is part of a larger round that is expected to close at approximately $500m by the end of March , valuing the company at $3bn. Zomato’s core business is its online restaurant listings platform but it has invested heavily in linking to an online food ordering and delivery service. It will use the cash to expand and compete against its main rival in India, Swiggy. The funding was secured as Zomato continues talks with Uber over the acquisition of the Indian branch of its Uber Eats food delivery subsidiary.

Indonesia-based online education platform Ruangguru secured $150m in a series C round featuring EV Growth, the venture capital firm whose co-founders include conglomerate Sinar Mas and internet company Yahoo Japan. Growth equity firm General Atlantic led the round, which included financial services firm United Overseas Bank’s UOB Venture Management unit and VC firm GGV Capital as well as undisclosed new investors. Ruangguru has developed an online platform that offers access to tutors across a range of subjects in addition to professional training, skills and corporate training, through methods such as infographic summaries, quizzes, animated videos and practice tests.

Concerto HealthAI, a US-based oncology data technology spinoff from artificial intelligence-focused holding company SymphonyAI Group, secured $150m in a series B round that included SymphonyAI. Declaration Partners led the round, which was backed by fellow investment manager AllianceBernstein and investment firm Maverick Ventures. Concerto intends to combine artificial intelligence technology with real-world data to generate insights that can assist in the development of precision cancer treatments. The funding will support product development and its expansion into other disease areas. The company has not disclosed details of its earlier funding but the round was announced alongside a multi-disease collaboration deal with Janssen Research & Development, a subsidiary of medical product group Johnson & Johnson.

Exits

GCV Analytics tracked 23 exits involving corporate venturers as either acquirers or exiting investors in January. All the transactions in question were acquisitions.

The exit count figure increased considerably compared to December, which registered 16 exits. The total estimated exited capital, however, went up to $8.36bn from the $7.95bn in the previous month, representing a small 5% increase. In comparison, during the same month of 2019, the exits count was similar (20 transactions) but the estimated total capital in exits stood at only $3.32bn.

Visa agreed to acquire one of its portfolio companies, US-based financial data network operator Plaid, in a $5.3bn transaction that will also allow fellow payment services companies Mastercard and American Express as well as financial services firm City to exit. The software supports some 2,600 fintech developers, to which Visa plans to expand its services and access through the transaction, broadening its reach across the financial services space. Founded in 2013, the company has built technology that enables users to transfer their data to third-party financial technology platforms. When a customer opens an account with a finance management platform, for example, the software allows them to link their bank account to the app.

CapitalG, Alphabet’s growth equity arm, agreed to provide $100m as part of a $1.1bn acquisition of France-based cybersecurity software provider Armis by growth equity firm Insight Partners. Insight Partners will put up the majority of the cash for the transaction, with “rollover” from undisclosed existing investors in the company. Armis produces security software for enterprises operating internet-of-things (IoT) or unmanaged devices, such as mobile devices, smart televisions or full-scale industrial or building systems. Venture capital fund Iris Capital and assorted angel investors had provided approximately $1.1m for Armis in 2017 before the company added $6.7m from VC firm Elaïa Partners and unnamed existing backers.

Virtual care provider Teladoc Health agreed to acquire US-based telehealth services provider InTouch Health for $600m in a deal allowing domestic robotics technology producer iRobot to exit. The transaction will involve Teladoc paying $150m in cash for the company together with $450m in shares. InTouch had raised about $93m in funding pre-acquisition, according to press releases and securities filings. Founded in 2002, InTouch combines a cloud network with dedicated telehealth technology that allows healthcare systems to diversify their care. It has partnerships in place with about 450 care providers worldwide and expects to increase full-year revenue about 35%.

OneConnect Financial Technology, the Singapore-based financial technology platform developer spun off by insurer Ping An, closed its IPO at approximately $347m. The company raised an initial $312m when it floated on the New York Stock Exchange, issuing 31.2 million American Depositary Shares (ADSs) priced at $10.00 each. Ping An itself subscribed for $10m of shares. The extra capital represents the partial exercise of an over-allotment option that gave the underwriters 30 days to buy up to 4.68 million more ADSs. Spun off from Ping An in 2017, OneConnect offers a cloud-based platform that includes a range of financial technology tools to help businesses in the industry digitise their services. The company had received $750m from investors including SoftBank, real estate developer Oceanwide Holdings’ Oceanwide Financial Technology vehicle and financial services firm SBI and its SBI Stellars Fintech Fund.

UCloud Information Technology, a China-based cloud services provider backed by media group Bertelsmann, secured RMB1.94bn ($284m) IPO on Shanghai Stock Exchange’s Star Market. The company issued 58.5 million shares priced at approximately $4.84 each, valuing it at about $2bn, and its share price increased to $10.60 on the first day of trading. The company reportedly selected Star Market for its flotation as it is the only bourse in mainland China that enables companies to go public with a dual-class share structure, enabling founders to retain a majority of the voting rights. Founded in 2012, UCloud operates 32 data centres across 25 countries and territories in Asia, Europe and the US. It focuses on products such as cloud storage, data analytics and cybersecurity tools and serves clients primarily in the internet, e-commerce, manufacturing, gaming and financial industries.

One Medical, a US-based primary healthcare provider backed by Alphabet, went public in a $245m IPO on the Nasdaq Global Select Market. The offering consisted of 17.5 million shares priced at $14.00 each, at the foot of its $14 to $16 range, valuing One Medical at approximately $1.72bn. The underwriters have a 30-day option to acquire almost 2.63 million shares more which would raise the size of the offering to just short of $282m. Listed under the name 1Life Healthcare, One Medical runs a primary care service with nearly 400,000 members who can access care through telehealth services available at all hours of the day, in addition to physicians at brick-and-mortar surgeries in nine markets.

Consumer electronics producer Apple acquired US-based artificial intelligence platform developer Xnor.ai for approximately $200m allowing NGP Capital, the venture capital firm spun off by smartphone maker Nokia to exit. The company was spun out of Allen Institute for Artificial Intelligence (AI2), established by Paul Allen, the late co-founder of software producer Microsoft. It advances research conducted by Ali Farhadi, an associate professor at University of Washington. Founded in 2017, Xnor has developed technology that makes it possible to run machine learning and image recognition tools on low-power devices, removing the need to upload data to the cloud. It has also built a tool that allows developers to easily add AI functionality to apps.

China-based property rental marketplace Danke Apartment, which counts Bertelsmann, co-working space provider UCommune and financial services provider Ant Financial as investors, floated having secured almost $130m. The offering consisted of 9.6 million American Depositary Shares (ADSs) on the New York stock Exchange, each representing 10 ordinary shares, priced at $13.50 each. The price was below the $14.50 to $16.50 range and the number of ADSs was cut from 10.6 million. Danke operates what it refers to as a co-living platform, running an online platform where users can rent apartments across 13 Chinese cities that it sources from their owners and renovates to a fixed standard.

Biopharmaceutical company I-Mab, which is backed by pharmaceutical firm Tasly and immunotherapeutic developer Genexine, raised approximately $104m when it went public in the US. The China-based firm priced just over 7 million ADSs, each representing 23 normal shares, at $14.00 each, towards the upper end of the $12 to $15 range it had set. They closed at $12.50 after its first day of trading on the Nasdaq Global Market. Founded in 2016, I-Mab is developing treatments for cancers and autoimmune disorders in addition to other diseases in areas of high unmet need. About $50m of the IPO proceeds will be channelled into development of I-Mab’s drug pipeline, funding phase I, Ib and phase II clinical trials for prospective medications. Another $15m will go to upgrading its manufacturing capabilities.

Lizhi, a China-based podcast app developer that counts consumer electronics producer Xiaomi as an investor, raised $45.1m after pricing 4.1 millions ADSs at $11 on the Nasdaq Global Market. They briefly rose to $15.25 before closing at $11.63 on the first day of trading, giving Lizhi a market capitalisation of approximately $532m. Lizhi had initially filed to raise up to $100m in October 2019, but subsequently set the price range for the IPO at $11 to $13. Founded in 2013, Lizhi operates a user-generated audio platform that allows users to create, share and monetise podcasts. It now has 5.9 million monthly active content producers and its content has been played more than 48.9 billion times over the past two years. The company relies on artificial intelligence technology to assist with the creation of compelling content and to help source podcasts aligned with a user’s personal tastes.

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