An audio version of the ‘Henkel’s Approach To Startup Collaboration (CVC Case Study)’ session from our GCV Digital Forum in January 2021.
The Big Ones
Bonny Simi, pilot and founder of US airline JetBlue’s corporate venturing unit, read the runes correctly in December when she left to join portfolio company Joby Aviation as head of air operations and people.
This week, Joby, which is in prototype phase of developing an all-electric, vertical take-off and landing (eVTOL) passenger aircraft, has agreed a $6.6bn reverse acquisition with New York-listed special purpose acquisition vehicle Reinvent Technology Partners.
Simi, who remains an adviser to JetBlue Technology Ventures (JTV), said: “The regional transportation ecosystem is ripe for disruption, and startups like Joby Aviation will revolutionize how people move across urban areas. Joby’s vehicle platform will be the standard to beat. Nearly four years ago, we saw that Joby already was the emerging leader in the eVTOL space, and [the developments with Reinvent] validate our early investment.”
Simi had uncovered the Joby soon after setting up JTV in 2016 – it was the GCV award winner as new entrant of the year – through her network in Silicon Valley (she studied under legendary finance professor Ilya Strebulaev at Stanford) and was a big proponent on the power of eVTOL to disrupt airlines even a few years ago.
Joby is expected to operate for commercial use in the US beginning in 2024 after becoming the first company to receive an eVTOL certification basis plan with the Federal Aviation Administration and receiving the US Air Force’s first ever airworthiness approval for an eVTOL aircraft. The piloted, four-passenger aircraft is faster than existing rotorcraft, flies 150 miles on a single charge, and will be 100 times quieter than existing rotorcraft or small planes during takeoff and landing, JetBlue said.
Raj Singh, managing director of investments at JTV and co-winner of the GCV Powerlist award with Simi in September, said: “As with all of our investments, JetBlue Technology Ventures’ goal is to better position JetBlue with startup-led innovation that could radically change the travel industry. Travelers today are more conscious of their carbon footprint than ever before, so the reduction of pollution that comes with electrification is highly appealing.”
The deal is also noteworthy for bringing together the digital with physical ways of connecting people.
Long- and short-haul travel is being disrupted through the covid-19 disease, accelerating shifts to cheaper or more sustainable modes and reflecting changing communication and work patterns caused by technology more broadly.
Reid Hoffman and Mark Pincus, the two directors of Reinvent alongside Michael Thompson as CEO, were among the first three investors in social network Facebook and early investors in Twitter and Airbnb. As Pincus was in the early phases of founding gaming group Zynga in 2007, Hoffman was among his earliest investors having earlier set up business network LinkedIn.
Pincus and Hoffman acquired the six degrees patent that enabled the social media and network effects model to flourish based on Metcalfe’s law, which states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).
These network effects, as well as undermining the need to travel so frequently given online ties, also are starting to disrupt finance.
Pincus and Thompson began investing together in 2017 after the latter reportedly returned investors’ money from BHR Capital, a successor to hedge fund Bay Harbour Management, according to Hedge Fund Alert at the time.
Alongside Hoffman, they established Reinvent Capital in 2018 with an eye to tapping into the late-stage venture deals being agreed.
In its regulatory filing for the Reinvent Spac, they said: “A substantial market opportunity exists for a potential business combination in the private technology sector. As of August 2020, per PitchBook Data, there were 417 private technology companies valued over $1bn globally, accounting for over $1.65 trillion of cumulative valuation, up from 18 private technology companies valued over $1bn in 2010.
“More than half of these companies are headquartered within the US, and most are focused on our key investment sectors, including consumer internet, games, marketplaces, ecommerce, and other technology subsectors.
“While the quantity and scale of private technology companies have grown, the number of technology initial public offerings (IPOs) has remained constant at approximately 40 technology companies per year. Per studies from Jay Ritter, the average age of a technology company going public has increased from four years in the first dot-com boom to 11 years in the last decade.
“Based on Dealogic data, the average market capitalisation of technology company IPOs has increased from approximately $400m to approximately $2.8bn in this time. We believe this disconnect between the quantity of scaled technology companies and the number of those companies that actually go public each year h
as created an attractive backlog of potential targets for our blank-check company.”
It is an opportunity set to make the three even richer as the initial shareholders in Reinvent collectively own 20% of the Spac. In the S-1 regulatory filing: “In August 2020, our sponsor paid an aggregate of $25,000 to cover for certain expenses on behalf of us in exchange for issuance of 14,375,000 Class B ordinary shares, par value $0.0001 per share, or approximately $0.002 per share.”
The deal with Joby now prices each share at $10 each, according to the 8-K filing this week.
Whether in business, finance or life, the power of relationships and networks holds true.
But if things are bubbling away for many startups but even more so for the big, listed tech companies.
The K-shaped covid economy, where some companies and individuals do well even if the majority struggle, is evidenced in a number of ways.
In his latest blog post, Ray Dalio, co-chief investment officer and co-chairman of hedge fund Bridgewater Associates, states about 5% of the top 1,000 companies in the US are in a bubble, according to his analysis and classification. This works out at about 3% of the S&P 500 index, and these relative handful of companies have seen stellar share price increases of about 350% on average over the past year or so (chart below from Dalio).
Naturally, this sort of bifurcated market attracts investors to find the next big thing, and speed is of the essence. This creates the demand for faster flotations, particularly if they can include egregious remuneration for insiders bringing these deals to market – otherwise known as special purpose acquisition companies (Spacs).
Matt Taibbi and Eric Salzman recently added Spacs to their Financial Devil’s Dictionary in their podcast.
As they note: “America still leads the world in one thing: inflating speculative bubbles using gibberish finance acronyms. Meet the latest ‘Get-Super-Rich-Quick’ scheme, the Special Purpose Acquisition Company.”
The temptation to leap on these Spacs is certainly high. As the Economist notes in its latest issue: “Last year in America, underpricing led to $30bn of unrealised gains for newly public companies (and their employees). With Spacs and direct listings, another route to going public, there is no pressure for a price to pop.”
In its earlier article, the Economist quoted academics Michael Klausner and Emily Ruan of Stanford University and Michael Ohlrogge of New York University, who looked at blank-cheque firms that made acquisitions between January 2019 and June 2020. They found that while companies that went public through the Spac route fell in value by an average of 3% after three months, 12% after six months and by a third after 12 months, about half the sample were “high-quality” – defined as those run by former Fortune 500 bosses or set up by large private equity firms – and these performed much better.
Whether quality will remain high is unclear. As Taibbi and Salzman said: “In 2021 already, 160 Spacs have raised over $50bn, nearly matching last year’s record of $83.4bn.”
Given Spacs tend to raise more cash once they find an acquisition target (about five times that in the initially listed pot, the Economist reckons) this could bring $600bn of deals in the next one to two years, which is about double the entire global VC market, based on Pitchbook’s data for 2020 deal values.
A bit more speed and a chance to replace venture capital or private equity in some businesses makes it a development that could outlast these bubble conditions. If not, it will return to the dusty archives already storing investment trusts, payment-in-kind notes and collateralised debt obligations used in prior bubble eras to soak up excess liquidity and irrational exuberance.
Could India as the sleeping giant of corporate venturing finally be waking up?
Economic Times of India’s (ET) scoop that conglomerate Reliance Industries’ Jio Platforms is finalising a potential $200m commitment to domestic venture capital fund Kalaari Capital could be the signal for a wider local commitment and corporate venturing efforts.
The Mukesh Ambani-led conglomerate has reportedly closed a $100m first commitment, with an additional commitment of $100m planned for later as part the group’s plans to deepen its footprint in India’s tech scene, ET said.
Kalaari’s portfolio companies, such as furniture retailer Urban Ladder and lingerie retailer Zivame, were acquired by units of Reliance Industries, ET said, with a source adding: “Reliance’s investment in Kalaari will give the company an early line of sight into startups and upcoming sectors.
“RIL won’t necessarily acquire all the companies in which Kalaari invests, but it will certainly act as a discovery pipeline.”
In November, Reliance committed $50m to Breakthrough Energy Ventures primarily for international deals.
It is a scale-up from earlier commitments. In 2018, for example, a Reliance Industries subsidiary contributed to Indian venture firm 3one4 Capital $39.3m Fund II.
But there have been false dawns before. Back in 2016, Ambani said Reliance Industries would set up a Rs 50bn ($750m) corporate venturing fund to invest in digital technology developers.
At the time Ambani said: “We also have plans to partner with thousands of Indian entrepreneurs, whose digital ventures can bloom in the ground that Jio is preparing.”
Back in 2010, its Reliance Capital aimed for $500m fund and it made investments through two subsidiaries, Network18 and GenNext Ventures.
The difference potentially now is Reliance has itself raised tens of billions of dollars in the past year to fund Jio and transform itself from primarily an energy-focused conglomerate to a telecom and tech one.
In an emailed response to ET, a Reliance spokesperson said, “Reliance remains committed to supporting the build-up of a thriving startup ecosystem in India, particularly in digital enablement space, and will continue to explore various avenues to do so.”
Reliance’s commitment could also come at an important time for India’s ecosystem more widely.
Martin Haemmig, adjunct professor at Cetim, in his keynote at the GCV Digital Forum in January, noted GCV Analytics data showed about a 20% drop in both domestic-only and foreign-only CVC investment last year in India.
This is different both from other Asia-Pacific countries and US/Europe. Gateway House’s report last year uncovered the importance of China to India corporate venture capital (CVC) deal activity. This was affected in the past year especially with the so-called techlash by politicians limiting Chinese tech companies in India.
That local CVCs reduced activity is unclear but would be a warning signal. You might expect a reduction in foreign-only deals in favour of hybrid deals as local CVCs become more active – this is generally seen as an important source of FDI (foreign-direct investment) and to help local entrepreneurs scale up globally.
That India has dropped from a relatively low base vis a vis China that has many more large deals would be concerning. The first generation of CVC champions in China – Baidu, Alibaba and Tencent – encouraged their portfolio companies, such as Didi Chuxing and Meituan Dianping, to scale up and start CVC quickly.
The tech incumbents in India, including Tata, Infosys and Reliance, have perhaps looked more internationally and to dominate local markets without local CVC in the main.
That Reliance is now supporting third-party VCs and acquiring portfolio companies will create a more dynamic ecosystem for startups alongside its own corporate venturing backers, such as search engine Google, giving it greater global heft.
There is a new breed of solutions for global challenges.
It is, therefore, exciting to see Victoria Slivkoff, global head of innovation and entrepreneurship at University of California (UC) System, has become executive managing director of the Extreme Tech Challenge (XTC).
Slivkoff joined Barrett Parkman, co-managing director, to develop the Tech for Good startups awards initiative co-founded by Young Sohn and Bill Tai in which Global Corporate Venturing is a partner.
While at UC, Slivkoff had run its entrepreneurs competition with the winners going forward to the XTC final on 15 July.
This year, the UC winners announced at the GCV Digital Forum on January 27 included the champion in the XTC Social Impact contest – Curies, which provides a system for enrolling patients in clinical trials, with a focus on minority groups that have historically been underrepresented, trash-to-cash recycling service Takachar and Sophie’s Bionutrients, a producer of sustainable food proteins using fermented feedstock that is headquartered in Singapore.
Takachar was selected for the early-stage track, while Sophie’s Bionutrients was best among the growth-stage businesses.
This year’s XTC awards are expected to see more than 2,500 applications by the deadline on April 25, with 80 companies selected for the finals on June 4 and then winners on July 15.
Chevron Technology Ventures has committed $300m to Future Energy Fund II, a newly formed vehicle that will invest in developers of technology that can reduce carbon emissions. It is a successor to the $100m Future Energy Fund launched by Chevron in 2018 that has since backed 10 companies, and is the eighth fund to be formed by the Chevron subsidiary since it was established in 1999.
Direct listings remain a relatively unpopular way to go public, but the recent issues in securing an accurate valuation at IPO stage may lead to more VC-backed companies taking that option. Cryptocurrency trading platform developer CoinBase is choosing the direct listing route, though a factor in that may be that it just generated a $322m profit over the course of 2020. Its shares are reportedly trading on private markets at a $100bn valuation – more than 200 times that at which BBVA, New York Stock Exchange, USAA and Docomo Capital invested in the company back in 2015.
Electric luxury sedan developer Lucid Motors has agreed a reverse merger with special purpose acquisition company (SPAC) Churchill Capital Corp IV at a combined equity value of nearly $11.8bn. The transaction will be boosted by a $2.5bn private investment in public equity financing, the largest PIPE investment ever for a SPAC deal. Lucid’s investors include Mitsui and it is gearing up to release its first vehicle later this year.
ReNew Power, the India-based renewable energy provider backed by Chubu Electric Power and Tokyo Electric Power, has set its sights on Nasdaq and will undertake a reverse merger with RMG Acquisition Corporation II to collect up $1.2bn in gross proceeds. ReNew’s post-money valuation is set to be $8bn and it has lined up an even bigger PIPE than Joby – a total of $855m. Of note here is that private investor Chamath Palihapitiya, founder and CEO of Social Capital, is throwing his weight behind the investment. Notable why? Well…
Palihapitiya is a busy man. He has also backed a $165m PIPE for Berkshire Grey, the US-based robotic fulfilment systems developer backed by telecommunications group SoftBank, which has agreed to a reverse merger with Revolution Acceleration Acquisition Corp. Berkshire Grey is looking at $507m in gross proceeds overall and a valuation of $2.7bn when the transaction completes in the second quarter. It has been a relatively quick exit for SoftBank, the telecoms giant having only led a $263m series B for Berkshire Grey in January 2020.
Markforged devises reverse merger plan
Xos carries itself to reverse merger
Advanced battery developer Enovix has agreed a reverse merger with special purpose acquisition company Rodgers Silicon Valley Acquisition Corp at an implied pro forma enterprise valuation of $1.13bn. Enovix had previously raised over $200m from investors including Intel Capital, Cypress Semiconductor and Qualcomm Ventures, and it comes after big rounds for fellow energy storage technology providers Sila Nanotechnologies, Powin and Highview Power in the past month.
Fintech has been among the largest growth areas in venture-stage tech over the past year but Marqeta, the operator of a payment card issuing platform, occupies its own specialised part of the sector. It has reportedly confidentially filed to go public, and is targeting a $10bn valuation. That’s more than double the $4.3bn valuation at which Marqeta last raised money, in April, and more than five times that at which it secured $260m from investors including CreditEase, Visa and CommerzVentures in mid-2019.
Smart projector manufacturer Xgimi has filed for a $185m initial public offering on the Shanghai Stock Exchange’s tech-focused Star Market that would provide exits for Baidu Ventures, Mango Media and Zhongnan Red Cultural Group. The company has raised at least $177m pre-IPO, and Baidu is currently its second largest shareholder, after founder, chairman and CEO Bo Zhong.
WingArc1st to fly to public markets
Qingju, the bicycle rental service spun off by on-demand ride provider Didi Chuxing in 2018, is reportedly set to announce $600m in series B funding from unnamed investors together with $400m in debt financing. Its parent company had pumped in $850m last year together with $150m from SoftBank and Legend Capital, and the new funding will support the expansion of its motorised bike offering.
SVolt Energy was formed by China-based automotive manufacturer Great Wall Motor in 2012 and spun off six years later, and now it has raised $541m in a series A round co-led by Bank of China Group Investment and CMG-SDIC Fund Management. No word on a valuation for the round, but the latter had previously invested at a $1.15bn valuation in April, and SVolt is now pushing ahead with its series B fundraising.
Plume Design, a developer of technology that helps increase the speed and security of home wifi, has pulled in $270m for its own series E round, at a valuation of $1.35bn. The capital was supplied by growth equity firm Insight Partners and brought Plume’s overall funding to $397m. Its earlier investors include Liberty Global, Charter Communications, Service Electric Cablevision, Shaw Communications, Belkin, Qualcomm, Comcast Cable, Samsung, Sumitomo and Foxconn.
Reddit revealed earlier this month it had raised $250m in series E funding at a $6bn valuation, and a regulatory filing yesterday revealed it has upped the round to $368m and set a $500m target for its close. The online community had been spun off in 2014 by Condé Nast – which still owns a stake – and its subsequent investors include Tencent, which put up $150m to lead its $300m series D round in 2019.
Zomato has received $250m in late-stage funding at a $5.4bn valuation, up from the $3.9bn valuation at which it last closed funding, two months ago. The food delivery and restaurant listings service has now raised about $1.45bn altogether from investors including Ant Group, Info Edge and Delivery Hero, and is reportedly preparing to launch an initial public offering set to take place later this year.
Moore Threads emerges with unicorn valuation
Clover discovers $230m in series C funding
ECarX drives through another $200m
Sales management platform developer Highspot has raised $200m in a series E roundfeaturing Bain & Company and existing investor Salesforce Ventures, probably the most successful corporate venturer in the enterprise software space. The round valued Highspot at $2.3bn and doubled its overall funding to $400m.
SPH stacks up $160m in series B
WuXi Diagnostics works out $150m series B
Pocket Outdoor packs in $150m
Vividion invites investors to $135m series C
JG Summit calls Tyme for $110m round
ScienceLogic scoops up $105m in series E
Innovaccer vacuums up $105m
Anuvia gets $103m series C allocation
Orna accumulates $100m
Infra.Market constructs $100m growth round
Foxtrot Market stores $42m in series B
An audio version of the ‘Perfect Harmony: The Convergence of AI Across Industries – Best Practices Examined’ session from our GCV Digital Forum in January 2021.
The Big Ones
Wishing our readers around the world a wonderful prosperous lunar new year – welcome to the year of the ox.
There has been a plateau in deal volumes in China over the past two years with other Asia-Pacific markets catching up, as adjunct professor Martin Haemmig noted at our last GCV Digital Forum at the end of January.
But China’s market has set the innovation bar higher in a host of fields, from ecommerce to artificial intelligence (AI) and electric vehicles. State-supported, mission-led innovation is a powerful aid to delivering a society’s vision – in China’s case leading the world in AI by 2030, Wired’s article notes.
The capital requirements, therefore, have scaled up to compete with the US and so fewer, larger deals makes sense.
A glance at the past week’s $100m-plus rounds, prepared by news editor Rob Lavine, shows China and the US still dominate the entrepreneurs gaining the funding to scale up to global champions.
China’s large, corporate-backed deals included:
Fenbi Education – $390m (IDG Capital, Huaxing Growth Capital, Hony Capital, Trustbridge Partners and unnamed others)
Pony.ai – $100m (Brunei Investment Agency and Citic Private Equity Funds Management)
Horizon Robotics – $350m (Sunny Optical Technology, BYD Auto, Great Wall Motors, Changjiang Automobile Electronic, Changzhou Xingyu Car Light, Dongfeng Asset, CMC-SDIC Capital, Shougang Fund and Shanghai AI Industry Fund)
Plus – $200m (Wanxiang International Investment, Guotai Junan International, Citic CPE and Full Truck Alliance/Manbang Group)
It was a powerful end to a year that saw the state tackle the power of a previous generation of entrepreneurial superstars, such as Alibaba and Tencent. And it remains a delicate balance to encourage innovation within restrictions.
The past 30 years have seen unprecedented numbers of people move out of poverty in China and the world through innovation and market forces. What the next year will bring will be further shocks and tensions – notably around Taiwan and geopolitics but remembering the sacrifices and accomplishments to get this far is important to build in the right direction.
Health, wealth, love, happiness and the time to enjoy it all.
AI quarterly report and monthly GCV published
“Artificial intelligence [AI] will change how business, governments and societies operate for decades to come.”
This was the theme at Tortoise Media’s AI discussion between editor James Harding and Mariana Mazzucato, academic and author of the new book, Moonshot.
There have been relatively few general purpose technologies since the first industrial age. The use of steam power and then electricity transformed society and business. In the first and second ages of industry with semiconductors, and then the internet created the conditions for data and information to be shared. AI will then write the software to capitalise on the opportunities and as the hardware improves so does the scale and speed.
As Jeff Herbst, vice president of business development at Nvidia and head of Nvidia GPU Ventures, in discussion with George Hoyem, managing partner at In-Q-Tel, shared at the GCV Digital Forum 2021 last month: “Modern AI is basically pattern recognition on data, whether it is images or voice.
“Fundamentally what is going on in the world right now is that the traditional model of how computers are programmed has been turned on its head.”
Herbst predicted the industries that would be most transformed by AI will be those that manage large amounts of data such as healthcare or retail.
Hoyem said that in the same way most technology uses the internet today, AI was also heading in a similar direction.
“It is going to creep into every vertical application and it starts with things that are highly parallelised and data sets like images, voice and even unstructured text.
“It is going to cover pretty much everything in about 10 years.”
This creates a question for governments for how best to steer or manage the progress. Mazzucato rightly argues for “goal-oriented, public private partnerships.
“What does it mean to have purpose at centre of public governance and system? Be bold on outcomes wanted and open on methods to get there.
“Have the ability to learn through trial and error and not outsourcing to consultants. Develop organisational capacity beyond administration but through dynamic procurement to bring policy redesign. Dynamic procurement to scale up not just VC.
“Going to the moon and back in a generation [the 1960s] gave immense spin-overs. [Our current] materials, software, traces back to those days. What does it mean today?
“It means targeting spill-overs rather than cost-benefit analysis.”
In the UK’s industrial strategy announced in 2017, Mazzucato and former universities minister David Willetts put AI and data as central to any challenge. She described it as “a fundamental input to transform”. The missions set out in the strategy focused on healthy ageing, the climate and the future of mobility to be safe, sustainability, have equal access and net-zero carbon emissions.
The European Union is going further with its green deal as part of its 2021 to 2027 Horizon Europe budget. Similarly, both China and the US are setting ambitious climate goals.
AI has already allowed Alphabet and other tech companies to reduced energy use and costs for data centres – as Callum Cyrus notes in his main feature.
But, as Nvidia’s chart on the AI startup ecosystem shows, most entrepreneurs are targeting the global health system. Already, scientists are weaving human brain cells into microchips, as the blog Futurism notes.
David Saad, mathematician at Aston University, said: “We believe this project has the potential to break through current limitations of processing power and energy consumption to bring about a paradigm shift in machine learning technology.”
AI will only fix the problems set for it by the politicians if they are clear what societal challenges they want tackled.
As Pope Francis put it in November: “Artificial intelligence is at the heart of the epochal change we are experiencing… Future advances should be oriented towards respecting the dignity of the person and of creation.”
How do you get startups to go from zero to scale?
When you see hundreds if not thousands of ideas and startups, as Jeff Schumacher, founder of New Asset Exchange (NAX), has then you realise a good team and product-market fit takes you only so far.
The differentiator is volume, often using capital to spend on marketing. Schumacher’s latest startup, NAX, has taken this idea and developed a software platform to create corporate asset-backed products, ventures and securities.
Emerging with stealth with $65m in funding from a dozen corporate, institutional and family office investors, NAX has a development unit to take data and turn it into a security or venture with the software to trade it.
This model could, for example, turn an insurance company’s data around the 25 attributes needed to underwrite a work of art and allow banks to lend money against it in order to help fund its purchase.
The law of large numbers then works if there are lots of these credit notes to package them up and syndicate or tranche the bundles of debt into asset-backed securities, similar to car loans or house mortgages.
Take the idea on and NAX wants to apply the same model to indie games developers for securitising expected revenues. But its biggest target is climate change.
How can carbon be priced or corporations offset emissions? Schumacher, former founder of BCG Digital Ventures and Axon Advisory Partners, said: “Climate is hard to trade because it is opaque, compare and has no scale.
“The Paris Accord will not work because social investment funds are not enough. We need financial innovation and instruments to attract capital.”
There is increased attention on the topic this year as COP26 is being held in London and expected to update the Paris Accord with new emissions targets, carbon reporting, investor incentives and corporate governance standards.
As George Serafeim, professor at Harvard Business School, noted in September’s GCV Digital Forum, the creation of impact-weighted accounting standards will help push the main listed corporations to explaining and tackling their externalities.
Creating a financial market to help, say, a smelter plant minimise or offset their environmental impact would be useful.
GCV through its Global Energy Council and its sister publications, Global Impact Venturing and Global University Venturing, will be preparing its Symposium in the UK in early November around COP26 with special events planned to cover the golden triangle between London, Oxford and Cambridge and in Scotland and the north of England.
UK-based cryptocurrency exchange provider Blockchain.com, which raised a $120m strategic growth round.
These investors included Access Industries, an investment and industrial group founded by Leonard Blavatnik, GV (formerly known as Google Ventures and one of Alphabet’s corporate venturing units), venture capital firms Lakestar and Lightspeed Venture Partners, and Moore Strategic Ventures (Louis Bacon’s hedge fund’s venture unit), Kyle Bass (founder and principal of Hayman Capital Management hedge fund), Eldridge and Rovida Advisors.
When Blockchain.com set out to raise its series A round in late 2014, there were only a handful of venture-backed crypto companies and a bitcoin was worth hundreds of dollars.
Six years later and Bitcoin has crossed what Blockchain called the “monumental price target of $50,000” and the company provides 65 million wallets in 200-plus countries. More than a quarter (28%) of all Bitcoin transactions since 2012 have occurred via Blockchain.com, it added.
Peter Smith, Blockchain.com’s CEO and founder, said: “The current bull run is dominated by stories of Fortune 500 companies, investment funds, and institutions driving net inflows into crypto. The fact that the best macro investors in the world participated in our latest fundraise is further proof that institutions are taking a serious look at their crypto strategy.”
Jalak Jobanputra, founder of VC firm Future Perfect Ventures, which invested in Blockchain.com’s 2014 round, in her newsletter put part of the institutional moves down to bitcoin having decoupled from other assets over fears of inflation. She said: “The last couple of weeks have felt like we have moved decades forward in the sector, and this seems to be accelerating daily.”
Adjuvant stimulates $300m fund
Sesame Workshop, National Geographic Society and Kaiser Foundation Hospitals have all thrown their weight behind a $165m third fund raised by edtech-focused VC firm Reach Capital. The fund will specifically target educational technology producers that are looking to remove barriers, particularly those faced by ethnic minorities, disabled students and under-resourced communities. Reach’s existing portfolio already includes Outschool – also backed by Sesame Workshop – and Springboard – also backed by Telstra Ventures.
Spain-based bank BBVA has committed a further $150m to financial sector-focused venture capital firm Propel Venture Partners and bringing its total commitment to more than $400m since 2016. BBVA has committed an initial $50m to an annual fund as the sole limited partner (LP). This will be followed by similar funds in 2022 and 2023, which will be open to outside investors.
Eurazeo is going in a different direction with its $97m Smart City II Venture Fund, focusing on early-stage startups in the energy, mobility, property technology and logistics industries. Limited partners for the fund’s first close include car manufacturer Stellantis, electric utilities EDF and Mainova, public transport operator RATP, energy producer Total, logistics company Duisport and real estate developer Sansiri. The predecessor vehicle, Smart City I, invested in approximately 25 companies across Europe, North America and Asia.
Masco puts finishing touch to $50m fund
SCB 10X, the corporate venturing unit of Thailand-based Siam Commercial Bank (SCB), has set up a $50m fund for early and growth-stage startups targeting blockchain, decentralised finance (DeFi) and digital assets.
Kraken Digital Asset Exchange, a US-based cryptocurrency service provider, has set up a corporate venturing unit.
Kraken Ventures will target early-stage companies and protocols across the crypto and financial technology ecosystem, including decentralized finance (DeFi), as well as enabling technologies, such as artificial intelligence, regulation tech and cybersecurity.
BIG goes local with Hyogo Kobe Fund
Costco Wholesale, a Nasdaq-listed retailer, has committed $1m to Fearless Fund, a US-based venture capital firm set up to invest in women of colour (WOC).
Costco’s investment marks a string of corporate interest in the fund, following recent investments from PayPal and Bank of America.
Savola Group, a Saudi Arabia-based food and retail conglomerate, has set up its corporate venturing unit and completed its first investment.
Its corporate venture capital fund will invest in disruptive technologies and opportunities in the food and retail space regionally and globally, according to news provider Wamda.
DexCom, a Nasdaq-listed supplier of continuous glucose monitoring for people with diabetes, has set up its corporate venturing unit under Steve Pacelli.
Dexcom Ventures will invest in glucose sensing technology and adjacent areas, such as data analytics, remote patient monitoring and population health.
LightShed Partners, a US-based boutique research firm founded by media analyst Rich Greenfield in 2019, has set up a corporate venturing fund.
LightShed Ventures is raising $75m to invest in seed and series A rounds across technology, media and telecom sectors, according to news provider Barron’s.
Ensemble Innovation Ventures (EIV), the holding company of US-based healthcare provider Delta Dental of Colorado, has set up a corporate venturing fund.
Ensemble Innovation Ventures Fund (EIVF) will target the health and wellness space and invest in early-stage venture companies primarily in its local region.
9Unicorns, an India-based incubator and startup fund set up by Venture Catalysts, has raised INR1bn ($14m) from local food provider Haldiram’s and other investors.
Haldiram’s had announced a partnership with Venture Catalysts in April 2019.
Venture capital firm Global Accelerated Ventures (GAV) has partnered with Oxford University Innovation (OUI), the research commercialisation unit of UK-based University of Oxford to set up a $25m special purpose investment vehicle (SPV) targeting conservation-focused startups.
The Oxford GAV Conservation Venture Studio will support and bring prototypes to market
It has barely been four years since JD.com spun off its warehousing and distribution services provider as JD Logistics, but the unit quickly went on to raise $2.5bn in 2018 from Tencent, China Life and others. That capital seemingly provided a decent runway and now JD Logistics is looking to build on its business growth thanks to a surge in online shopping during the pandemic by filing to go public in Hong Kong. Financial terms have not yet been set, but sources told DealStreetAsia the company is eyeing a $40bn valuation. That’s not a bad multiple on the $12.8bn it was reportedly valued for that 2018 round.
Also benefiting from a surge in online shopping is BigBasket, the India-based grocery delivery company that has now agreed to an acquisition by Tata Group in a deal that values it between $1.8bn and $2bn. Tata is buying a 60% stake in the business and existing shareholders, which include Alibaba with a near-30% stake, are set to exit almost entirely. Tata is not stopping there: the plan for BigBasket is said to be turning it into a public company as early as 2021.
Coupang, the Korean online retailer that ships products to customers nationwide within hours of purchase, is reportedly eyeing a $50bn market cap with a planned $1bn initial public offering that would provide an exit to SoftBank and its Vision Fund. The corporate and the fund have invested $2.5bn between themselves and that market cap would be a more than fivefold increase on the $9bn valuation that Coupang fetched in 2018. Coupang more than halved its net loss over the past two years, though it still stood at nearly $475m for 2020.
Cloopen Group – also known as Ronglian Cloud Communications and as Yuntongxun – has already completed its IPO and brought in $320m through a listing on the New York Stock Exchange that provided exits to New Oriental and Telstra Ventures (though neither owned more than 5% before the offering). It had priced its ADSs at just $16 but as of yesterday’s close they were already worth $29.65 so there is every expectation that underwriters will jump at the chance to buy the additional 3 million ADSs.
Adagene advances to IPO
Hearing loss treatment developer Decibel has already gone public, pricing its shares at $18 to raise more than $127m through a listing on the Nasdaq Global Select Market that provided exits to GV, SR One and Regeneron. It was more than the $75m in proceeds that Decibel had originally targeted but despite a brief climb to $24.39 a share on the first day of trading, they closed back down at only $18.03.
Amgen and Pfizer also celebrated exits as cancer immunotherapy developer NexImmune – a spinout of Johns Hopkins University – raised $110m in an upsized initial public offering on the Nasdaq Global Market. NexImmune’s shares closed at $25.33 on the first day of trading on Friday. Neither corporate owned more than 5% in NexImmune ahead of the offering.
Another week, another set of reverse mergers. Today it is AEye’s turn, the lidar system developer having agreed to combine with CF Finance Acquisition Corp III at a $2bn valuation. Existing shareholders Subaru-SBI Innovation Fund, Intel Capital and Hella Ventures joined GM Ventures and others for a $225m Pipe financing. AEye’s backers, which had supplied more than $60m in equity funding, also include Aisin, LG, SK Hynix and Airbus Ventures. The merger is expected to complete in the second quarter of the year.
Owlet grows into public company
Humacyte, a US-based developer of tissue-based medical technology backed by conglomerate Access Industries and healthcare company Fresenius Medical Care, is the latest company to jump on the reverse merger bandwagon. The business is set to merge with Alpha Healthcare Acquisition Corp to list on Nasdaq, and the deal will land it $175m in financing from Fresenius and Alexandria Venture Investments, among others. Alpha Healthcare already raised $100m when it went public, and Humacyte is looking at a $1.1bn market cap once the transaction closes. Fresenius took a 19% stake in 2018, while Access Industries made its investment in 2015 as part of a $150m series B.
Humio is choosing a more traditional exit by agreeing to a $400m acquisition by CrowdStrike that will primarily consist of cash but include some equity. It is a sizeable amount of change dropped by CrowdStrike, not least because Humio had only raised slightly more than $30m in equity financing – most recently completing a $20m series B round led by Dell Technologies Capital in March last year.
Talis takes in IPO proceeds
Xingsheng Youxuan, which allows neighbourhood communities to club together to purchase goods in bulk, has added $2bn to its coffers thanks to commitments from Tencent and China Evergrande Group, among others. The company said it now processes more than 8 million daily orders and is delivering to more than 30,000 towns across China. The latest cash injection comes just a couple of months after JD.com committed $700m and less than a year after Xingsheng secured $800m in its series C-plus from Tencent and others.
SpaceX meanwhile is showing no ambitions to go public just yet and the US-based spacecraft producer and launch services provider backed by Alphabet, has added $850m in fresh funding from unspecified investors at a reported valuation of $74bn. It is not the biggest round raised by SpaceX – for now that remains the $1.9bn transaction last summer – but it is notable for one because the company had allegedly lined up offers totalling $6bn within three days (yes, you read that right) and for another because existing shareholders took the opportunity to sell $750m worth of stock. No word on their identity either, however.
Axiom Space lifts off with $130m
Kakao Mobility hails Carlyle for $200m
Locus Robotics is one of two companies to have raised $150m (see Standard Cognition below, too) and the warehouse automation technology producer’s series E round featured returning backer Prologis Ventures (though it is unclear when the corporate first invested). Zebra Ventures did not participate this time, having previously contributed to the $40m series D and $26m series C rounds.
Standard Cognition checks out $150m series C
Mainstay Medical puts away $108m
TigerGraph charts course to $105m
LegalForce powers up with series C
An audio version of Oxford Union Debate Motion: Will Blockchain Disrupt The Venture Industry discussion session from our GCV Digital Forum in January 2021.
The Big Ones
I was catching up with a former corporate venturing leader this month as she described a healthy portfolio of activities covering public and private board roles and “forming a SPAC – isn’t everyone?”
Yes, is probably the answer to working on a special purpose acquisition company (SPAC), if you are part of the financial in-crowd at least.
The latest report is that LinkedIn co-founder Reid Hoffman and tech entrepreneur Mark Pincus are nearing a deal to merge their blank cheque company with Joby Aviation, valuing the flying taxi developer at about $5.7bn, according to the Financial Times.
Joby, which has raised more than $800m from investors including corporate backers Toyota, Uber, JetBlue and Intel among others, is hoping to start operations from 2024, similar to peers Lilium and Archer.
Archer recently secured a $3.8bn public listing through a SPAC and a $1bn order from United Airlines that will come into play when its flying taxis are approved by the US regulators.
You can see what is attractive to the promoters of the SPAC, as they might receive up to 20% of the offer as shares. In a $5.7bn deal that is a lot of money, and even if the aftermarket underperforms for some reason, Hoffman and Pincus will have earned a fortune.
For Joby, it provides new capital to cover development costs. As to why public market investors want access at this stage of risk, that is baffling, but the promise of growth in a potential market seems to be enough for now.
You can see why SoftBank Group, which is heavily committed through its $100bn-plus Vision Funds, has urged some of its high-profile portfolio companies to accelerate plans for stock market listings.
“They are being fairly transparent in their agenda that they would like everybody to list,” an executive at a company backed by Vision Fund told Nikkei Asia, the owner of the FT, earlier this week. The person described the argument as very logical: “This is a once-in-a-lifetime opportunity, and you should take it.”
But for corporate venturers trying to do deals, SPACs are throwing out the calculations for new potential deals. As one new CVC head said: “Everything is different. We used to focus on potential revenues and let the equity return equation sort itself out over five years. SPACs are impacting on valuation.”
But when capital is this abundant everyone is looking at allocating cash to the potential winners.
But, if innovation is speeding up, capital is abundant and invention is the root of success in driving equity, why did a record number of corporations stop investing last year?
Management changes, internal politics, not-invented-here antibodies, financial pressures on corporate cashflows and balance sheets, tensions between long-time horizon investing and business unit and C-suite strategy, and a host of other issues still bedevil the community.
Corporate venturing leaders with scars on their backs know how to manage these concerns, and spend at least half their time managing internal fires and stakeholders, even if this means leaving less time for building a team and investing in startups that will be relevant in the future for both financial and strategic reasons.
The most powerful tool, however, remains the use of mimetic desire. Being able to point to a peer senior managers respect who is doing corporate venturing successfully is a powerful argument, just as it was when Claudia Fan Munce at IBM was able to do so in referencing Dan’l Lewin at Microsoft in the wake of the dotcom crash after 2001.
But referencing is just a start. The community has been collaborative and supportive to new personnel within experienced units as well as the 800 or so newer units executing their first deal last year.
The sharing at the Global Corporate Venturing events and Connect powered by Proseeder digital tool drives the dealmaking and community, and the mentoring and learning now happens throughout the year through the GCV Institute, our new professional development program launched last month.
The webinar today will update the community on the planned courses for how corporate leaders can understand why and how best to use the corporate venturing tools, as well as train up the CVCs and help land the value back into the parent. My thanks to Liz Arrington, Patty Burke and James Gunnell for leading the webinar, and to all the Institute’s advisers and mentors for showing where the proverbial puck is heading and helping us all skate there beforehand.
It would have made for interesting few months for Tina Nova, a director at Nasdaq-listed genomic diagnostics company Veracyte.
Nova is also president and CEO of Decipher Biosciences, a peer specialising in urologic oncology that markets genomic tests for prostate and bladder cancers.
Veracyte has agreed to acquire Decipher, formerly known as GenomeDx Biosciences, for $600m. Nova has now left Veracyte’s board and will become general manager of its urologic cancer business unit.
Nova ran a dual track process at Decipher. Investment bank Evercore had advised on the trade sale as well as an initial public offering.
Decipher had filed last month for a $100m IPO as a price discovery mechanism and to keep Veracyte fair in its valuation given Nova had been on its board.
It is also another exit for US-listed pharmaceutical firm Merck & Co in the diagnostics and tools space. Merck owned 8.8% of Decipher having sold Preventice to Boston Scientific for up to $1.025bn last month.
UnitedHealth Group Ventures, the investment arm of UnitedHealth Group, holds an 11.4% stake in Decipher.
But with both the M&A and IPO markets heating up there will be plenty of chances for the other corporate-backed startups in the space to capitalise.
Nationwide began forming a corporate venturing team back in 2015, and in 2017, after forming investment vehicle Nationwide Ventures the previous year, it put aside roughly $100m for corporate venture capital deals. It has since invested in 25 financial and insurance technology developers and must like what it has seen, because it has upped its VC allocation to $350m. The company’s portfolio already includes Next Insurance, BlueVine and Hover.
Astia marshals Mastercard for $100m fund
Oscar Health is the latest highly valued tech company to file for an initial public offering, having raised almost $1.7bn in venture funding from investors including Alphabet and Ping An since it was founded in 2012. The digital health insurer was valued at $3.75bn in 2018 and has subsequently secured $365m in funding at a valuation that was surely higher. Interestingly, one of its largest rivals, Hippo, is reported to be in talks to list through a reverse merger.
The IPO market is still at a fever pitch of course. Immunotherapy developer Immunocore has gone public in a $258m offering in which it increased the number of shares while floating above its range. The Eli Lilly and WuXi AppTec-backed company has since seen its shares shoot up by 66%, taking its market capitalisation near to the $1.8bn mark.
Bolt Biotherapeutics has had a similarly successful IPO, increasing the number of shares by 30% and pricing them above the range to raise $230m. All its main shareholders, including Novo and Nan Fung’s Pivotal BioVenture Partners, bought shares in the offering, and the oncology drug developer’s shares also rose considerably on their first day of trading to increase its market cap to more than $1bn.
Vor Biopharma forces through $177m IPO
Terns directs itself on to public markets
Sensei graduates to $133m IPO
Matterport has almost as many corporate backers, all of whom are set to score an exit after the 3D modelling technology provider agreed to a reverse merger with special purpose acquisition company Gores Holdings V. The deal will involve Matterport listing on the Nasdaq Capital Market and will value the merged company at $2.9bn. Its investors include Qualcomm Ventures, CBRE, Ericsson Ventures, AMD Ventures, News Corp and PTC.
Hyzon Robotics will also get a Nasdaq Capital Market listing through its own reverse merger transaction, with this one set to value it at $2.1bn. The company was only spun off by Horizon Fuel Cell Technologies a little over a year ago, subsequently raising an undisclosed amount from investors including Total Carbon Neutrality Ventures in October. It is preparing to ship its first hydrogen fuel cell-powered trucks to customers later this year.
Pet care services provider Rover has had its issues over the years but nevertheless looks set to make it on to the public markets after agreeing a reverse merger with special purpose acquisition company Nebula Caravel Acquisition Corp. The transaction looks set to value the merged company, Rover Group, at about $1.6bn. It comes after some $280m in venture funding from investors including pet product retailer Petco.
Hyperconnect meets Match in $1.73bn deal
Digital health remains a big growth point in the venture capital space, and Yuanxin Technology has just completed a $466m series E round co-led by Tencent. Yuanxin offers telemedicine consultations, prescription medication payment tools and a health insurance offering, and this is its fourth round in just over two years. Tencent has been an investor since at least 2015.
Horizon Robotics has pulled in $350m through a series C3 round backed by Sunny Optical and automotive manufacturers BYD Auto, Great Wall Motors, Changjiang Automobile Electronic, Changzhou Xingyu Car Light and Dongfeng Motor’s Dongfeng Asset unit. The round boosted the AI chipmaker’s overall series C funding to $900m, all of which was raised in the past two months. Its existing investors include Contemporary Amperex Technology, Intel Capital, SK China and SK Hynix.
Advertising dollars continue to be tricky in digital media unless you occupy a specific niche, and if Google dominates the search engine space and Facebook social media, Reddit is effectively the leader in what was once known as online forums. It’s boosted advertising revenue 90% in the last year on the back of some increasingly prevalent mainstream press coverage. It has also bagged $250m in a round led by Vy Capital at a $6bn valuation. That’s double the valuation at which it last raised money, in a Tencent-led round two years ago.
Transport technology has been the big mover in the first few weeks of 2021, and the latest company in the sector to close a nine-figure round is Plus, developer of an automated trucking system it plans to begin shipping later this year. The company has raised $200m in a round co-led by Wanxiang International Investment and backed by existing investor Full Truck Alliance (AKA Manbang Group). The presence of automotive parts producer Wanxiang and trucking services marketplace Full Truck also hints at the kind of strategic partners with which it is working.
Nexthink, a developer of workplace experience management software, has secured $180m in series D funding at a $1.1bn valuation. The company, whose earlier investors include Mannai Corporation, has now raised at least $325m altogether, with the series D round led by investment firm Permira’s Growth Opportunities Fund.
Day One Biopharmaceuticals emerged from stealth nine months ago with $60m in series A funding from investors including Access Biotechnology, which has returned for the oncology drug developer’s $130m series B round. The proceeds will support the progress of Day One’s lead paediatric cancer treatment candidate, which has just entered phase 2 studies.
Cybersecurity technology producer Armis also had a productive 2020, being acquired by Insight Partners in January in a $1.1bn deal that included a $100m investment by Alphabet’s CapitalG subsidiary. It’s still raising money however, and has received a reported $125m from investors including CapitalG at a $2bn valuation. The round was led by Brookfield Technology Partners, and Armis said it has now raised $300m in funding altogether.
Stash stores $125m in series G round
PGDx picks up $103m in series C
Pony.ai pins down $100m
Clear queues up $100m round
Dailyhunt chases down $100m in series H
Powin powers up with $100m
An audio version of The Venture Manifesto discussion session from our GCV Digital Forum in January 2021.
The Big Ones
Few VC-backed companies have had as busy a week in the mainstream media as Robinhood. The share trading platform developer has been ground zero for the GameStop rush as well as increased activity for other “meme” stocks like AMC, Nokia and BlackBerry. But those increased trading levels means more cash required to meet SEC requirements, and the Alphabet and Roc Nation-backed company first raised $1bn from existing investors along with some $500m to $600m in debt financing a week ago Friday and then another $2.4bn over the weekend to come out with $3.4bn last Monday.
Kuaishou went public in Hong Kong this Friday morning in a hugely oversubscribed initial public offering in which it raised $5.4bn, only to see its shares open at a price nearly three times that of its IPO. The short-form video app developer had secured $4.35bn in funding from investors including Tencent and Baidu prior to the offering and now has a market cap that stands around the $160bn mark.
US-based printing technology producer Xerox plans to launch innovation and corporate development divisions through a reorganisation involving the formation of a $250m corporate venturing arm. Xerox’s Corporate Development group will engage in investments and merger and acquisition deals as well as deploying the recently announced $250m fund. The unit is yet to be launched but will invest in mid-sized, growth-stage companies aligned with Xerox’s strategic interests. It will be led by executive vice-president Louie Pastor, who has also been appointed chief corporate development officer and chief legal officer.
Crossover is an exit this week. Stem cell immunotherapy developer Sana Biotechnology –based on research at Harvard, UCSF and University of Washington, and co-founded by former executives of Juno that was acquired by Celgene for $9bn a couple of years ago – has floated in an offering that netted it nearly $588m (more than four times as much as its $150m original target), reputedly representing the largest IPO yet for a preclinical biotech company. Shares surged 40% on the first day (from $25 to $35.10) so that greenshoe option seems likely, which could push proceeds to nearly $676m. It comes about eight months after Sana Bio disclosed $700m in early-stage funding from investors including GV, the Alphabet subsidiary formerly known as Google Ventures. Its current share price gives it a market cap of about $7bn.
It’s interesting that after the Ubers and Airbnbs of the world have gone public, a wave of new companies in more coronavirus-resistant sectors have stepped up to fill that void at the top of the VC-backed valuation heap, and quickly too. Data engineering software producer DataBricks has received $1bn from investors including Microsoft, AWS, CapitalG and Salesforce Ventures in a series G round valuing it at $28bn. That’s a more than fourfold increase from its series F, just over a year ago.
UiPath’s valuation is even higher, the automation software provider having pulled in $750m in series F funding at a $35bn post-money valuation. Corporate investors Tencent and CapitalG weren’t identified as participants in the round, which more than tripled UiPath’s valuation from its July series E, and it’s going to be interesting to see how much higher that valuation can go when it executes the IPO for which it confidentially filed in December.
Online food delivery has been heavily boosted in the past year and Good Eggs combines several different areas – prepared food and meal kits, farm-to-table produce, alcohol and flower delivery – in a single offering. It’s also managed to raise $100m from investors including GV and Rich’s despite operating mainly in the San Francisco Bay Area. The capital will support its expansion into Southern California, with wider movement surely on the horizon.
Tealium, developer of a management software tool for customer data, has secured $96m in series G financing at a $1.2bn valuation, increasing its overall funding to $160m. Its earlier funding came from investors including Sumitomo’s Presidio Ventures unit, ABN Amro Digital Impact Fund, Citi Ventures and Parkwood, though none were named in the latest round, which was co-led by Georgian and Silver Lake Waterman.
Mobile Premier League, the developer of an online gaming platform focused on the South and Southeast Asian markets, was founded about three years ago and has already notched up its fourth funding round, raising $95m from investors including Susquehanna International Group, Go-Ventures and Telstra Ventures. The series D round valued it at $945m post-money and the proceeds will go to bolstering its esports offering.
Telecoms and internet group SoftBank is launching a $100m fund to invest in companies based around the Miami, Florida area of the United States. The vehicle has already chosen its first portfolio companies, including cybersecurity software developer Lumu Technologies. It will invest in locally-founded startups as well as those willing to move to the area.
Genetic testing service 23andme has chosen to go the reverse merger route for a public listing, joining with VG Acquisition Corp, a special purpose acquisition company sponsored by conglomerate Virgin Group in a deal that will value the merged business at about $3.5bn. It had received more than $870m in funding pre-IPO from an investor base that includes GV (which is scoring some huge exits right now), WuXi AppTec, Johnson & Johnson, GlaxoSmithKline, Roche and Illumina.
Astra is set to become the first private space launch services provider to hit the public markets, having agreed a reverse merger with special purpose acquisition company Holicity at an implied valuation of $2.1bn. The deal was agreed a year after Astra emerged from stealth having secured over $100m from investors including Airbus Ventures, which is slowly growing a significant presence in the spacetech sector, and two months after it launched its first rocket into space.
Drizly’s investors, which include Vayner/RSE, are heading for an exit of a different kind after the alcohol delivery service agreed to be acquired by Uber for $1.1bn. The company had disclosed approximately $85m in funding and will join an expanding range of Uber delivery services spearheaded by its Uber Eats subsidiary. It also stands as a sign of growth in the on-demand service sector, and perhaps forthcoming consolidation.
Roblox has had an extremely busy couple of months, filing for and then postponing its initial public offering, changing over to a direct listing, raising $520m from investors including Warner Music Group at a hugely increased $29.5bn valuation and now reportedly putting its plans to go public on hold. The game creation platform developer, which also counts Tencent among its investors, is postponing the listing due to regulatory scrutiny on how it classifies revenue from sales of its Robux currency on the platform.
Shared workspace provider Knotel was valued above $1bn just 18 months ago but has now filed for bankruptcy, a reminder that while some business models have thrived during the coronavirus pandemic, others have been far unluckier. Knotel had raised roughly $560m from investors including Mori Trust, Rocket Internet, Itochu, Bloomberg Beta, The Sapir Organization, Raiffeisen, Wolfson Group, Moinian Group and Wainbridge Capital.
We have teamed up with 500 Startups’ CVC Insider Series, where top CVC practitioners offer advice and best practices regarding common challenges encountered within corporate venturing. Featured this week is an interview with Jennifer Ard of Intel Capital. Jennifer is interviewed by Nicolas Sauvage who we interviewed in an earlier episode of our Leadership Series.
The Big Ones
GCV Digital Forum 2021 event had a host of highlights, including awards, the World of Corporate Venturing annual review, magazines and to bring together such luminaries to share insights and deal flow through the GCV Connect powered by Proseeder platform as well as commercially bring in the subscribers, sponsors and attendees.
To have about 1,000 at the forum and Mach 49 workshop and hundreds of meetings and engagement with the pitch sessions is awesome, particularly through the regional and sectoral meetings, such as for the hydrogen roundtable and Global Energy Council meeting and report.
The event also showcased the launches of our professional development and community platforms for venture investors of all types to meet up, the GCV Institute and Global Innovation Venturing, respectively.
We have together really set out the stall for this year for the growth of the GCV Leadership Society, GCV Connect powered by Proseeder platform, Global Innovation Venturing, GCV Institute including Academy and a boost to readers across our titles, with my colleague, Thierry Heles bringing out the latest quarterly report for Global University Venturing.
Let us work together to achieve our common goals. There is strength in unity.
Xerox sets up $250m corporate venture capital fund
Xerox’s has now set up a reported $250m corporate venture capital (CVC) fund. The timing is notable for a few reasons.
First, Tolga Kurtoglu, Xerox’s head of research, left late last year, to this month join computer maker HP – probably Silicon Valley’s original archetypal company having been founded by Stanford University students from their garage – as chief technology officer.
Second, Xerox is back into CVC after one of the most seminal journeys into CVC.
As CB Insights in its excellent history of the industry noted: “Xerox had had an active CVC program since the 1960s, operating an internally managed fund that invested in some of the most legendary figures in Silicon Valley, including Raymond Kurzweil [proponent of the singularity between people and machines] and Steve Jobs [founder of Apple]….
“Xerox started Xerox Technology Ventures (XTV) in 1988 to exploit and monetize the technology created in Parc and its other research labs, funding it with $30m.
“The company’s chairman said at the time that it was ‘a hedge against repeated missteps of the past’. Apple was one of several examples in which technology initially developed by Xerox was commercialized by more nimble competitors.”
But Parc also developed the laser printer among a host of projects and XTV was an enormous financial success, netting capital gains of $219m on the company’s initial investment, an astounding net internal rate of return of 56%, CB Insights’ history notes.
XTV was terminated, reportedly due to politics, and replaced with Xerox New Enterprises, which did not relinquish control of firms or allow for outside investment and had less success.
Which direction Xerox’s new fund takes will showcase whether the new management since the 1990s has learned the right lessons and there are now plenty of examples of groups setting up for success and longevity, as identified in the GCV Digital Forum over the past week.
Thanks to the 1,000 or so investors, including those part of the GCV Leadership Society who joined this Festival of Corporate Venturing and helped with the pilot and roll out of the GCV Institute launched to provide the professional development to recruit, retain and train CVCs and their business units and executive on the right approaches. In innovation we trust and we welcome Xerox and its CEO, John Visentin, back into the community
Focus on large acquisitions
There are certainly all these elements to Preventice’s acquisition by Boston Scientific for up to $1.025bn. But the conditions for these deals are set by the animal spirits in the wider public markets.
And here the music is certainly playing as Silicon Valley Bank notes in annual healthcare report.
The boom in diagnostics (dx/tools as a subsector) was set by last year’s flotation of digital disease management company Livongo in an $355m initial public offering. The following year saw telehealth group Teladoc acquire Livongo for $18.5bn.
And behind both Preventice and Livongo was US-listed drugs group Merck’s corporate venturing unit, Global Health Innovation (GHI).
William Taranto, head of Merck GHI, noted by email: “This is our second unicorn for GHI in the last 18 months (Livongo and Preventice). We were majority owner of Preventice.”
Jon Otterstatter, co-founder and CEO of Preventice Technologies, and Taranto in a session moderated by Heidi Mason of Bell Mason Group spoke at length at the GCV Symposium a few years ago. Mason when asked by email remembered it well. “I recall being on your London Symposium stage with Bill and Jon some years ago, talking about strategic vision and gainful implementation before [the] ‘CVC ecosystem investor model’ was common wisdom.
“Bill and Jon discussing how their strategic innovation partnership was forged with vision of new digital health market [and] new sector…and even then, they were anticipating this type of M&A or IPO as a future rung in their strategic platform ‘ascension’ story.”
Merck operates a $500m GHI Fund and added a $700m private equity fund to be able to buy-and-build and take larger stakes across the ecosystem. For his GCV Powerlist 2016 award, Taranto said: “We are focused on using our growth equity firm to create ecosystems around oncology and infectious disease.
“We are very proud to have acquired and merged Preventice Solutions and eCardio, then bringing in Boston Scientific as our partner.”
After a merger with eCardio and a spin-out after acquisition, Joe Volpe, general manager of Merck’s $700m fund and a GCV Rising Star 2016, said the Preventice asset deal paid Merck back more than 80% of what was invested and left it still owning about 48% of the asset with significant value. This was increased to majority control in last year’s $137m round, while Boston Scientific owned about 22% stake in Preventice pre-takeover.
As SVB notes in its annual healthcare report: “Historically, we have seen few, if any, large private dx/tools acquisitions….
“However, in 2020, we saw three multi-billion dollar private M&A (ArcherDX [bought for $1.4bn by Invitae], Grail [acquired by Illumina for $8bn] and Thrive Earlier Detection taken over by Exact Sciences for $2.2bn]), two of which were pre-commercial….
“All three deals exited in less than five years from the close of their series A….
“We anticipate [this year] an even split between $1bn-plus IPOs and M&A, as big-deal IPO/M&A optionality has arrived in the sector.”
Just in the past week has been a further 11 venture-backed healthcare companies filing details on their IPOs and another four trade sales, with the majority backed by corporate venturers.
The stem cell therapy developer Sana Bio filed to go public to raise $150m seven months after closing $700m in funding from investors including Alphabet unit GV.
WuXi AppTec and New World Development-backed Adagene plans a $125m IPO.
Cambrian Biopharma is the largest investor in cancer immunotherapy developer Sensei Biotherapeutics, which has filed to raise up to $100m.
The immunotherapy developer Immunocore plans to go public in the US with $100m IPO.
PureTech Health, Johnson & Johnson and Novartis are in line for exits after the cancer drug developer Vor Biopharma filed for its initial public offering.
Lilly Asia Ventures is the largest shareholder of liver disease therapy developer Terns, which has filed for $100m IPO.
UnitedHealth Group and Merck are both in line for exits as Decipher Biosciences files for a $100m initial public offering.
Amgen and Pfizer-backed oncology therapy developer NexImmune has filed to raise up to $86.3m in an IPO on the Nasdaq Global Market.
Novo and Pfizer are among the investors set to exit the cancer therapy developer Bolt Biotherapeutics, which has set a $100m target for its initial public offering.
Non corporate-backed Lucira Health and Landos Biopharma also announced pricing of their IPOs.
On trade sales, Biohaven has purchased the 58% stake cancer immunotherapy developer Kleo Pharmaceuticals it did not already own, while Haemonetics acquired Cardiva Medical in a deal worth up to $510m, Thermo Fisher Scientific bought Mesa Biotech for $550m and Philips acquired Capsule Technologies for $635m.
With the rapid flow of capital back to investors at a faster pace, the appetite for more dealmaking is increasing.
SVB noted healthcare company investment surged more than 50% last year from 2019 to set a new high at $52bn so GCV is delighted to announce Taranto and Rob Coppedge, head of Echo Health Ventures (EHV), will co-chair the new Global Health Council being formed next month. You can catch up with Merck and EHV at our GCV Digital Forum this week, which includes an invite-only healthcare roundtable and public discussion moderated by Neil Foster at Brown Rudnick and including Hitachi’s US chairman.
Los Angeles County Employees Retirement Association supplied $100m for Lilly Asia Ventures’ LAV Biosciences Fund V fund two years ago, and it has now put up another $100m that will be spread across its LAV Fund VI and LAV Fund VI Opportunities funds. Lilly Asia Ventures, a spin off of pharmaceutical firm Eli Lilly, is looking to raise a total of $1.35bn for the two funds.
Arch structures $1.85bn Fund XI
Xiamen C&D backs $441m Qiming fund
Fireside Ventures finalises $118m second fund
Kuaishou has priced a $5.4bn initial public offering that will take some beating in 2021, even bearing in mind how bullish the markets are right now. The Tencent and Baidu-backed short-form video app developer will be valued at roughly $61bn in the offering, which will take place early next month in Hong Kong, though reports of the retail portion of the share subscription being 1,200 times oversubscribed suggest that market cap is going to skyrocket.
Decibel sounds out public markets
Landos aims for $100m IPO
Electric carmaker and mobility technology provider Faraday Future has had an uneven history, raising a reported $2bn before property developer China Evergrande acquired a 45% stake through subsidiary Evergrande Health Industry for $860m. However, Faraday looks set to snatch a public market listing, having agreed a reverse merger with special purpose acquisition company Property Solutions Acquisition Corp. The transaction will be buoyed by $775m in PIPE financing and will value the merged company at about $3.4bn.
Content recommendation engine developer Taboola failed in its bid to merge with peer Outbrain last year but has agreed to go public through a reverse merger with a special purpose acquisition company to form a $2.6bn business. The deal will also include $150m of shares bought from existing Taboola shareholders that could potentially include corporate investors DMGT, Baidu, Advance Publications, Yahoo Japan and Comcast.
Latch unlocks public listing with reverse merger
SAP signals Signavio acquisition
Shell shoots for Ubitricity acquisition
Loon comes back down to earth
SenseTime looks set to be one of the big tech IPOs of 2021, and news has emerged that the artificial intelligence software producer reportedly raised funding in late 2020 at a $12bn valuation. The size of the round has not been disclosed and nor have the investors, but reports in August suggested SenseTime was targeting $1.5bn in a pre-IPO round, and its existing backers include Alibaba, Qualcomm, SoftBank, Suning and Dalian Wanda.
Elsewhere in China, electric vehicle producer Leapmotor has received $665m in series B funding from investors including a Hefei government fund, SDIC Chuangyi Industrial Fund Management, Hangzhou Jiuzhi Investment Management and Shanghai Yonghua Capital Management. The company was spun off by Dahua Technologies and counts corporates Shanghai Electric and CRRC among its earlier investors.
Investors have been looking out for a resurgence in the cleantech sector for a while now, and the bull market for electric carmakers could pull up an adjacent part of the market: battery technology. Sila Nanotechnologies, which is developing more effective forms of battery chemistry, has raised $590m in a series F round that more than tripled its valuation to $3.3bn. The round was led by Coatue but none of Sila Nano’s corporate backers – Daimler, Siemens, Samsung and Amperex – were named as participants.
The covid-19 pandemic has boosted business for food ordering apps and grocery delivery services, and Finland-based Wolt has taken advantage, expanding from the first group to the second. It has also just raised $530m from investors including Prosus to hike its total funding to $856m. The round comes as the company disclosed that it roughly tripled revenue during 2020.
The digitalisation of the financial services sector is continuing apace, with neobanks still raising big money. The latest is Brazil-based Nubank, which has bagged $400m in a series G round featuring Tencent that boosted its valuation to $25bn. Tencent also took part in Nubank’s last round, a $400m series F in mid-2019 that valued it at $10bn. The latest capital influx will support its Latin American expansion.
Didi digs up $300m for autonomous driving unit
Samsung-backed cloud networking technology provider DriveNets has pulled in $208mthrough a series B round valuing it at over $1bn. D1 Capital Partners led the round, which follows $117m in series A funding DriveNets had raised at a reported valuation of about $500m. Samsung Venture Investment Corporation lists it as a portfolio company but has not confirmed when it invested.
Tourism and leisure booking platform developer Klook is in one of the sectors hit hardest by covid-2019 but has accordingly added features like interactive video content and a contact tracing tool to its offering. It’s been rewarded with $200m in series E funding from investors including Softbank Vision Fund 1. It had secured $225m in its last round, which was led by Vision Fund 1 in 2019.
Lyra Health wires in $187m
In China, autonomous driving technology developer Uisee has received $154mfrom investors including the corporate-backed National Manufacturing Transformation and Upgrade Fund. It had raised an undisclosed amount of series B funding from investors including Robert Bosch Venture Capital last February.
Bloomreach, developer of digital experience technology that helps online retailers drive sales, has raised its first funding in five years, taking $150m from Sixth Street Growth at a reported $900m valuation. That earlier round was a $56m series D that included Salesforce Ventures, increasing Bloomreach’s overall funding to nearly $100m. The latest round supported the company’s acquisition of customer experience software developer Exponea.
Huohua Siwei has become the latest Chinese digital education provider to raise money, having secured $150m in a series E3 round featuring Tencent that reportedly valued it at $1.5bn post-money. Trustbridge Partners led the round, which expanded the company’s overall series E funding to $400m over the past six months. Online tutoring service Yuanfudao backed its series E1 round back in August, and its total funding is near the $600m mark.
Agile Robots manoeuvres to $130m
Digital health insurance has been doing big numbers of late, and Sidecar Health has pulled in $125m through a series C round led by Drive Capital. Sidecar, which counts Comcast Ventures among its investors, is present in 16 US states and intends to expand that reach over the course of 2021.
Design Therapeutics discovers $125m in series B
Melio gets $110m payment
Stripe makes Fast work in $102m round
TScan hangs up $100m in series C
Albert absorbs $100m in series C funding
Yunxuetang yanks in $100m from Tencent
Soci cements $80m series D
Deerfield sets Nuvalent in motion with $50m series A