01 February 2021 – Xerox Sets Up $250m Corporate Venture Capital Fund

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.

Funds

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

Exits

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

University

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

Deals

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

University

Soci cements $80m series D

Deerfield sets Nuvalent in motion with $50m series A


“Funky Chunk” Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0

01 June 2020 – UBS Groups Prepares for Fintech Investments

The Big Ones

1

Switzerland-based bank UBS Group is setting aside hundreds of millions of dollars of its money to invest in financial technology companies, according to Bloomberg.

UBS hired Erasmus Elsner for its venture capital and growth equity unit last month but is reportedly still recruiting staff for a dedicated corporate venture capital (CVC) team. It is planning a corporate VC fund to make investments between $10m and $20m in dozens of companies targeting bank/client engagement, investing and financing platforms and the improvement of the bank’s underlying operations, a source told Bloomberg.

Mike Dargan, UBS’s Global Head Group Technology, said: “UBS wants to further engage with and support fintech firms. The new venture investment portfolio is a next step to accelerate our innovation and digitisation efforts.”

2

It’s a scary-enough headline, ‘Huawei Banned, So Let’s Invade Taiwan to Take TSMC?’, in reaction to the strict set of rules announced by the US government on May 15 in a bid to cut the China-based 5G and telecoms equipment maker off from the global semiconductor ecosystem.

In its subsequent report, “US strategic approach to the People’s Republic of China,” published on the 20th, the US said: “The administration is implementing the Foreign Investment Risk Review Modernization Act to update and strengthen the capacity of the Committee on Foreign Investment in the United States (CFIUS) to address growing national security concerns over foreign exploitation of investment structures, which previously fell outside CFIUS jurisdiction.

“This includes preventing Chinese companies from exploiting access to US innovation through minority investments in order to modernise the Chinese military. The US has updated its export control regulations, particularly in light of Beijing’s whole-of-society strategy and its efforts to acquire advanced technologies related to hypersonics, quantum computing, artificial intelligence, biotechnology and other emerging and foundational technologies. We are also engaging allies and partners to develop their own foreign investment screening mechanisms, and to update and implement export controls collaboratively through multilateral regimes and other forums….

“Domestically, the Administration is taking steps to strengthen the US economy and promote economic sectors of the future, such as 5G technology, through tax reforms and a robust deregulatory agenda. The President’s ‘Executive Order on Maintaining American Leadership in Artificial Intelligence’ is an example of a US government initiative to promote investment and collaboration to ensure the US continues to lead in innovation and setting standards for a growing industry.”

But the horse might have bolted. The ChinaTalk article at the top suggests Huawei has done enough over the past few years to survive, stating: “The main issue is supporting Huawei in maintaining its dominant position in 5G and helping it continue to be able to supply the needs of 5G bases.

3

The US healthcare system has many virtues, but it is simply too expensive and hard for consumers to access care, according to insiders. Coastal Americans’ faith in their system has been shaken by the coronavirus and this has created opportunities for some. Jeff Bennett, CEO of startup Higi, is trying to tackle the issue and has received a fillip with a new round of funding.

UK-based personal healthcare provider Babylon has joined the ranks of new corporate venturers by leading the latest round for US-based health engagement technology developer Higi.

The round was reportedly $30m in size and Higi’s previous investors, 7Wire Ventures, Flare Capital Partners, Jumpstart Capital, Rush University Medical Center for Health and William Wrigley Jr, also took part. Higi raised $25.8m in 2018, according to a regulatory filing, from investors including Blue Cross Blue Shield-affiliated venture firm Sandbox Industries, though Sandbox has said it is now no longer an investor.

4

Similarly, money is flowing in other parts of healthcare and life sciences. The power of science fiction films retains its hold in inspiring inventors but the secret to corporate venturing and open innovation lies in retaining optionality.

Drawing on inspiration from Star Trek, Vaxxas, a Queensland University, Australia, spin-out, has developed technology which could mean vaccine delivery via needles and syringes could soon be a thing of the past.

The World Economic Forum named the company a Technology Pioneer in late 2014 and over the past decade the company has been working on a nanopatch, based on research at the university’s Australian Institute for Bioengineering and Nanotechnology, that delivers vaccines painlessly and more efficiently than syringes.

5

Cisco intends to purchase the network analytics software producer, which had raised more than $110m from investors including GV and Salesforce Ventures, for a reported $1bn.

Networking equipment manufacturer Cisco agreed yesterday to acquire ThousandEyes, a US-based network management software provider backed by internet and technology conglomerate Alphabet and enterprise software producer Salesforce.

The price was reported by Bloomberg as being approximately $1bn, a figure confirmed to CNBC by a person familiar with the matter. Cisco expects the transaction to close by the end of next month.

Founded in 2010, ThousandEyes provides cloud analytics software that collects data from a range of access points, such as data centres and consumer devices, to identify potential sources of disruption and ensure websites, applications and services are delivered optimally.

Deals

Genome sequencing technology developer MGI Tech has closed a $1bn series B round, four years after being formed as a subsidiary of genome research organisation BGI. The round, which follows a $200m series A a year ago, shows the potential value in spinning off valuable subsidiaries, and it follows a $265m round for another China-based spinoff, smart sensor and power semiconductor provider BYD Semiconductor (see yesterday).

Chinese online grocer MissFresh has seen business pick up sharply during the coronavirus lockdown and has accordingly raised funding at a reported $3bn pre-money valuation. The company’s existing backers include Tencent and Lenovo but the only new investor revealed in media reports is CICC Fund. Bloomberg reported in the last few days that it was set to raise roughly $500m.

SpaceX meanwhile goes from strength to strength, the spacecraft producer and launch services provider expanding its latest funding round to $346m and surpassing its original target of a $250m close. Elon Musk has got a lot of flack over the past few years, but it’s worth noting that Tesla’s shares are continuing to rise while Alphabet-backed SpaceX is still growing – to a $36bn+ valuation, if reports from earlier this year are accurate.

Electric carmaker BYD is preparing for a Hong Kong Stock Exchange listing and as part of a restructuring effort it is spinning off semiconductor and sensor subsidiary BYD Semiconductor with $265m in external funding. Sequoia Capital China, CICC Capital and SDIC Venture Capital are co-leading the round, which will value the subsidiary at more than $1.3bn. Originally known as BYD Microelectronic, it was formed in 2004.

Marqeta makes off with $150m

Insitro has created a machine learning-equipped drug discovery platform and has secured $143m in a series B round featuring WuXi AppTec’s Corporate Venture Fund, GV and Alexandria Venture Investments. GV had already contributed to the $100m in series A funding with which Insitro emerged from stealth in mid-2018, at a $1.05bn valuation.

Arvelle arcs to series A close

Pie Insurance picks out $127m

Bolt flashes on fresh funding

AbCellera has built an antibody drug discovery system and has secured $105m in a series B round featuring Eli Lilly, having signed a collaboration agreement with the pharmaceutical firm last week. In fact it’s been a great few weeks for Canada-based AbCellera, which got a commitment for up to $125m in financing from government agency Innovation, Science and Economic Development Canada at the start of this month.

Elsewhere in China, Xiaomi has invested almost $103m in power bank producer Zimi through a cash-and-stock deal that increased its stake in the company from 22.5% to 49.9%. Zimi was already part of the Xiaomi ecosystem, a strategic investment initiative intended to construct a network of companies producing Xiaomi-compatible products. That network reportedly now encompasses some 300 portfolio companies.

Mindstrong mines Optum for $100m series C

Oxford Nanopore expands latest round

CFS sees out $84m series A2 round

Exits

Sendo and Tiki test the waters for merger

Roche reaches for portfolio company Stratos

UA’s FreeFall Aerospace completes merger

Kintor Pharmaceutical has however successfully floated in Hong Kong, pricing its initial public offering at the top of the range to raise $240m. The IPO featured a $115m cornerstone investment by appliance maker Gree, which provided $89m, Highlight Capital and Foresight Fund. It was 500-times oversubscribed according to Kintor, which is developing prostate and breast cancer drugs, and which plans to now expand into hair loss treatment.

VeriSilicon vies for $111m in IPO

Avidity to invade public markets

Burning Rock files for $100m IPO

Pliant places IPO terms

Nanoform to shape $76.7m IPO

Funds

U-M taps Deerfield for Great Lakes Discoveries


“Funky Chunk” Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0