Funding for tech startups has been on an inevitable upswing for years, a result of a virtuous circle where wildly successful tech companies on the public markets whet the appetites of investors and investors’ backers to find more diamonds, a push met by a pull from the rush of talent with entrepreneurial aspirations out to put that money to work. 2019 has felt a bumper year in that longer trend, with 9-figure rounds ($100 million or more) and “unicorn” statuses so prevalent that the numbers have started to cease to be news items in themselves.
With 2020 now just days away, a look at the 50 biggest funding rounds for start-ups in the past year draw out some trends. We’re pulling out the top five below for a closer look, but it’s interesting too to see some of the other trends emerging across the rest of the pack.
Automotive remains a huge pull when it comes to raising big bucks: part of the reason is because the space is capital intensive, as it straddles both software and hardware (that is, not just equipment but cars). Capex is another reason for some of the other big investment rounds of the year, such as the biggest of them all, for an internet data center startup.
Asian companies figure massive in the list, and account for 7 of the 10 biggest rounds in the list.
Small players: there were only three companies in health tech in the top 50, only one in education technology, and only three in the areas of AI and robotics. I don’t know if that means these areas simply don’t require as much capital investment, or if these challenges are simply not as interesting right now for investors as those more squarely focused on revenue generation and business needs. Hopefully the former, as the wider tech world faces a lot of cynicism and skepticism from the public, and could use a better profile from solving actual problems.
Note: for this piece we have focused on investments made in pre-IPO technology companies, and on new equity investments rather than secondary or debt rounds.
$3.7 billion Series A – Tenglong Group.
The name may not ring a bell, but the size of this round, and the what Tenglong does (and where it operates) speaks to one of the biggest trends not just of the last year, but the last decade. The company, based in China, is a specialist in building customized internet data centers, and its rise has dovetailed with the rapid growth of its customers, which include the likes of Baidu, Tencent and Alibaba, among others. China has the most smartphone users of any country in the world — 850 million as of October 2019, with the second-highest number (in India) at only half that — and customized data centers are built and operated not just to service that huge, internet-hungry number, but to be able to grow and shrink (mostly grow) along with it.
This $3.7 billion round — co-led by Morgan Stanley and Nanshan Capital and announced this month — is not only the biggest Series A of the year (and likely one of the biggest ever) but it is also the highest round of the year according to CrunchBase that is not associated with a private equity investment or company not squarely in tech (only one other funding was bigger: $4 billion for the Abu Dhabi National Oil Company). It’s also the biggest rounds ever raised by a data center business (which have a lot of capital-intensive needs, one reason for the big money). Tenglong Group has been around for around four years, but the money is coming in now as it looks to scale across China.
Takeaway: Judging by the growth numbers, and funding like this to lay the groundwork for the next phase of internet services, usage and users, China’s only just getting started.
$3 billion Series F – Kuaishou Technology
Another monster round for a Chinese startup, this time one squarely in software. Known as Kwai outside of China, Kuaishou is TikTok’s biggest competitor and one of the highest-grossing photo and video apps globally, recently hitting 100 million daily active users. The company this month reportedly closed a $3 billion round that values the startup at $28.6 billion. Tencent led with a $2 billion investment, with Yunfeng Capital, Boyu Capital, Temasek Holding, and Sequoia Capital also participating.
Reports say that this is the final round before the company opts for a public listing in the US market. Granted, the rumours of an IPO have been circulating for almost two years at this point, stretching back to when this $3 billion round was just a $1 billion round. In the meantime, the funding will be used to help Kuaishou compete with ByteDance and its blockbuster app TikTok.
How that will play out both within and outside of China remains to be seen.
On one hand, TikTok has been in the spotlight in the US, not only because of its popularity, but because of regulatory scrutiny and concerns over how an app owned by a Chinese entity behaves with respect to personal data. How and if that kind of scrutiny will extend to other apps like Kwai is not clear.
On the other hand, TikTok has been a trailblazer in being the first social media app out of China to really break through to a mainstream audience in the West (and in particular the US). The big question is whether it’s an outlier or if other apps will follow suit… and if Kwai will take its TikTok rivalry global by trying to crack markets like the US and Europe. There are some notable differences in how the two work, including the fact that Kwai monetises with social commerce, compared to TikTok’s focus on ads; related to that, TikTok’s algorithms favour popular creators, while Kwai has a more long-tail approach.
Takeaway: TikTok is still the only really significant social-consumer app run and owned by a Chinese company to break the US and other Western markets. This funding shows that there is still a lot of mileage and my guess is that we’ll see many more developments here, despite the many regulatory and other hiccups that may be faced.
$2.6 billion corporate round – Argo AI
Coming from a single strategic investor, the German car giant Volkswagen, this investment catapulted Argo AI from being a US-only play (backed by no less than Ford) into one with a far more international profile, particularly around the development of its nascent autonomous vehicle technology.
We’re still miles (or kilometers, if you wish) away from seeing any kind of self-driving cars on our streets, in part because of the vast technical (and safety) complexities of building these services, even for limited capacities on very specific routes; and in part because of the economics: the question is not just how to make something like this, but how to make it at a scale that guarantees profit for those making the cars either for individuals or for those operating services using the cars.
Takeaway: While the hurdles to getting autonomous cars out into the market continue to be picked apart and solved, little by little, this investment — and the dozes of others that have been made into the various components that will form part of the tech stack for autonomous cars — is about money and people getting behind ideas not only to try to help get that to happen, but to be involved early in what they hope will be the most promising companies. On the other hand, the sheer number of hopefuls spells consolidation around the bend.
$1.5 billion Series D – Chehaoduo
Another mobility-related round, but from the commerce end of the spectrum. Chehaoduo is a startup that’s built two online marketplaces in China, respectively for selling used cars and new vehicles. This latest funding came from SoftBank’s Vision Fund back in February and highlights the fund’s wider investment strategies across both the mobility and e-commerce sectors. The fact that it’s yet another example of a huge Chinese startup raising money is another sign of just how much money is pouring into the region to fuel the growth of these businesses and that market.
Takeaway: As with other Chinese juggernauts, one big question will be whether Chehaoduo will use some of the funding to export its business to more countries and regions. The market is very crowded with car marketplaces, and so it will be worth watching for what brings the most traction and loyalty over time — whether it’s the inventory, or the extra services, or the flexibility offered to buyers and sellers, or a combination of all of them.
$1.46 billion Series H – Grab (on-demand transportation, food delivery and payment
Grab is in the pantheon of huge transportation-on-demand giants face a lot of competition, and see opportunities to spawn lines of business adjacent to ride hailing that tap into existing customer relationships and their logistics networks — both of which require gigantic sums of money. In the case of Grab, the Singaporean based company that operates across Southeast Asia has raised over $9 billion. This $1.46 billion tranche, led by SoftBank’s Vision Fund, was actually part of a much bigger Series H (which may or may not yet be closed but was estimated earlier this year to be at $5 billion), and it comes at a time when Grab is in hot competition with other providers like Go-Jek, consolidating holdings from others like Uber that are pulling away from some of its most costly efforts; as well as building up food delivery and a network of other services.
Takeaway: Will the penny drop for Grab at some point as it has for others in the space like Uber, or has the company managed to pull off its unit economics in such a way that it’s not haemorrhaging money?
Honorable mention (although that not be quite the right phrase, given all of its controversies this year)… The We Company (formerly known as WeWork) has raised billions in 2019 — in fact the most of any startup — but in 2019 it has all been in the form of secondary deals and loans. The company — whose primary business is around developing and then leasing out office and co-working space — was primed for an IPO this year at an eye-watering $47 billion valuation.
That plan never came to be after it opened its books, revealed its staggering losses (losing $1.9 billion on $1.8 billion in revenues in its most recent full fiscal year), and faced a battery of shock and awe, as well as jokes, over its business model. As many began to question whether WeWork was even a “tech” company — and if it (or actually any company, tech or not) was justified in reaching such lofty valuations — the company started scrambling because in fact, it was about to run out of cash. Cue billions in emergency funding, potentially to be followed by billions more, to give The We Company time to right-size and reorganize.
Here’s the list in full:
- $3.7 billion Series A – Tenglong Group (internet data centers)
- $3 billion Series F – Kuaishou Technology (social media)
- $2.6 billion corporate round – Argo AI (autonomous vehicles)
- $1.5 billion Series D – Chehaoduo (online car sales)
- $1.46 billion Series H – Grab (on-demand transportation, food delivery and payment)
- 9.76 billion Chinese yuan Series A – T3 (mobile travel services)
- $1.25 billion ‘funding round’ – OneWeb (broadband satellites)
- $1.2 billion round – Coconala (marketplace for a wide range of digital-based services and advice)
- $1.15 billion round – Cruise (autonomous vehicles)
- $1 billion Series G – One97 (PayTM’s parent, mobile commerce and payments in India)
- $1 billion Series E – Rappi (an Amazon-style online store in South America)
- $1 billion Series D – Flexport (logistics)
- $1 billion Series A – JD Health (health)
- $1 billion ‘corporate round’ – OpenAI (AI)
- $1 billion corp round – Uber Advanced Technologies Group
- $940 million Series B – Nuro (robotics)
- $800 million Series D – ke.com (proptech)
- $750 million Series D – MEGVII (AI)
- $700 million ‘corporate round’ – Rivian (electric automaker)
- $700 million Series B – NetEase Clould Music (digital media)
- $585 million Series D – Udaan (b2b trading)
- $575 million Series G – Deliveroo (food/delivery/logistics)
- $568 million Series D – UiPath (RPA)
- $550 million (ish) Series F – FlixBus (automotive)
- $550 million Series C – Babylon Health (health)
- $530 million Series B – Aurora (mobility/automotive)
- $530 million Series C – Lixiang (electric car/mobility)
- $500 million Series E – Chime (fintech – consumer)
- $500 million Series B – Ziroom (prop tech)
- $500 million Series C – Byton (smart car)
- $500 million Series C – Danke Apartment (prop tech)
- $500 million Series E – Clover Health (health)
- $484 million Series E – GetYourGuide (tourism/ travel)
- $460 million Venture Round – Klarna (payments fintech)
- $429 million Series B – Hozon (automotive)
- $429 million Series B – WM Motor (electric cars)
- $434 million Series F – Zhihu (China’s Quora)
- $413 million Series F – Delhivery (logistics, courier services for B2B and C2C and B2C)
- $400 million Series D – Convoy (freight)
- $400 million Series F – Databricks (data analytics)
- $400 million Series D – Frontier Car Group (car marketplace)
- $400 million Series C – Knotel (WeWork-style office space provider)
- $400 million Series F – Nubank (banking services in South America)
- $400 million Series D – ke.com (property platform)
- $400 million Series F – DoorDash (delivery)
- $400 million Series B – Knock (proptech – online homes marketplace)
- $370 million Series G – Compass (proptech – online homes marketplace)
- $350 million Series A – Jusda (B2B exchange)
- $350 million Series E – Root Insurance (insuretech)
- $350 million Series E – Zhangmen (online tutoring)