Chinese investment in Israeli technology companies is on the rise, with IVC Research Center predicting Tuesday the value of investment rounds involving one or more Chinese investors growing by as much as 54% this year, reported Haaretz.
Tel Aviv-based IVC, which studies investment trends, noted the value of investment rounds in which Chinese investors have participated has nearly tripled in three years, with $302 million last year. In the first four months of 2015, the figure is already at $117 million, IVC said at an investor’s conference called “Chinese Investors – Israeli Technologies”. Based on these early trends, investment rounds with Chinese participation should reach $467 million this year.
Michal Adam, the center’s business development manager, explained that both Israel’s success in the field and a shortage of startups in China brought Chinese investors to the Holy Land.
“There are more venture capital and private equity funds in China and more competition inside China for good deals, so they’re searching for deals outside, not just in Israel,” Adam told TheMarker.
According to IVC, there are some 30 new Chinese investors in Israel since 2012, with Huawei and Desay looking for good deals. Alibaba, the world’s biggest e-commerce company, invested $5 million in the startup Visualead in January, and announced two months later it would be putting money into Jerusalem Venture Partners’ VC fund.
Since growth in the Chinese economy has been slowing lately, companies have been looking to the field of technology for new opportunities.
“There is an understanding that technology and innovations is a key factor for continued growth, so they’re looking in tech hubs around the world,” said Adam.
Some 80 Israeli companies and 11 Israeli venture capital funds have raised money from Chinese sources, mostly since 2011. About 115 Israeli tech companies have 138 representative offices in China, IVC reports, though that is a drop in the bucket compared to the estimated 2,750 in the US and Europe.
David Fuchs is managing partner of the newly formed Synergy Funds, a Shanghai-based investor into Israeli companies setting up operations in China. He says local operations allow companies to tap even more Chinese capital.
“Today’s Chinese VC market is growing by leaps and bounds – it was $15.5 billion in 2015 and in the first quarter it was $7 billion,” he told TheMarker. “What we’re seeing in Israel is the tip of the iceberg of Chinese capital. Startups [not operating in China] don’t have access to the iceberg below the surface.”
Speakers at the conference told their audience that Chinese investors were somewhat less sophisticated than their American counterparts, and were more interested in how their portfolio companies could address the Chinese market specifically.
“The most important thing is don’t try to explain to them how [the investment] will work for you, try to explain how it will work for them in China,” said Sharon Kedmi, CEO of Demeter AWE Holdings, an agro-tech investor and consultant. “It’s more comprehensible for them to know how your technology will work in China than in London or Bangalore.”