China innovators

Chinese companies’ appetite investing in Israeli technology companies grows

Shenzhen-based Kuang-Chi Group is one firm investing in the Middle Eastern country.

PUBLISHED : Friday, 06 May, 2016, 1:51pm
UPDATED : Friday, 06 May, 2016, 3:08pm

Chinese companies’ appetite for foreign technology companies continues to grow, as evidenced by Shenzhen-based Kuang-Chi Group.

It launched its start-up incubator in Israel with US$50 million to invest in Israeli and other international early-stage companies.

It plans to raise that to US$300 million in three years.

“Israel is a supermarket for innovation,” said Liu Ruopeng, founder and chairman of the group in a statement. He plans to focus investment on companies working in the field of biometrics, communications or robotics.

China became the largest acquisitional country in the world for technology mergers and deals in the first two months this year, accounting for nearly half the total US$70 billion volume, according to research company Dealogic.

Experts said Israel is becoming increasingly important as a destination for Chinese companies looking to buy technology firms.

“Israeli companies are typically better at developing advanced and specified technologies than commercialising them, but this is what the Chinese are good at,” said Ruth Zhang, president of Israeli-Sino Innovation Investment Consultant, a company that advices Chinese entrepreneurs on investment in Israel.

Kuang Chi’s first investment is US$20 million funding in EyeSight Technologies, an Israeli software company that enables computers to understand human gestures.

It said its incubator and fund will be headquartered in Israel. They will also bring in companies from around the world, a spokesperson said.

The company will pay for the initial US$50 million fund on its own and may invite outside sources to co-finance the additional amount, according to the spokesperson.

Founded in 2010, Kuang-Chi started as an electronic material and communication equipment provider. Its subsidiary KuangChi Science Limited became a listed company in Hong Kong in 2014. It has invested in several companies to develop futuristic technologies in recent years, including Canadian solar powered aircraft company Solar Ship and New Zealand jetpack maker Martin Aircraft Company.

Many other Chinese companies have invested in Israel.

Ping An Ventures, an investment company connected with Chinese insurance giant Ping An Insurance Group, set up a US$100 million investment fund in Israel in 2013 and had invested in at least eight companies.

Chinese search engine giant Baidu invested US$3 million in Pixellot, a motion capture technology company in late 2014 while e-commerce giant Alibaba Group funded the B round investment of quick response codes — QR codes — technology start-up Visualead last year.

Alibaba owns the South China Morning Post.

Consultant Zhang said Chinese investment is still at an early stage in Israel in terms of volume and Chinese investors also face cultural challenges.

“The Israelis have a very strong inner social circle which makes things run efficiently here,” Zhang said. “But it will take time before Chinese companies gain their trust.”

According to Tel Aviv based research company IVC Research Centre, Israeli high-tech companies raised over US$4.4 billion in 2015, up 30 per cent from the year before.