China economy

European tech firms are grabbing Chinese investment

Chinese investors eye continent half a world away as source of profit.

PUBLISHED : Wednesday, 11 May, 2016, 6:35pm
UPDATED : Monday, 30 May, 2016, 5:11pm

Chinese investors’ interest in European technology firms has grown over the past three years because the continent is home to entrepreneurs with potential but has so far lacked the capital seen in other markets, commentators said.

Mattias Ljungman, a partner at venture capital firm Atomico — which has offices in Istanbul, Beijing, Tokyo, London, Sao Paulo and the Cayman Islands — said interest from Chinese investors had accelerated over the past twelve months because they see Europe as being on a different cycle to China or the United States.

“There’s an increasing appetite by the Chinese to look at Europe because they have recognised the opportunities of Europe, which is a huge market in itself.” Ljungman said. “And plus it has this more attractive profile in terms of being a good opportunity in seeing strong growth while actually not being overheated as we have seen in other markets.”

Atomico was founded by Skype co-founder Niklas Zennström in 2006. The company has invested in more than 50 companies, including gaming firms Supercell and Rovio. The venture capital firm also assists its portfolio companies to expand into other markets, including China, Ljungman said.

Chinese foreign direct investment in Europe rose to a record US$23 billion in 2015, according to law firm Baker and Mckenzie, with 73 per cent of investments focused on four industries, including technology.

Investments made in Europe under US$100 million from Chinese investors rose to US$2.6 billion in 2015, with private investors representing 80 per cent of investments, Baker and Mckenzie said.

Total venture capital investment in Europe rose 5 per cent to US$4.3 billion in 2015, according to Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors.

In January, Chinese technology investment group Cocoon Networks, backed by China Equity Group, announced a US$721 million London-based venture capital fund to invest in technology start-ups in Europe.

London-based peer-to-peer mortgage lender Lendinvest received US$32 million in funding from Chinese technology firm Beijing Kunlun in June 2015.

Atomico invested US$25 million in the property technology lender in March and Ljungman became a member of the start-up’s board.

He said the European talent pool of 1.6 million developers and a higher number of science, technology, engineering and maths graduates compared with the U.S. meant the continent had advantages over places such as Silicon Valley in California.

Ljungman said financial technology, fashion, gaming and online payments were strong trends for Chinese investors in Europe.

European companies are more flexible and more willing to enter new markets with different languages and cultures as they have experienced this close to home and want expand to neighbouring countries, unlike start-ups in the U.S., Ljungman said.

Atomico is currently raising a US$750 million fund, which will be its fourth fund, Ljungman confirmed.

The Swede said the fund will be focused on European investments in the continent’s main start-up hubs of London, Berlin and the Nordics.