A new wave of Chinese outbound investment has arrived in Israel, led by a younger generation of Chinese investors and entrepreneurs. This generation is more technology savvy than its predecessors, more focused on innovation, and will have a deep and lasting impact on Israel’s startup ecosystem.
Earlier waves of Chinese international investment were focused on manufacturing, natural resources and infrastructure. They were dominated by state-backed enterprises targeting large-scale projects and companies, often in Africa and frontier economies. Now, with outbound investment led by entrepreneurial investors who are digital natives, the emphasis is changing, and that is where Israel stands to benefit.
This generation is characterized by technology pioneers such as Alibaba, Baidu, Huawei, Kuang-Chi and Xiaomi, among the world’s most successful tech companies, on par with Western counterparts such as Amazon, Cisco and Samsung. What they see in Israel is an unmatched opportunity to learn and benefit from the unique Israeli technology ecosystem that is fast, dynamic, and lean.
Israeli technology investment from China is growing 50 percent annually, according to IVC Research Center. IVC expects the total raised in financing rounds with Chinese participation to reach as much as $500 million this year, up from next to nothing in 2011. The largest Chinese tech groups are already being felt in the local market.
Emblematic of this activity is a $20 million investment made last month by Shenzhen-based technology group Kuang-Chi in eyeSight Technologies, the Herzliya-based leader in computer vision and gesture control. Kuang-Chi is a global tech powerhouse, with reach into Europe, North America and Oceania. Its investment in eyeSight is an important endorsement of the Israeli startup ecosystem.
At the same time, Kuang-Chi announced plans to open a Tel Aviv-based fund and incubator that will invest as much as $300 million in Israel and abroad. Founder and Chairman Dr. Ruopeng Liu told Bloomberg News that he traveled the world to find the right place to locate its technology fund before picking Israel because of “its people who have the spirit to create future technologies.”
Having spent the better part of the last four years shuttling between Israel and China, it’s become evident to me that China sees Israel as a partner with complementary capabilities. What we lack in size, market and resources, we make up for in resourcefulness, creativity and speed. And, given the differences in scale, there is little direct competition as you would find between China and America, Korea, or Japan.
No other country’s technology ecosystem offers China similar advantages, and we’re only beginning to see the benefits.
Dorian Barak is managing partner of investment firm Indigo Global which acted as advisor to Kuang-Chi on its recent investment in eyeSight Technologies.