How China Can Leverage Israel’s Innovation Engine

Earlier this year, the Chinese company that I founded announced the then-largest single investment in an Israeli technology startup in more than a year. With its $20 million investment, Kuang-Chi not only bought a stake in the Herzylia Pituach-based eyeSight, but we also got a foothold in Israel’s innovation ecosystem.

We followed that up in September, buying stakes in two other Tel Aviv-area companies, Beyond Verbal and Agent Vi. And we plan on investing much more.

In partnership with Israel’s Indigo Global, Kuang-Chi is creating the first Chinese fund of its kind. We are combining investment in early to mid-stage Israeli and global companies with incubation by Kuang-Chi through our Global Community of Innovation (GCI). Here in Israel, we set an initial commitment to invest $50 million and plan to grow that by 6x — to $300 million –within the next three years.

On many recent occasions, I have been asked why we chose Israel. It’s simple: The country has one of the most effective and efficient innovation engines in the world. Simply put, for Kuang-Chi to succeed in nurturing our GCI, we need to be a player here.

The Technion and McKinsey & Company recently published a study that sought to identify pockets of opportunity for foreign companies “looking to boost their innovation metabolism” through collaboration with Israel’s startups. The study found six models for foreign companies like Kuang-Chi to work with innovative Israeli companies — approaches that work well in any cluster of innovation.

Kuang-Chi has developed an R&D strategy and a systematic approach that will allow use to find new technologies and potential partners here, very much aligned with how the Technion study recommends.

Source: McKinsey & Company

We are partnering with local companies so that our Global Community of Innovation can leverage Israeli innovation while share R&D risk. We are investing in local companies, kicked-off in a big way with stakes in the three companies that each are pursuing new heights of innovation.

We are going further, establishing a corporate venture capital fund whose portfolio will be locally managed in Israel. And, those portfolio companies will gain competitive advantage and scale with involvement in Kuang-Chi’s incubator network, along with access to China’s domestic markets.

It’s a start, much like it was in 2010 when five Chinese scientists, including myself, returned to China to create Kuang-Chi, which has grown to become a global innovation group with more than 3,000 patents worldwide in the areas of metamaterials, photonics, satellite technology, aviation, and robotics.

The first few months of early 2017 are already shaping up to be significant for China-Israel technology investment and we are pleased to be part of the Israeli innovation ecosystem.

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