Growing Chinese VC Investment in Israel

China Israel

Chinese investment in Israel is on the increase, with investors investing directly via their own funds and using Israel venture funds. The Wall Street Journal attributes this to the wave of Israeli IPOs acquisitions of Israeli companies this year. IVC Industry Analytics and KPMG reported that the first half of 2014 saw 335 Israeli hi-tech companies raise a record $1.6 billion, an 81% increase from H1 2013.

Investors across Europe and America have been engaging with Israeli tech opportunities for a long time, while the Chinese are relative newcomers. Industry experts explain this new interest by referring to their traditional preference for ‘longer-term bets’, commenting that they look or ‘technology that is already being used back home’ (WSJ 2014).

“Most of the investments we’re seeing are strategic investments and not purely financial ones,” said Yoav Sade, a partner in law firm Meitar Liquornik Geva Leshem Tal and vice chairman of the Israel-China Chamber of Commerce.

“Chinese investors would look for tech companies that already have a product and sales with an added value that has to do with China,” said Mr. Sade. “Many times the investment contracts include commercialization licenses for operations in China.”

Insiders have also attributed the growth in Chinese investment to government efforts to boost bilateral ties and trade as well as the success of Li Ka Shing, a prominent Chinese investor in Israeli tech (Forbes 2014).

July saw Chinese venture fund SAIF Partners participate in app-monetisation company SupersonicAds Ltd’s funding round, SAIF’s first investment in an Israeli company. Another direct investment was that of China Broadband capital Partners LP, who participated in a $85 million, pre-initial public offering funding round for Israeli adware company IronSource Ltd. Other Chinese investors have chosen to use Israeli funds themselves, with Qihoo 360 Technology co. and Baidu Inc investing in Carmel Ventures and Jerusalem venture Partners.

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