China’s Kuang-Chi to set up Tel Aviv base, eyes larger firms

Multi-billion dollar Chinese group weighs investments not only in startups but also revenue-generating companies

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Dr. Ruopeng Liu, Chairman of Kuang-Chi Group (Courtesy)
Dr. Ruopeng Liu, Chairman of Kuang-Chi Group (Courtesy)

China’s Kuang-Chi Group, which said in May it was earmarking $300 million for investments in Israeli and other global technologies, said it is stepping up activities and looking to open an office in Tel Aviv that will serve as its International Innovation Headquarters.

The multi-billion dollar conglomerate is also mulling investments in larger, revenue-generating Israeli tech companies as opposed to startups.

The group has already invested $50 million from its first Global Community of Innovation (GCI) Fund, and is now setting up a second fund for the remaining $250 million to be invested in smart city/smart home technologies, Internet of Things, artificial intelligence, virtual and artificial reality, robotics and medical devices. Kuang-Chi is targeting companies that seek collaboration with local Chinese firms for entry into their domestic markets.

The first fund “was very successful, it has all been invested,” said Dr. Liu Ruopeng, chairman of Kuang-Chi, in an interview in Tel Aviv this week. “We are almost there for raising the $250 million” for the follow-on fund he said.

Set up in May 2016, the $50 million GCI Fund I and other Kuang-Chi Group units now have stakes in three Israeli startups: computer vision developer eyeSight; a voice analytics creator Beyond Verbal; and, video intelligence and analytics provider AgentVi. The fund also invested in Norwegian biometric authorization innovator Zwipe, and Canadian aviation company SkyX.

Dr. Liu Ruopeng, Chairman of China's Kuang-Chi Group, middle, meets Jerusalem Mayor Nir Barkat on January 11, 2017 with Jerusalem City Council member Fleur Hassan-Nahoum, right (Courtesy: Jordan Polavoy)
Dr. Liu Ruopeng, chairman of China’s Kuang-Chi Group, middle, meets Jerusalem Mayor Nir Barkat on January 11, 2017, with Jerusalem City Council member Fleur Hassan-Nahoum, right (Courtesy: Jordan Polavoy)

The second fund will be open to outside investors, something likely to attract additional Chinese money to Israeli technology; the selected startups will also be supported by a new China-based incubator, established by Kuang-Chi to help bring its portfolio companies to the Chinese market.

“Institutions and private investors said they wanted to join so we decided to allow that,” Liu said. “It will help the companies as well, as it will give them greater exposure to a wide range of Chinese companies and investors.”

Chinese investors who are keen on getting a chunk of Israeli technology don’t always know how to approach the matter, Liu said. “Deep science requires that investors understand technology and how to transfer it into business. That is a high criteria capability that not everyone has. We are global and we understand science, and we understand how to do investments here,” and that is why people are looking to invest via the GCI fund.

As the world’s second-largest economy shifts its identity from a manufacturing and labor-intensive economy to a high-end innovative force, Asian giants including Alibaba Group, Hutchison Water Ltd., and Huawei have set up R&D centers, invested in funds and snapped up Israeli startups and companies. Israel sees China as a strategic partner and a key country for economic cooperation and has allocated to the East Asian giant six Israeli trade missions — more than to any other country.

Kuang-Chi’s new office is expected to open this month in Tel Aviv and will employ six locals, who will be supported in their work by some four to six people who will fly in regularly from China, said the Israeli partner of Kuang-Chi, Dorian Barak, who is also the founder of Indigo Global. The opening will mark the first time that a Chinese strategic high-tech investor sets up an office in Israel, he said.

Looking at bigger companies too

Kuang-Chi is constantly evaluating new investments, Barak said, and in the future may also consider buying larger, revenue-generating Israeli companies. “We do see more advanced and profitable companies that are very interesting,” he said, citing the fields of ad-tech, aviation technology, biometrics and satellites as key points of interest. The investment in these companies could come from other Kuang-Chi subsidiaries as well as the GCI fund, he said.

The Israeli startupts Kuang-Chi has invested in to date have made progress both in tech terms and in business terms, and that is the kind of progress Kuang-Chi expects to see from its investments, he said. Kuang-Chi works with the entrepreneurs to help integrate their product into the market and its team of scientists also help refine the product, adding the necessary “ingredients to turn the technology into a commercial solution.”

Within six months of its investment, Kuang-Chi and eyeSight jointly built a local team in China to provide markets with the most advanced embedded computer vision solutions currently available, he said.

In December, Beyond Verbal signed its first cooperation agreement in China, with the Second Affiliated Hospital Zhejiang University School of Medicine in Hangzhou. Beyond Verbal also recently announced that a similar cooperation pact with the Mayo Clinic established a strong correlation between certain characteristics of individuals’ voices and heart disease.

Founded in 2010 by five Chinese scientists, Kuang-Chi is now a multi-billion-dollar conglomerate, employing more than 2,600 people employees in 18 countries. Kuang-Chi’s subsidiary company KuangChi Science Limited (00439.HK) is concentrated on the development of future technology. The Group also operates through Shenzhen-traded Zhejiang Longsheng (002625.SZ) and Martin Aircraft Company (ASX: MJP), as well as research institutes and private companies.

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