Not a week goes by, it seems, without a large delegation of Chinese business people, investors and government officials visiting Israel to look for deals, start-ups and joint projects with businesses and universities. In a sense, the Israel-China business channel has become very crowded – overcrowded, some might say – as VCs and large corporations on both sides compete for the best deals.
But most of that action is taking place among top-tier organizations – companies and venture capital funds that invest in the largest projects and organizations, according to D. Todd Dollinger, Chairman and CEO of The Trendlines Group, an Israeli investment firm that specializes in early stage start-ups in the areas of medical devices and agricultural technology.
“There is still a lot of opportunity in early-stage companies in China, because most investors are interested in later-stage companies that are already known in the West. We are definitely focused on earlier stage companies, and we have found a very positive response to our approach in China.”
Trendlines has two incubators in Israel, one concentrating on medical devices, and the other on agtech. The firm invests in the companies it sponsors in the incubators, and helps them achieve exits (Trendlines has done four exits in the past 16 months, said Dollinger). Both those areas are in great demand in China, and Chinese firms are actively looking for help.
Chinese partners and investors were present at Trendlines’ recent investment conference, where over 500 people came to see presentations by 13 companies in the medical device and agtech fields.
“We have a lot of intellectual property in these areas which we intend to bring to China, to develop the technologies they need. That IP will be implemented in incubators we set up in China,” Dollinger noted, adding that Trendlines recently opened an office in Beijing.
Although the ardor for medical devices in the US has fallen somewhat in recent years, the market in China is constantly growing. As the population there gets older, there will be an ever-greater need for new devices to enable people to live as normal a life as possible; and with over a billion people that need to be fed, China needs agtech to grow crops more efficiently.
But IP protection isn’t China’s strong suit; that, at least, is the perception, and Dollinger is cognizant of the dangers.
“I can’t say we’re not nervous,” he said. “Everyone knows a horror story about an Israeli company that got ripped off. But to be fair, it can happen anywhere – one of the worst cases of IP theft we as a company have faced came from a company we were working with in the United States.”
The secret to success in China is partnering, said Dollinger. “You need people who understand the culture and the way things work, so we are partnering with manufacturers, agents and law firms that can take care of problems on the ground.”
Indeed, Chinese companies – with a strong impetus from the government – have become much more cognizant of the need to follow international customs and laws on intellectual property protection.
While large Chinese companies like Baidu and Tencent have become “westernized” due to their activities on foreign investment markets, Dollinger believes the importance of protecting IP has filtered down even to smaller companies that have not had much experience with Westerners.
“The Chinese are very aware of what Israel has accomplished, and they are ready to move on to the next stage of our business relationship, with Israeli technology trickling down from top-tier companies to the rest of the economy,” Dollinger said.