(Translation)
Unless it is brought to an oasis from a desert a seed would not sprout nor root. The Israeli VCs simultaneously carry both missions of nurturing technology seeds and discovering commercialization oasis.
By Li Na
Erel Margalit comes to China three or four times a year. It makes his wife and three daughters long to come and visit. This good-looking middle-aged man is the founder of JVP, an Israeli venture capital firm. Among the 200 VC companies in Israel, JVP is ranked among the top five.
The primary mission of Erel’s trips to China is to help broker JVP’s portfolio companies’ businesses, not direct investment to China’s start-ups.
In the past ten years, the global industrial environment has experienced great changes. The United States was the destination for most of Erel’s trips. But as the IT industry continuously shifts to the East, the number of his flights to Japan, Korea and China has increased gradually. In early April, 2005, Erel arrived in Beijing as the first stop of his around-the-world business trip. For Erel, China has transformed from a distant concept to a tangible global business destination.
In the second half of last year, Erel and Alon Ironi and their entourage spent one week in China, visiting dozens of well-known domestic cellular phone manufacturers in Beijing, Xiamen and Shenzhen one by one. Alon is the CEO of Siano Mobile Silicon, a company that develops digital television receivers for mobile communication and entertainment equipment, and allows users to watch television programs on their portable devices such as cellular phones and PDAs.
When Alon approached Erel for investment, Siano was still at the conceptual stage -- he didn’t even have a complete business plan. Yet the huge Chinese handset and IC market for cellular phones and ICs caused Erel and Alon to reach a mutual understanding -- go to China. By visiting China’s leading handset manufacturers and relevant technology standard making committees, Alon completed his business plan. Interestingly enough, Alon already found his first Chinese employee, Siano’s current Director of Business Development for Greater China, Wang Wei, before the company was set up. A veteran in the consulting business, Wang Wei is responsible of building mobile television industry alliances for Siano in the China market. His main duty is to reach out to both the upstream and downstream IC makers and handset manufacturers.
After studying the China market, JVP took the lead and made US$5 million investment at Siano, and subsequently led a few other VCs to make additional investment of nearly US$12 million. In Siano’s globalization blueprint, apart from the China market, Japan and Korea are also heavily underscored.
JVP and Siano can be viewed as examples of Israeli VCs and start-ups. The overwhelming majority of Israeli VCs’ investment is made in Israel’s local technology start-ups. For those local start-ups with potential breakthrough innovation, Israeli VCs get involved from seed stage and help them find survival space in the global market.
Due to the lack of a domestic market, Israeli VCs and technology companies are forced to choose the internationalization path. Despite the fact that Israel places high-tech industry development as a national strategic policy, Israeli technology companies must look abroad for commercialization hotbeds. Thus they are often called “the global start-ups”.
While Chinese enterprises possess cost advantage in manufacturing, Israeli enterprises are adept in core technology development. They are highly complementary, and therefore have bright future to cooperate. Not only in China, but also in the global market would Israeli VCs take the initiative of “brokering business” for Israeli start-ups. Their role is more like a business broker.
The large number of Israeli VCs’ visiting China in the recent two years is not by accident. The delegation of over 200 business executives led by Vice Prime Minister and Minister of Industry and Trade of Israel, Ehud Olmert, to China in last June is the largest, and highest ranked economic and trade mission led by the Israeli government. Among the delegation members, there were Israel’s mainstream VCs such as Pitango, Vertex and Giza, as well as representatives from the information, electronic technology, medical equipment and other industries. During their stay, Infinity, an Israeli VC, and China-Singapore Suzhou Industrial Park cofounded a joint fund ---- Infinity-CSVC Ventures L.P. Three months later, Datang Telecom Technology and Israel’s PNV also reached an intent to jointly set up an Israel-China venture fund. The fund will be mainly used to support Israeli companies’ development in the China market.
Direct investment is not the purpose of Israeli VCs’ entering into China. In fact, Israeli VCs’ investments in China are just a few. To date, except three companies (UP Technologies (China) Ltd., Semiconductor Manufacturing International Corporation and Fiberxon Technology (Shenzhen) Co., Ltd.), where the shadows of Israeli VCs could be found among the numerous investors, there is hardly any other domestic company received Israeli venture investment.
Nonetheless, the portfolio companies of Israel’s Giza venture fund have had cooperation with many Chinese enterprises, and indicated that they may develop more cooperation partners through various means such as technology license, joint venture setup and so on. By June last year, 15 of Infinity’s portfolio companies have entered China. And JVP’s recent invested company, Sepaton, which is engaged in data backup, has also authorized Beijing GrandRole Science & Technology Development Co., Ltd. to be its general distributor in China.
Erel, the founder of JVP, predicts that among the companies to be invested by JVP V fund, which will be raised next year, one third will establish business relationship with China, such as setting up offices, or R&D centers. Even so, Erel did not forget to warn the CEOs of his portfolio companies that, “there is no need to go to China if China is not a core and essential element in your globalization strategy!”
