Chinese Investments in Israeli Tech Mapped
A proven hotbed of new technologies, for Chinese investors the small Israeli market represents an opportunity to acquire knowledge, and study innovation
In Early January, U.S. National Security Adviser John Bolton visited Israel to discuss defense and regional issues. According to Israel’s national broadcaster Kan, between discussions on Syria and Iran, he raised one other pressing American concern: the involvement of Chinese companies in Israel's economy, and in its tech industry, via invested capital.
In the past decade, Chinese investors have discovered Israeli industry and technology. More and more Chinese money has been finding its way to Israel's shores, more Chinese construction companies have set foot in the local market, and incoming tourism from China blossomed. One China-based company has won a project to build and operate Israel's Haifa seaport, where American navy vessels regularly dock, for 25 years.
A proven hotbed of new technologies, for Chinese investors the small Israeli market represents an opportunity to acquire knowledge, and study innovation. It is also a more forthcoming market, when it comes to being on the receiving end of Chinese funds, than the U.S. market and some parts of Europe.
In July, CTech reported the soaring trade relations between Israel and China started drawing criticism in the U.S. On Sunday, an op-ed published by The Wall Street Journal warned of Chinese “ influence over as much as 25% of Israel’s tech industry.” Authored by Ilan Berman, a senior vice president at the American Foreign Policy Council, a Washington-based conservative non-profit think tank, the article published does not include a reference for the figure mentioned.
According to the interviews held by Calcalist, China-based limited partners of local venture funds committed at times hundreds of millions of dollars from a single entity. Through the local funds, corporations like Alibaba and Baidu, Chinese government entities, and some of China’s wealthiest businesspersons have gained access to Israeli startups.
Alongside funds committed to Israeli venture funds, Chinese entities have also stepped up their game in terms of direct investments in local startups. According to a November report by IVC, over the past two years the average qarterly number of direct Chinese investments in Israeli companies grew from 15 to 20.
Total sums invested also grew. Over the past five years, according to the report by IVC, around $1.5 billion of Chinese dollars were invested in around 300 Israeli companies. Investors included Li Ka-Shing's Hong Kong-headquartered Horizons Ventures and Alibaba's investment arm.
Israeli companies need to consider the possible ramifications of being backed by China-based entities, especially if operating in domains that may have national security implications, including cybersecurity, energy, and mobility, former U.S. ambassador to Israel Daniel Shapiro said in an interview with Calcalist Tuesday. Companies operating in such domains may find their ability to do business with certain American partners, especially government entities diminished if they have Chinese backers, he said.
"An Israeli startup in its seed or A round may not be thinking so many years ahead about its market strategy in the U.S., but if it has a significant Chinese investor component, even in its early rounds, several years later, when it’s ready to take its technology deep into the U.S. market, it may find that there are some real repercussions," Shapiro said.
https://www.calcalistech.com/ctech/articles/0,7340,L-3754524,00.html
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