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December 2016

by: Jason Weiss

Axis China — startups going east

I just returned from my first trip to China, taking 5 Israeli startups to the beautiful island of Hainan to pitch and meet with dozens of Chinese investors hungry for new technology. In just 2 days of networking, I learned more about business in China than in years of working with incoming Chinese delegations in Israel. Here are some key insights:

Local partners and trust is most important. We partnered with the NAEC,a Chinese-American company that has been working with Chinese investors, corporations, and government for over 10 years. As our on the ground partners on the Chinese side, they not only arranged the logistics but invited and brought the investors, including many very serious investors under the radar of traditional foreign delegations. Partnering with them, it helped boost the visibility and opportunity for our Israeli startups, and fast track introductions to the right people.

I had the chance to spend some time speaking to many investors — new companies as well as large established ones, experienced investors and new funds. An interesting point was how many investors don’t come from traditional VC industries. Many investors came from real estate, materials, and other industries and have recently opened an investment arm for startups. No matter who it was, one thing that cut across all of them is their interest for new investment opportunities, specifically in technology.

Secondly, Chinese are looking more and more for cross border investments. On the opening night, I gave a keynote address to the crowd about investing in Israel, but also touched on cross border investment in general. The Chinese have been some of the most active investors in Israel — since 2011, Chinese investment in Israel has gone up 50% year over year, and in 2015 total Chinese venture capital investment was a staggering $1.77B, 40% of total investment in Israel that year. We see delegations coming to Israel nearly every week, and specific funds, accelerators and programs for China have sprouted up in Israeli like TechCode, Startup East, and more. One thing I knew before, but learned again this week, is how hungry Chinese are for new investment opportunities and see Israel as a key source of their innovation growth.

Despite the numbers, there are still many challenges dealing in China. While there is a lot of money in China looking to invest, many still do not know how they want to invest or have established cohesive investment strategies. This can lead to endless talks and frustration for entrepreneurs, not knowing what the investor is really looking for. This gets to one of my key insights — local partners are necessary for cross border deals and especially with different cultures like China and Israel. Since the event, I’ve been in nearly daily contact with one of the largest Chinese real estate companies, who hasn’t yet invested outside of China but set up a whole team to source foreign deals and opportunities. They are eager to find new investment opportunities in internet and TMT, and are looking to us to help find the right deals for them. We’re also following up with one of the largest Chinese equity funds, who has invested abroad but never in Israel, to better understand their strategy and how we can connect them with the right startups.

So how will things turn out from here? We see the amount of investment and business from China as the tip of the iceberg — many more will come, and from new industries looking to diversify. For Axis Innovation, we plan on working with many more delegations, Chinese investors, and startups looking to go east, and further establish ourselves in the Asian market.