Israel and China are becoming a close collaborative couple in the tech industry. Chinese entrepreneurs admire the technology innovations Israel has achieved and China is an ideal market for Israel companies to expand beyond their borders.
Israel has invested considerably in China to establish a network facilitating the tech collaboration and entrepreneurial activities. For example, IP Bank-China was created in 2010 in Suzhou under the auspices of the Infinity Group, an Israel-based private equity firm that was created by the China Development Bank and the IDB Group in 1993. It manages over $700 million and RMB 2 billion. The bank is focused on acquiring companies, brands, and intellectual property for licensing and commercialization in China. It has over 15 offices across China with a 90-strong team, whose members work across the Infinity Group and IP-Bank China. The China Development Bank primarily provides the RMB funding while the dollar financing has come in from investors all over the world. The business model is to identify intellectual property from Israel and then scout the appropriate acquirer in the Chinese market who might need these types of assets. One case is a company named Power Paper, a producer of micro-batteries (slender enough to be printed on paper) and already a portfolio company of the Infinity Group. They were struggling with their key product for quite some time in Israel. They had incorporated the battery into an anti-wrinkle facemask for commercial purposes. IP-Bank China carved out the Chinese patent from the global patent and started looking for suitable partners in China for entirely different applications. The result was a partnership with a Chinese printing company and the battery was assimilated into anti-counterfeiting labels which are used in the packaging for cigarettes, wine and other kinds of alcohol. When you open the packet, a light, powered by the battery, turns on, showing the consumer that this is a genuine product.
Usually the deal-making model has a variety of approaches. Some patents are to be acquired firstly and later sold out. Some to license, some are used as currency in exchange for equity in companies, the difference with other IP funds is that IP-Bank China is identifying the IP internationally, and help find a Chinese partner and grow together with that company. It also claims to help Chinese entrepreneurs gain access to the market with a low entry point and then share in the results. Currently IP-Bank China is sector oriented and focuses on clean tech, medical, material and high-end manufacturing technologies.
From top-down perspective, as early as in 2008, Israel has signed a bilateral agreement with the government of Jiangsu province ( one of most prosperous region in China),to form Jiangsu – Israel program for Industrial R&D with a primary aim to support joint industrial R&D projects and aimed at carry out commercialization in the global market. Afterwards, another three innovation cooperation agreements have signed during MIXiii Israel Innovation Conference in May this year, with the aim to support Israel companies expand into Chinese market by the means of top-down.
Within the entrepreneurial community, more non-government driven match-making have been happened. Intensive and extensive fact finding and study tours are arranged by a variety of business entities from two countries. Dark Horse Club, a start-up entreprenur incubator in Beijing led a delegation composed of Chinese young entrepreneurs and finished on a seven-day learning journey to study Israel innovation environment and meet with local tech companies.
More and more such activities fuel the Chinese entrepreneurs zeal to collaborate with Israeli companies and Israel is seen by Chinese as a source of advanced technology with the image of startup nation due to extensive collaboration and PR activities. Recently a book “ startup nation, Israel” Chinese version is widely promoted and get the traction in China. The Israeli companies are targeting several sectors essential to China’s development plans; hi-tech, renewable energy, water treatments, medical equipment, communications, agriculture and consumer products. According to the “China Global Investment Tracker,” which measures China’s investments and contracts worldwide, the Chinese have poured $1.7 billion into Israel’s economy and most of it went to the agriculture sector ($1.4 billion) and the rest was invested in Israeli high-tech companies between 2005 and end-2013.
Collaboration in academic and research field also is burgeoning between the Jewish state and the Asia giant. Two top universities from Israel and China announced in May this year that they are starting a $300 million research project focused on nanotechnologies. Tel Aviv University and Beijing's Tsinghua University said they will exchange graduate students and faculty members to work at a joint research center based at the two institutions. The cooperation initially will focus on nanotechnology, particularly with medical and optics applications, but may be later expanded to other areas, including raw materials, water treatment and environmental issues.
It appears that in the coming decade, we are going to witness a rise of quantity and scale of the joint-venture, co-development cases in the field of academic, innovation and business context, It’s time to look eastward ever more attentively.