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China Tech Investment
Ecosystem and Opportunities
Bruno Bensaid @ BPI/BusinessFrance
Impact China launch 2016
Nov 14, 2016
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
Pioneering investment banking advisory firm focusing
on cross-border M&A and capital raising transactions
between China/As...
Why Work with Shanghaivest?
Deep knowledge of several Verticals
-> short time to Market when approaching funds or buyers
T...
Keynote to ENGIE delegation of top executives
(www.engie.com one of the largest energy companies
worldwide) on the New way...
Keynotes at different conferences on Investment and
Cross-border M&A (Bruno Bensaid – 2015)
On Chinese TV (Ghislain de Mareuil - 2016)
Ghislain De Mareuil, Interviewed by Phoenix TV on the important role
of the Asi...
Lui Kam,
Partner,
contributed
Chapter 3 -
Due
Diligence in
China of
“Risky
Business in
China” (Ed.
Palgrave
Pocket)
Contri...
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
China is the second largest VC market in the world.
The amount of VC investments received in China almost
tripled in 2015!...
National Medium and Long-term Program for S&T
Development (2006-2020) to become an innovative nation:
o Increase R&D expen...
The Chinese government became the biggest financial
backer of entrepreneurship as new economy growth engine
As of end 2015...
Top local universities and Government are
creating innovative models
Ø In 2001, Tsinghua University set up Tsinghua Scienc...
Newly Created Impressive Tech
and Investment Zone: DreamValley
Ø Aims to gather 10,000 entrepreneurs, 2,000 startups proje...
But Markets are always Volatile in China:
In June-July 2015, all local stock exchanges crashed
Amidst Chinese slowing Econ...
As Economy and IPOs stumble, VC funds dry up
698 investments in China in
Q3’2016, down 34% YOY
Dollar value of the 631 dea...
VC Investment in China Reached a Five-quarter
Low in Q316
VC rounds harder and longer to raise, yet money chases
later stage rounds (in more mature companies)
Source: Taihe Capital...
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
Despite a
depressed China
domestic VC
environment ,
China Outbound
Investment is THE
trend to watch for
Western
entreprene...
20-25% of the world’s Unicorns are Chinese
China’s Technology Giants rank 2nd behind the US, and
have a strong M&A appetite
Total Number of Investments from BATQX in past 4 years
Baidu: ~80
Alibaba: ~165
Tencent: ~175
Qihoo 360: ~45
Xiaomi: ~95
-...
Feeding China’s Unicorns Overseas
Investing outside of
China has become
of key driver of
technology growth
for China’s Uni...
What are Chinese Tech Companies interested in when
they go “shopping” overseas?
Artificial Intelligence, machine learning ...
Beijing Kunlun putting £23 million ($34 million) into peer-to-
peer mortgage lending marketplace Lendinvest (2015)
For Chi...
Chinese Firm CSC Group to Fund Artificial Intelligence
Incubator in Britain (2016)
Chinese state-backed private equity fir...
Chinese private equity fund Angel Plus unveils new
incubator for startups in London (2016)
Chinese private equity fund Ang...
New Chinese VC Cocoon Networks Opens For Business In
London With A GBP 500 Mil ($713 Mil) Fund in 2016
“In China, valuatio...
In the mean time, in France…
Ø “King of Sino-Europe Cross-Border Funds” – Cathay Capital is deploying
its Sino-French Inno...
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
Case Studies of Successful fundraisings of Western-lead
Companies in China
WITHME.COM (US/China founders)
Focusing on ecom...
Case Studies of Successful fundraisings of Western-lead
Companies in China
VISUALEAD (Israel)
Visual QR code technology
Ø ...
Case Studies of Successful fundraisings of Western-lead
Companies in China
GLAMOUR SALES / MEI.COM (France)
Leading Luxury...
Case Studies of Successful fundraisings of Western-lead
Companies in China
VIRTUOS GAMES (France)
Outsourcing Shop to majo...
Cheetah Mobile gobbling 2 French Mobile Marketing
Startups, MobPartner and News Republic in 2015/2016
MobPartner / News Re...
Theraclion & Median (France)
Ø Median - Medical imagery specialist in
oncology and Cancer treatment
(Alternext: ALMDT) wit...
Case Studies of Successful fundraisings of Western-lead
Companies in China
APPANNIE (US/China/France)
App Annie is the lar...
APPANNIE: fundraising lessons
learned in China
The first investor is the hardest to get
Show traction, KPIs etc
Build rela...
Presentation Agenda
Shanghaivest at a Glance
The China Tech Ecosystem and current trends
Chinese (and European) Cross Bord...
Opportunities & challenges for foreign companies
Opportunities depend on company’s size, activities, and
whether it is alr...
Solowheel Patent Nightmare in China – what lessons?
IP Matters, but Speed, Cash & Partnerships matter more
Find an angle and strong local sponsors/partners/clients
Put yourself in the shoes of the local VCs managers -> help
them ...
bruno.bensaid@shanghaivest.com
Brubrushanghai
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China Tech Investment Ecosystem - presentation @ BPI - 14 Nov 2016 - Bruno Bensaid

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China Tech Investment Ecosystem - presentation @ BPI - 14 Nov 2016 - Bruno Bensaid

  1. 1. China Tech Investment Ecosystem and Opportunities Bruno Bensaid @ BPI/BusinessFrance Impact China launch 2016 Nov 14, 2016
  2. 2. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Tech Investors Case studies of fund raising and acquisitions, lessons learned How to approach the process for a European company
  3. 3. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Tech Investors Case studies of fund raising and acquisitions, lessons learned How to approach the process for a European company
  4. 4. Pioneering investment banking advisory firm focusing on cross-border M&A and capital raising transactions between China/Asia & Europe. Shanghaivest was set up in 2010 by veterans from the M&A and technology investment industries. Shanghaivest has presence in Shanghai, Paris and San Francisco Building cross-border synergies in : 1. Technology and advanced manufacturing 2. Cosmetics, Luxury, Retail 2. Healthcare Clients include SMEs, GPs, and large strategic buyers alike looking for cross-border opportunities (exits, LPs, targets etc) About Shanghaivest
  5. 5. Why Work with Shanghaivest? Deep knowledge of several Verticals -> short time to Market when approaching funds or buyers Track Record in raising financing and divesting companies in China and Europe. Fully Chinese, yet also European and US-centric team -> local and global reach of investors. Highly reactive and approachable team DNA -> Technology, Venture Capital and M&A Transactions
  6. 6. Keynote to ENGIE delegation of top executives (www.engie.com one of the largest energy companies worldwide) on the New ways to do business in and with China – Horizon 2030 (2015) Keynote at INSEAD for CBEAD (China Business Executives Academy Dalian), Chinese Government elite training academy. Lessons From Experience & Advice to Chinese Investors in Europe (2015) - in Chinese Shanghaivest, a recognized Specialist and Coach In the China Cross-border Investment field Coach to Michelin China and teams of in-house entrepreneurs on building a venture, including deal sourcing for the Group (2016) Partner of Business France & BPI since the launch of Acceleratech Programs to China in 2013 Presentation to a Senior Delegation of MEDEF in China on Innovation Ecosystems (October 2016)
  7. 7. Keynotes at different conferences on Investment and Cross-border M&A (Bruno Bensaid – 2015)
  8. 8. On Chinese TV (Ghislain de Mareuil - 2016) Ghislain De Mareuil, Interviewed by Phoenix TV on the important role of the Asian investment bank for China-EU cooperation
  9. 9. Lui Kam, Partner, contributed Chapter 3 - Due Diligence in China of “Risky Business in China” (Ed. Palgrave Pocket) Contributor to “Risky Business in China” (Lui Kam - 2015)
  10. 10. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Tech Investors Case studies of fund raising and acquisitions, lessons learned How to approach the process for a European company
  11. 11. China is the second largest VC market in the world. The amount of VC investments received in China almost tripled in 2015!!! The China Venture Capital Market: #2 in the World Amount of VC investments in 2014 ($Bil.) Split by Country Amount of VC investments in 2015 ($Bil.) Split by Country Sources: E&Y Global Venture Capital Trends 2015
  12. 12. National Medium and Long-term Program for S&T Development (2006-2020) to become an innovative nation: o Increase R&D expenditure to 2.5% of GDP by 2020 o Derive 60%+ of economic growth from technical progress by 2020 Implementation platforms, means, incentives: o 129 national high-tech industrial development zones o 1600 integrated business “Nurseries – Incubators – Accelerators” (as of end 2015) hosting around 80,000 technology startups. o 9 international business incubators set up in or cooperatively with foreign countries for international expansions. o Public funds (e.g. Innovation Fund for Technology Based Firms), guiding funds (e.g. Venture Capital Guiding Fund of Shanghai). o Grants, subsidies, cash rebates, tax incentives, loan guarantees, etc. Government policies & stimuli (1/2)
  13. 13. The Chinese government became the biggest financial backer of entrepreneurship as new economy growth engine As of end 2015, $338 Bil. were funneled into 780 startup investment funds (government guiding funds) Amongst the 5 pillar policies of the 13th Five Year Plan, the development of crowd-funding for equity investment is authorized and encouraged: o As of end 2015, there are a total of 141 crowd-funding platforms, 84 of them went online. o As of end 2015, total funds raised through crow-funding platforms reached RMB4,374 Mil. (~$675 Mil.). Government policies & stimuli (2/2) Sources: http://finance.ifeng.com/a/20160201/14201246_0.shtml http://fortune.com/2016/03/09/investors-venture-capital-china
  14. 14. Top local universities and Government are creating innovative models Ø In 2001, Tsinghua University set up Tsinghua Science Park Business Incubator, Tsinghua Science Park Technology Asset Management, and Tuspark Ventures (raised 3 funds since 2006) Ø Tsinghua University’s x-lab, an accelerator program launched in April 2013, with 80+ teams in the program at end of 2013, is aiming to expand from 500m² to 5,000m² within 3 years! Ø Virtue Inno Valley, a Tsinghua-affiliated (x-lab alike) accelerator Privately or publicly backed co-working spaces: Ø Government-backed Z-innoway is a CNY 200 million, 45,000m² project. It covers 339 startups. 123 have raised funding Ø 3W is one of the accelerators operating in Z-innoway Ø 36KR, Cheku Café, Moment Café, Bingo Café etc, are among the cafés/ co-working space / media outlets / accelerators Government Stimuli: Beijing (Zhong Guan Cun)
  15. 15. Newly Created Impressive Tech and Investment Zone: DreamValley Ø Aims to gather 10,000 entrepreneurs, 2,000 startups projects, and host 300 investment funds or vehicles, an aggregate of RMB 100 Bil Capital Ø Already gathered 350 startups, including one listed on the NTB (New Third Board, a recently established Beijing OTC Board) Ø 43 startups have already raised more than RMB 1 Mil each. In total, RMB 1.1 Bil has already been raised by these startups. Ø 89 investment funds already on site (RMB 31.9 Bil AUM) Ø Some « star » startups » of DreamValley Ø 59store raised RMB 200 Mil in Pre-B round in August 2015 Ø 买好车 (maihaoche) raised RMB 100 Mil round A with Northern Light VC Government Stimuli: Hangzhou
  16. 16. But Markets are always Volatile in China: In June-July 2015, all local stock exchanges crashed Amidst Chinese slowing Economy, Shanghai Stock Exchange Composite Index (SHCOMP) went down 42% in 3 Months!!
  17. 17. As Economy and IPOs stumble, VC funds dry up 698 investments in China in Q3’2016, down 34% YOY Dollar value of the 631 deals releasing details totaled RMB 21 Bil ($3.1 Bil), down 12.5% YOY From Jan to August 2016: Chinese companies raised RMB 35.3 Bil through IPOs at home and abroad, down 86% YOY. IPOs were down 66% from Q3’215 to Q1’2016 Sources: zero2ipo, Taihe Capital, Caixin, Capital Today
  18. 18. VC Investment in China Reached a Five-quarter Low in Q316
  19. 19. VC rounds harder and longer to raise, yet money chases later stage rounds (in more mature companies) Source: Taihe Capital Startup founders facing tougher scrutiny and negotiations to secure funding. Average time spent to complete a fundraising round expanded to 9.5 months (July 2016) from 4 months (July 2015) Investors seek safer, later stage, targets: China's biggest ride-hailing company, Didi Chuxing, has raised $7.5 Bil in 2016 (+100% compared with 2015) Ant Financial Services, Alibaba's financial arm, raised in 2016 more than twice the amount it received in 2015
  20. 20. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Technology Investors Case studies of fund raising and acquisitions, lessons learned How to approach the process for a European company
  21. 21. Despite a depressed China domestic VC environment , China Outbound Investment is THE trend to watch for Western entrepreneurs A Silver Lining: Outbound
  22. 22. 20-25% of the world’s Unicorns are Chinese China’s Technology Giants rank 2nd behind the US, and have a strong M&A appetite
  23. 23. Total Number of Investments from BATQX in past 4 years Baidu: ~80 Alibaba: ~165 Tencent: ~175 Qihoo 360: ~45 Xiaomi: ~95 ----------Total: ~ 560!!! Source: Marbridge Consulting
  24. 24. Feeding China’s Unicorns Overseas Investing outside of China has become of key driver of technology growth for China’s Unicorns (Baidu, Alibaba, Tencent, Xiaomi, Qihoo 360, Cheetah Mobile…)
  25. 25. What are Chinese Tech Companies interested in when they go “shopping” overseas? Artificial Intelligence, machine learning & Applications Autonomous vehicle technology and applications Industry 4.0 (Robotics, smart systems, automation etc) Internet of Things (IOT) Sea and land-based cleantech, water treatment, pollutant decontamination, pollution fighting tech Aerospace & Aeronautics systems and techs, new materials… Financial and insurance technologies Healthcare & Medical Technology Agriculture technology E-commerce & online marketing; Design and creative skills
  26. 26. Beijing Kunlun putting £23 million ($34 million) into peer-to- peer mortgage lending marketplace Lendinvest (2015) For Chinese investors, Europe has become a strong opportunity Chinese PR Group BlueFocus Buys London-Based We Are Social (acquired 82.8% for $30 Mil) in 2013 2015 - Huawei buys Cambridge Internet of Things pioneer Neul for $25 Mil to strengthen its position in Narrowband IoT (part of future 3GPP cellular standards for connecting low data rate devices that have exceptionally long battery life) consolidate a prized relationship with Vodafone
  27. 27. Chinese Firm CSC Group to Fund Artificial Intelligence Incubator in Britain (2016) Chinese state-backed private equity firm CSC Group has inked a multimillion deal with British startup incubator Founders Factory. Planning on hiring 60 people and investing in five early-stage AI startups Plans to launch two new companies every year. CSC Capital is the third largest private equity fund in China (more than $60 Bil AUM)
  28. 28. Chinese private equity fund Angel Plus unveils new incubator for startups in London (2016) Chinese private equity fund Angel Plus ($760 AUM!!) led the launch of a new incubator called IUIA – A+Labs to help technology-oriented British firms commercialize in China The new incubator is said to provide office space, engineering tech support, manufacturing partnership and financial investment in the form of equity to UK startups in smart city, Internet of Things, and financial technology
  29. 29. New Chinese VC Cocoon Networks Opens For Business In London With A GBP 500 Mil ($713 Mil) Fund in 2016 “In China, valuations are quite high, and we see the same quality of companies in Europe at one-third of value in China and one-fifth of the value of the same companies in the U.S” and “There is real innovation in Europe too!” John Zai, CEO of Cocoon Networks Backed by China Equity Group and Hanxin Capital Plans to invest in UK and European startups in areas like fintech, creative industries and biotech Cocoon also partnering with University of London to build “London’s biggest incubator”
  30. 30. In the mean time, in France… Ø “King of Sino-Europe Cross-Border Funds” – Cathay Capital is deploying its Sino-French Innovation Funds Ø IDInvest manages Electranova, a recent fund invested by EDF targeting companies with strong China presence or potential Ø Demeter Partners and Emerald Technology Ventures signed an agreement in June 2015 with China Energy Conservation and Environmental Protection Group and Europe-China Commercial Union to setup a Sino-French fund
  31. 31. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Technology Investors Case studies of fund raising and acquisitions, lessons learned How to approach the process for a European company
  32. 32. Case Studies of Successful fundraisings of Western-lead Companies in China WITHME.COM (US/China founders) Focusing on ecommerce workflow tools including cross-border ecommerce. Ø Incubated by Chinaccelerator (batch II) in Dalian Ø Won its Demo Day and pocketed first investment from SOS Ventures and Infinity Ventures Partners ($3 Mil) Series A in 2011 Ø Moved to Las Vegas in 2013 following Series B investment from several investors ($6 Mil) including Zappos CEO Ø Series B’ ($28 Mil) in 2014 with a syndicate of existing and new investors Now Called
  33. 33. Case Studies of Successful fundraisings of Western-lead Companies in China VISUALEAD (Israel) Visual QR code technology Ø Had raised series A in Israel Ø Founders decided to relocate to China in 2013 with NO TRACTION at all on the local market Ø Failed to raise $$$ from local angel groups (mainly because of high valuation) Ø Finally got hooked onto an Alibaba team and after a year of negotiations, landed a $5 Mil Series B investment (Jan 2015)
  34. 34. Case Studies of Successful fundraisings of Western-lead Companies in China GLAMOUR SALES / MEI.COM (France) Leading Luxury Items Flash sales site Ø Created by a team of French executives, formerly from Coach, L’Oreal etc. Ø Raised $13 Mil seed capital from AXA Private Equity & Mandra Capital (2010) Ø Raised several follow on round from Neiman Marcus ($28 Mil) in 2012 and Chow Tai Fook ($65 Mil) in 2013 Ø Partial sellout and last fundraising round with Alibaba July 2015 ($100 Mil)
  35. 35. Case Studies of Successful fundraisings of Western-lead Companies in China VIRTUOS GAMES (France) Outsourcing Shop to major movie and gaming studios Ø Created by a former (French) Ubisoft GM in Shanghai Ø Raised Series A with Legend Holdings Ø Raised Series B from Xuhui Venture Capital (2014) Ø Now more than 500 staff working on the most popular franchises Ø Finally opening an office in Paris ! J
  36. 36. Cheetah Mobile gobbling 2 French Mobile Marketing Startups, MobPartner and News Republic in 2015/2016 MobPartner / News Republic Ø MobPartner (backed by NewFund) and News Republic (backed by XAnge, Creathor Venture, Intel Capital and business angels) were both acquired by Cheetah Mobile (NYSE: CMCM) in 2015 and 2016 respectively Ø Cheetah Mobile is a Chinese leader in mobile gaming and mobile utilities Ø Transaction amounts: $58 Mil and $57 Mil respectively (% of ownership not disclosed)
  37. 37. Theraclion & Median (France) Ø Median - Medical imagery specialist in oncology and Cancer treatment (Alternext: ALMDT) with EUR 3.9 Mil Revenue 2015, raised EUR 19.6 Mil from Inner Mongolia Furui Medical Science (300049:CH) Ø Furui will own 13% of Median Ø Earlier in 2016, Furui acquired 20% of Theraclion, a specialist in Echotherapy (thyroid and bread cancer treatments) Ø Theraclion is listed on Paris Alternext Medical Sciences, Biotech is a strong, new trend of China Outbound investment: Furui Medical shops in France
  38. 38. Case Studies of Successful fundraisings of Western-lead Companies in China APPANNIE (US/China/France) App Annie is the largest mobile app intelligence platform in the world Ø Spin-off of a Western-owned game outsourcing company in Beijing Ø Successfully raised $1 Mil (IDG VC) in Beijing in 2011 Ø Raised 4 subsequent round totalling $157Mil from IDG, Infiniti Ventures, Sequoia Capital, IVP Capital, Greycroft Partners etc. in 5 rounds Ø Subsequently relocated to San Francisco; made several acquisitions
  39. 39. APPANNIE: fundraising lessons learned in China The first investor is the hardest to get Show traction, KPIs etc Build relationship with VCs early Seek investors already using your product or who learnt about your product from peers Better work with investors with international experience or genuinely seeking international expansion Seek VCs with stellar reputation, as they will help attract visibility, new talents, customers (beware: attracting sub-par VCs will deter new investors…) VCs in China and US have the most experience in scaling services to hundreds of millions of users
  40. 40. Presentation Agenda Shanghaivest at a Glance The China Tech Ecosystem and current trends Chinese (and European) Cross Border Technology Investors Case studies of fund raising and acquisitions, lessons learned How to approach Fundraising for a European company
  41. 41. Opportunities & challenges for foreign companies Opportunities depend on company’s size, activities, and whether it is already present in China: o Localizing R&D activities with both global and local visions o Localizing China operations in a High-Tech Industrial Park (or Free Trade Zone) that is close to an innovation cluster/center o Partnering with a Chinese firm looking for innovative technologies, advanced know-how and skilled team o Investing in the China innovation ecosystem (including in startups) o Raising funds from Chinese investors bringing strategic values Main challenges to consider: o Hiring, keeping and motivating skilled talents o Fierce competition, protectionism, increasing nationalist feelings o Local (Chinese) entrepreneurs/teams will often be favored… o Speed: window of opportunity very narrow in China
  42. 42. Solowheel Patent Nightmare in China – what lessons?
  43. 43. IP Matters, but Speed, Cash & Partnerships matter more
  44. 44. Find an angle and strong local sponsors/partners/clients Put yourself in the shoes of the local VCs managers -> help them defend the project to their Investment Committee Local investors are wary of communication with foreign owned companies -> Localize team; hire a local co-founder (or CXO…) Research competition before pitching (hire local analyst to scout the market) ->VCs will gauge you against local competition It is likely VCs have seen your competitors’ decks before seeing yours -> Drop the confidentiality “sign me an NDA” spiel… No need wasting time approaching VCs not doing cross border Be relentless & don’t settle for term sheets local VCs offer (milestones-based payment, controlling stake, quick exit etc). Additional Challenges of Fundraising in China
  45. 45. bruno.bensaid@shanghaivest.com Brubrushanghai

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