Israel's venture capital firms are bullish on China

Some two weeks ago, Science and Technology Minister Eliezer Sandberg visited the southern China city of Shenzhen, and was a guest at a conference held there by the local association of venture capital funds. "We signed cooperation agreements and then I went out for a tour of city," Sandberg relates. "The deputy mayor, who led the tour of the crowded industrial area, pointed out one of the buildings occupied by foreign funds and and foreign commercial bodies, and said to me: `All you need do is bring Israeli funds here. I will give them as much space as they require.'"

Some two weeks later, Sandberg says, he found out that an Israeli investment company, headed by Eliezer Manor, a former director of the technology incubators, had opened an office in the building.

China has been the high-tech industry's hot spot over the past year. Everyone is talking about China's potential in the areas of production and technology, as well as the country's academic strength and huge market, which, till today, has surprised everyone with its accelerated growth capabilities and consistency.

Some four years ago, Silicon Valley was the place everyone wanted to be - the Valley was the place for technology and investments, and was also the key to the American market, the primary market at the time.

Silicon Valley was inundated with Israel venture capital funds, which set up offices there and sent over partners to run them. But three crisis years dulled the glamour of the Valley, and the managers of the Israeli funds began to find reasons to transfer their operations to the East Coast, a more convenient location from the point of view of the time difference as well.

Silicon Valley is about to be replaced by three Chinese cities - the commercial capital, Shanghai, the political capital, Beijing, and the southern industrial city of Shenzhen. These cities are expected to serve as a business development base for companies in which the VC funds invest.

Israeli VC funds have already initiated contacts with local investors. In the initial stage, say senior sources in the industry, the funds are trying to get acquainted with the Chinese market, which is undergoing significant changes and in which new key figures are constantly popping up.

At least four Israeli VC funds are examining the option of setting up offices in China. JVP, the Israeli fund that is trying to turn global, will, in all likelihood, be the first to open a Chinese office, to add to its offices in London, the United States and Japan.

The other Israeli VCs weighing the Chinese option are Pitango, which is currently raising its fourth fund, already has offices in London and Silicon Valley, and now has its eye on Shanghai; Giza, which has offices in London, the United States and Singapore; and Infinity-Clal, which plans to set up a Chinese office with a local partner.

Another Israeli fund, Vertex, is already operating in China, through its Singapore holding fund, the International Vertex Group, which has offices in Beijing.

The Israel Venture Association, the representative organization for the Israeli VC industry, is planning a conference in Shanghai in June, with Industry and Trade Minister Ehud Olmert slated to be in attendance. Few VC fund managers are expected to miss this opportunity to get a closer look at the Chinese market, today's largest consumer market for their startups, and most, if not all, senior Israeli VC players plan to be at the meet, which is expected to serve as a catalyst for the opening of Israeli VC fund offices in China.

	Shanghai, one of three Chinese cities expected to become a new Silicon Valley.
	Photo by: Haaretz Archives