Given that Israel is the size of a postage stamp and its market is minuscule, Israeli business types have always drooled at the thought of breaking into China. But the People’s Republic hasn’t always drooled back at foreign businesspeople, Israeli or otherwise. That seems to be changing fast.
- China’s new vision of manufacturing welcomes Israeli startups
- Israeli exports to Asia surge, decline to most of Europe
- Israeli criminal networks among many laundering money in China
The Israeli-Chinese love affair is ramping up. The past week brought the Chinese acquisition of iconic Israeli cosmetics and creams company Ahava, while the University of Haifa announced the establishment of a lab in Shanghai with East China Normal University.
Earlier this month, Ben-Gurion University unveiled an agreement to establish an innovation center with Jilin University. And while Chinese conglomerates prowl the Holy Land for the odd startup, the Kuang-Chi global innovation incubator is going all the way. In May it plans to become the first Chinese venture capital fund with offices in Tel Aviv.
Meanwhile, in the next few months IngDan, China’s biggest Internet of Things platform, will launch an “experience center” in Tel Aviv to showcase the goodies the companies on its roster make. The center, which adds to IngDan experience centers throughout Asia, is expected to draw Israeli companies to produce in Shenzhen using IngDan’s vast industrial network there. Through its Gateway to China initiative, the company says it can open Asian markets to Israeli innovation.
“We help entrepreneurs convert their crazy ideas into real products and connect them with manufacturing resources in China,” Chairman Jeffrey Kang told Haaretz at the company’s Hong Kong experience center.
IngDan is privately owned but it’s on a mission that Beijing would appreciate: connecting global innovation with China-based manufacturing and innovation, Kang says.
Long march to China
Though China voted yes to help establish Israel back in the day, it quickly swung in favor of the Palestinians. Israelis weren’t even allowed into China without a non-Israeli passport until the 1980s – roughly when the two countries began secretly forging military ties, to Washington’s irritation. Beijing and Jerusalem finally forged open diplomatic relations in 1992.
As for the Israeli businesspeople who danced with the Chinese dragon, the conventional wisdom is that they were burned to a crisp amid cultural differences and impenetrable bureaucracy.
But now Beijing has a new policy of expanding Made in China to Made by China – it doesn’t just want to make the world’s junk, it wants to make the world’s smart junk. And great stuff.
Yes, its mega-factories will still make the world’s toy cars and flashing plastic frogs. But Beijing badly wants to unshackle the Chinese people’s innovative powers and start making better-quality things. “For example, if in the past a company made a lousy television, now it could make a smart TV,” Kang says.
Meanwhile, in its pursuit of resources and originality, China has been trawling the world, including Startup Nation Israel, for “smart” things to buy. This ranges from cutting-edge technology companies to Israel’s biggest dairy firm, Tnuva, which allegedly boasts advanced methods for inducing cows to be productive.
(It’s anybody’s guess why the Chinese government looked to buy an Israeli insurance company, too. The deal fell through.)
So yes, there’s a new sheriff in Chinatown and things could be different for Israelis trying their luck there again.
Crazy little thing called ideas
Like many things Chinese, privately owned IngDan is a vast enterprise. Only two years old and founded by serial-entrepreneur Kang, IngDan already has over 10,000 companies and startups in its fold, all manufacturing weird and wonderful Internet of Things things – physical objects linked to the Internet via electronics and sensors. These are made with the help of IngDan’s 8,000-plus suppliers, generally in the Shenzhen area.
“We believe IoT is the next generation for the manufacturing industry,” Kang says, referring to the Internet of Things. “That’s why we’re targeting IoT innovators. We help them to convert their crazy ideas into real products and connect them with manufacturing resources in China.”
So what is IoT exactly? “IoT is the idea that everything around us be connected to the Internet,” Kang says. For example, suppose a company’s chairs have sensors that can tell if the chair is being used.
“This is good for big companies, to know where their staffers are,” he says. “They can know if the chairs are really manned, if a meeting room is being used. They can collect information on where people are and for what periods of time. The chair sensor can be connected to the air conditioner and electric light, turning them off when you leave the room.”
Wearable technology is also IoT. “Take a bracelet with biosensors, which can take measurements over time and identify trends,” Kang says. “It can create learning. For instance, take a person with a pacemaker. The bracelet could show a week of problem heartbeats, and could proactively transmit the information over the Internet to the doctor, who might suggest an examination before the patient falls sick.”
The Internet of Things is also baby monitors that can sing and dance and rat to the parents when the kid errs. It’s virtual reality stations (a VR roller coaster made by an IngDan client company was believably terrifying). It’s bracelets to monitor physiological vitals while jogging. It’s DIY make-a-robot.
The IngDan group has three strands to its business. One links Chinese entrepreneurs to the Chinese supply chain. One serves Western companies looking to source components in China (linking with the supply chain, ensuring that components are high quality, and negotiating prices). Finally, IngDan helps Western companies market to Chinese consumers.
“IngDan is a platform for people with innovation who have ideas but no manufacturing platform,” says Guy Edri, cofounder of the Israeli 24/7 grocery chain AM:PM and now co-owner of IngDan Israel.
In short, Israeli and other foreign companies that do business with IngDan come with the idea. IngDan helps evaluate its merit, groom the prototype and final product, and find manufacturing facilities. Finally, if needed, it locates marketing venues.
What’s in it for IngDan? It doesn’t make a dime on the perfecting process, says Chen Lupescu, formerly of Intel Israel and now CEO of IngDan Israel. Its money comes from commissions on the eventual mass manufacturing and later, hopefully, on mass sales in China through the channels IngDan helps set up.
So an Israeli with an idea for, say, a smart shoelace that can turn off lights and strangle intruders brings it to IngDan. First it can help check whether somebody already invented one. Then it can help render the concept feasible – cheap enough to manufacture sensibly, as the seasoned Edri points out. Then it can open the door to China and the rest of Asia.
What about protecting the foreign companies’ rights? “Israeli companies working with IngDan keep their intellectual property,” says Lupescu. She and IngDan Israel are working on building an IngDan experience center (of IoT gadgets, of course) in the upscale Tel Aviv Port area – and Israeli companies are already taking interest.
IngDan experience centers are not just places for reporters to take virtual roller coaster rides, play with robot lego or watch 3-D printers churn out plastic owls. “The IngDan experience center has three functions, Kang says.
“One is the experience center itself. The second is to be like TED [Technology, Entertainment, Design – a nonprofit company devoted to spreading ideas]. Entrepreneurs meet with potential investors and partners. Third is the IngDan coffee shop, which is part of the lifestyle – you can relax and brainstorm as they make innovation and entrepreneurship part of your life.” An in-house coffee shop definitely makes sense in Tel Aviv.
IngDan isn’t an incubator, it’s an IoT innovation platform. At this point IngDan isn’t contemplating investment in Israeli startups, though other Chinese companies certainly are, says Lupescu – see the Kuang-Chi global innovation incubator.
Kang also notes that financial investors are part of the ecosystem that IngDan is creating, as are media partners such as China Daily, which helped organize the media tour of IngDan. “Wired magazine is also our partner,” Kang adds.
So investment in Israeli startups isn’t on the plate at this point – but could become a by-product of the engagement. “I think that in the future, IngDan could be a door to a great deal of investment in Israeli startups, and to Israeli investment in China,” says Lupescu. “Things have to be done at the right pace, step by step, not jumping from 0 to 100.”