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. 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. 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. 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. 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. Keynotes at different conferences on Investment and
Cross-border M&A (Bruno Bensaid – 2015)
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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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. 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. Despite a
depressed China
domestic VC
environment ,
China Outbound
Investment is THE
trend to watch for
Western
entrepreneurs
A Silver Lining:
Outbound
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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