Sources inform ''Globes'' that CIGate.Asia a new fund set up by Mark Gazit and Amir Ya'ar, is completing the raising of $88 million. CIGate.Asia aims to enable Chinese corporations to invest in Israeli companies. The idea is to create introductions between Chinese corporations and Israeli start-ups, which will lead to their acquisitions and the establishment of Chinese R&D centers in Israel. On the Israeli side, the objective is to give Israeli start-ups an entry into the Chinese market via local companies.
CIGate.Asia managing director Mark Gazit previously worked at Israeli Air Force technology units, Intel Israel Ltd., and Microsoft Israel Ltd. In the early 1990s, he co-founded NetMedia, and Internet vendor that was sold to NetVision Ltd. (TASE: NTSN). In 2003, he founded SkyVision Holdings Inc , which provides communications services in Africa.
Gazit told "Globes", "Between this and that, I founded a small company in China, because I was infected with the Chinese bug. I met Amir a year ago, whom I knew from previous stations in my life, and we decided to do something in China together."
"Globes": What was your first step?
Gazit: "We want to hear what the Chinese needed and to find the best model. Until a year ago, Chinese companies made few investments or acquisitions outside China, but under the government's 12th five-year plan, which encourages R&D investment, companies are beginning to seek investments outside the country. The Chinese want to stop being the workshop of the world. They know they've reached their glass ceiling, because the whole world has already invested in China. They know that they must innovate."
Ya'ar and Gazit's business model in a limited partnership in which Chinese companies invest and through it can reach Israeli start-ups with potential synergy.
"Chinese corporations, such giants like China Unicom (Hong Kong) Ltd. (NYSE: CHU: HKSE: 0762; SSE: 600050) or Tencent can achieve exposure to companies in Israel through the fund," says Ya'ari. "We'll arrange for our investors meetings with companies they're interested in, and they'll come and examine them up close. Afterwards, we'll decide who to invest in and how much. We're creating exposure to the best Israeli companies, which facilitates the subsequent decision who to invest in. For example, Tencent will visit in June to examine companies."
Tencent QQ's instant messaging service is the most popular in China. The company, a subsidiary of Tencent Holdings Ltd (HKSE: 0700), also provides other services, such as a social network and ringtones. The company passed the 100 million users threshold a few months ago. It is the ninth largest Internet company in the world, after Twitter.
According to Gazit, after the Tencent delegation examines companies for investment, the team will help managers of the Israeli companies establish ties with the Chinese market.
Why is your model better than those of other funds that are trying to succeed in China?
Gazit: "Until now, Israeli companies did not want Chinese directors on their boards, because there was fear on the part of both sides. We'll be a meeting point and will bridge the difficulties. We believe that we can help Israeli companies in the Chinese market, and maybe even achieve an exit on one of China's stock markets, where no Israeli company has ever held an IPO."
What kind of companies are you looking for?
"We'll invest in more mature companies, which can reach the Chinese market and need a great leap forward. This is also the right stage for collaboration with a large Chinese corporation. We'll invest in cleantech, energy, new media, water and energy management, agriculture, and classic IT companies."
Israeli companies are still afraid that the Chinese will steal their patents and ideas.
"That's why we'll look for creative companies, which are not worth copying from because an amazing patent is not enough. We'll enable Israeli companies to remain in the country, keep their creativity and innovation here, and still reach the Chinese market via large corporations."
Gazit and Ya'ar have been joined by Chinese partner who worked for many years in investment banking in the US.
CIGate.Asia's Chinese office will be in Hong Kong. Gazit and Ya'ar believ that Israeli high tech can become an important partner in Chinese R&D. "If that happens, it will strengthen Israel's standing in the international community, and will solve political and strategic problems," says Ya'ar.
Published by Globes [online], Israel business news - www.globes-online.com - on June 16, 2011
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