The U.K. – China Channel Keeps Getting Shorter
In a reflection of the growing tech innovation links between China and the U.K., Cocoon Networks is setting up a $713 million fund in London for Chinese investors to invest in startups from Europe. Concurrently, Cocoon, which is backed by China Equity Group and Hanxin Capital, and comprises various businesses including incubators, accelerators, venture capital and intellectual property management, is partnering with University College London to create a 70,000 square foot incubator for co-working and mentorship for tech entrepreneurs.
In other recent indicators of Chinese capital funneling into London’s booming tech sector, in 2015, Beijing Kunlun Tech Co. invested $34 million in London-based LendInvest, the world’s largest P2P marketplace for mortgages. Earlier this month, London-based indie film streaming firm MUBI took in $50 million in funds from Hong Kong-listed Huanxi Media Group
The Silicon Dragon annual event in London, Feb. 25, brings in experienced speakers to talk about this topic: John Zai, Founder and CEO of Cocoon Networks and Christian Faes, co-founder & CEO of LendInvest.
In 2015, venture capital investment in to Britain’s technology sector reached a record high with London-based companies securing around 62% of the $3.6 billion raised by UK firms in 2015.
With its new fund, Cocoon plans to invest in UK and European startups whose products and services show potential for growth in the Chinese market, in areas such as fintech, biotech, medical devices and creative industries that intersect with technology (such as fashion tech). In addition to capital, Cocoon offers to help companies grow and expand into China by offering legal advice and practical assistance.
The decision to base in London reflects the city’s increasingly prominent position as a bridge between the U.S., Europe and China. London’s tech sector has grown rapidly since 2010, when Prime Minister David Cameron launched the Tech City initiative. It is now Europe’s biggest tech hub, as well as the most popular European city for Chinese foreign direct investment.
The long list of tech companies with a London presence includes Alibaba, Huawei, Cheetah Mobile and gaming company Rekoo.
Cocoon CEO John Zai explains that he believes Europe boasts a real opportunity for investing. At home, the Chinese market is overvalued. Abroad, Chinese investors have historically been fixated on the U.S. market. Trends such as competitive rounds and high valuations in Silicon Valley are compelling some U.S. and Chinese investors alike to diversify and pay more attention to opportunities, especially early stage deals, in Europe.
As Chinese investors continue scouring the European market for deals, London has seen a surge of additional Chinese companies setting up operations within the city: some 28 over the last nine months, and close to 40 expected by the end of this March.