Meet the Chinese financial giant that opens startups to all of China
This would be the company’s second multimillion-dollar fund in less than two years.
By MICHAEL ZEFFCREDITEASE’S VIP delegation visits Jerusalem last week. CreditEase partnered with experienced venture-capital investors Tayman Kan and Benjamin Weiss to create the CreditEase Israel Innovation Fund in 2015, making CreditEase the only Chinese financial institution with a physical office in Israel.(photo credit: Courtesy)
China’s largest wealth-management company, CreditEase, sent a VIP delegation to Israel last week, part of a fund-raising campaign to set up a $50 million fund to invest in Israeli earlyand late-stage technology companies.This would be the company’s second multimillion-dollar fund in less than two years.CreditEase partnered with experienced venture-capital investors Tayman Kan and Benjamin Weiss to create the CreditEase Israel Innovation Fund (CEIIF) in 2015, making CreditEase the only Chinese financial institution with a physical office in Israel. The first fund managed to raise $32m. within eight days from 180 CreditEase clients throughout China. This year, CEIIF invested in eight Israeli companies, making it one of the more active venture capitals in Israel.“We formed this fund with Tayman and Ben because we think it’s a good thing to link Israel and China and contribute to the economy of both countries,” CreditEase senior vice president of Dawei Liu told The Jerusalem Post.After approaching CreditEase founder and CEO Tang Ning for partnership, Weiss said, Ning dispatched a due-diligence team to Israel that studied the market in Israel and concluded that Israel was a safe, stable and growing investment.“What you are seeing in the year since, is an emphasis on Israel on CreditEase’s part,” Weiss told the Post.CreditEase says it is the world’s largest microfinance company, servicing more than one million borrowers across at least 100 cities in China, with offices in New York, Singapore, Hong Kong and now Tel Aviv. CreditEase is internationally backed by notable institutional investors, including Morgan Stanley Private Equity Asia.“CreditEase is the No. 1 company in the world in peer-to-peer lending and microfinance,” Weiss told the Post.“They started it in China long before the Americans learned how to do it.”CreditEase associate director of overseas products Weiqing Huang shed some light on the reasons behind his company’s and his country’s interest in Israel.
“China is experiencing a slowdown of economic growth,” he told the Post.“The Chinese government is encouraging companies to transform from traditional labor-intensive manufacturing to more-advanced sectors.“We think that Israel has the technology but is a small market. China, on the other hand, has a big market and a lot of capital and is eager to get the technologies, especially the original hi-tech coming from Israel.”CEIIF is hosting its third VIP delegation in Israel for CreditEase clients. The delegation is comprised of 37 senior executives, business owners and individual investors with surplus wealth.“We puts a lot of work into educating our clients about investment, about diversifying into overseas investments and about Israel,” Liu said. “We circulate Israel-related information to our clients and organize these VIP delegations.With every new delegation more people join.”During their stay, members of the delegation visited universities and kibbutzim to get a sense of how the technology is made from the grassroots and met with CEIIF’s portfolio companies to see where their money is invested.“We don’t only invest money, but we help our companies enter and accelerate in the Chinese market,” Kan, CEIIF’s managing partner, told the Post. “We help them find strategic investors in China and manage their relations there. For example, we helped Corephotonics land clients like Huawei.”Corephotonics is an Israeli bluechip company that makes dual-camera modules for smartphones and has existing investors, including Samsung.Even though CreditEase only holds 1% in the company, Corephotonics insisted that Kan sit on their board following his contribution in opening the company to the Chinese market.Another notable example of a CEIIF portfolio-company success is Rehovot- based Silentium, which produces noise-reduction technology. During the previous delegation in June, CreditEase introduced one investor to Silentium, which helped facilitate projects with high-speed train companies in China seeking quieter cars and setting up a sales network in north and south China.One of the elements that make CEIIF unique in the landscape is that it brings Israeli technologies and start-ups to all regions of China, with clients in second-tier cities that are unknown to Israeli venture-capital funds but still have markets of at least 15 million people to tap into.“We know that some Chinese Internet giants, such as Alibaba and Tencent, already make large investments in Israel,” Liu said. “The smart Chinese capital is already accelerating investments in Israel. But ordinary Chinese people and businesses outside Hong Kong don’t know they can participate in this process. We bring them to Israel and bring Israel to them.”CreditEase and CEIIF are now in the process of fund-raising for their second fund, which will be announced at the end of December and has a $50m. target goal.“From our perspective, there’s almost an untapped, unlimited potential between Israel and China,” Weiss said.“And for me personally it is important that culturally, Israel nurtures this relationship, because it’s something good for the Israeli hi-tech ecosystem for the next 10 or 20 years. This is a client and a partner that will be here for the next 20 years.”Huang and Liu expressed high hopes and great expectations for the future of their business in Israel.“Right now, our fund is relatively small, with only $30m., and for a second fund we are going to raise another $50m.,” Liu said. “But what we see taking place in the future is a $1 billion fund if [CEIIF] works hard and delivers good results.”