A venture capital firm backed by the Chinese government is aiming to invest up to $500 million into U.S. and European technology startups.
Silk Ventures, which has offices in Silicon Valley, London, Shenzhen, and Beijing, will put a particular focus on fintech, artificial intelligence, medical technologies and startups specializing in related sciences.
“The mission is to connect technology companies from Europe and the United States, Israel as well, to the Chinese market,” said Silk Ventures Founding Partner Angelica Anton in an interview.
Silk Ventures joins a bevy of Chinese funds seeking stakes in Western startups. In February 2016 Cocoon Networks Ventures launched a 500 million pound ($720 million) venture fund targeted at U.K. startups in fields from hardware to biotechnology. The China-backed CreditEase Fintech Investment Fund in March announced three investments in U.S. fintech firms.
Of the $500 million raised by Silk Ventures, half comes from SASAC, the State-owned Assets Supervision and Administration Commission of the State Council, which supervises and regulates state-owned enterprises in China.
The remaining half of Silk's fund has been raised from a group of investors the company declined to identify. It said in a statement that it will announce its first investments in July. The company launched an accelerator based in London's Canary Wharf in 2015, which provides support to China-focused startups.
Breaking into the Chinese market is a challenging prospect for a startup in part due to strict governmental regulations, as well as enormous existing competition in many sectors, or simply the difficulty of winning over locals. Airbnb Inc. in March attempted to tackle this by adopting a new brand name in China: "Aibiying".
Silk Ventures aims to match Chinese corporates with European and American startups producing technologies that can fill the regional demand. The group's VC partners in London and Silicon Valley will focus on sourcing those startups for potential investment.
“It's definitely a pull-based relationship and it's always been,” said Anton. “You've got startups here who need to access the market, you've got corporates there who are very inefficient, very old fashioned. They need to innovate, they need to compete globally, and they do that by collaborating with startups who bring the technology.”
Silk Ventures will consider individual investments as much as $50 million, or ten percent of the fund’s total.
The firm will be partly focusing on fintech investments, highlighting blockchain, currency exchange, and “regtech" as key sectors of interest. Regtech is the growing branch of IT that aids regulation, due diligence, financial security and risk management.
There are some sectors of industry Anton said she would want to avoid. Payment technologies are one, in part because of the high level of existing developed competition from local players such as Tencent, WeChat, and Alipay. “It's a very, very strong area in China already. It's very hard for a new entrant to make something of it,” said Anton.
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