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Envestors Conquer China: Scaling the Great Wall of Opportunity

An overview of the first ENVESTORS One Belt, One Roadshow, November 2017.

China Roadshow Objectives:

  • To introduce leading high growth UK based technology companies to strategic market development and investment partners in China.
  • To assist UK technology companies to fully capitalise on the China market opportunity.
  • To enable UK technology companies to understand the key challenges and requirements of doing business successfully in China.
  • Understanding the opportunity and Provincial Government support available (grants, incentives, and ancillary benefits) to UK companies seeking to establish a formal office or operation in China.
  • Understanding the market development opportunity for UK technology companies to set up a formal presence within a leading science and high tech development park in China.

 

Why China?

Founded in1949 as a hardline Communist country, the People’s Republic of China has steadily embraced the tenets of capitalism, especially since economic reforms were enacted in 1978. Today, China’s economy is the second-largest in the world and will likely overtake the U.S. sometime this century. It is universally acknowledged that British technologies firms are extremely strong: we have some of the most groundbreaking academic research coming out of our universities which is commercialized at

a much higher rate than elsewhere in the EU. China is, quite simply, desperate to catch up: a tech hungry nation, and yet still unable to access Facebook or YouTube.

Of the 1.3bn Chinese citizens, there are many that are highly educated, extremely wealthy and eager to get a piece of us, whether to qualify for
a Tier 1 visa (and thus residency in the UK), to advance Chinese interests or to simply move their cash abroad. At ENVESTORS, we fully understand that this is a huge opportunity for our leading UK tech companies to

fully embrace the vast opportunities that lie in China, whether through investment Рmany of the larger corporations are specifically mandated to invest in our tech to advance Chinese interests Рor expansion into
a country that has the capability to manufacture their products quickly, cheaply and efficiently.

With a view to building this metaphorical ‘investment bridge’, we made 6 exploratory trips to China in 2017 alone and have recently brought in a full time, dedicated China Investment Analyst, which has also enabled us to publish our ENVESTORS magazine in Mandarin. To fully capitalise on the dichotomy of a country this is both forward thinking and highly traditional, we needed to understand and truly appreciate just how

the Chinese mindset works. There are a number of key cultural norms and values that Western leaders like the UK need to be aware of when negotiating; it is also the case that you need to ‘kiss a thousand frogs’ and these visits have been essential in identifying strategic partners with confidence.

The ENVESTORS pedigree – we have raised over £100m for our portfolio companies since we founded the business in 2004 – has given us both the experience and kudos to introduce leading high growth technology companies to market development and investment partners in China. In layman’s terms, we know how to find the right ‘fit’ between the company and investor.

In light of this newfound capitalist focus, the old silk trading route has been replaced by the One Belt, One Road initiative, a development strategy created by China’s president Xi Jinping, that focuses on connectivity and cooperation between Eurasian countries. Seizing the opportunity presented by this scheme, ENVESTORS launched our very own version, the One Belt, One Roadshow in November 2017. We invited our portfolio companies ZAP&GO, ANCON and SOLARIS – absolutely at the forefront of the best technology companies in the UK today but lacking the capability to break China without our help – on a multi-city tour to enable them to understand the key challenges and requirements of doing business successfully in China and essential to full capitalisation of this opportunity. Chinese investors have started exploring markets to grab hold of global cutting- edge technology as well as to diversify their portfolios, and we know that our UK technology companies are the best to assist in this objective.

The Roadshow began in Shenzhen, a place which 20 years ago was‚Ä®just a fishing village… Now it’s a Tier 1 City with over 18 million residents, snapping at the heels of nearby Hong Kong for strategic trade importance. Home to the Shenzhen Stock Exchange and one of the biggest container ports in the world, the scale, speed of development and infrastructure is astonishing.

‘The One Belt, One Roadshow was absolute gold dust for SOLARIS. Almost every solar panel in the world is built‚Ä®in China and the opportunity to meet these manufacturers‚Ä®in person has proven invaluable: we can now tailor our development based on their requirements and not just on our assumptions. Without that face to face interaction, we would not have got that key detail. We also met with the biggest solar panel inverters in China, who are now returning the favour and coming over to London. Finally, we all know about the pollution problems in China, but it was so much worse than I could ever have believed. This has given us the impetus to really get things changed from both a solar and green angle, because, quite simply, the world needs it’.

Niall Haughian, CFA, SOLARIS

In partnership with a local operator, we hosted a dedicated investment event at the science and innovation high-tech real estate facility, Galaxy World. ENVESTORS companies were extremely well received by the audience of 30 VC funds and investors, with very strong registered investment intent secured for all of them.

Through our highly prestigious and significant alliance with CBBC (The China-British Business Council, an organisation that co-operates closely with the government to assist UK businesses expand into China), we were invited to showcase our companies at the Outbound Investment Conference, specifically organised as a result of the implementation of the “Going Global” strategy, a major move for China to further enhance the level of opening up in order to allow more global-going Chinese enterprises to share overseas investment opportunities and experience. We were honoured to be invited by CBBC to exclusively present our technology portfolio companies as the best that Britain has to offer; likewise the potential investors were a carefully selected assembly of those who are properly interested (see above re kissing frogs). We were formally presented to an audience of 400 VCs, family offices, corporate ventures and private investors. Company propositions were marketed, keynote speeches attended and there was much discussion about Chinese investment into Britain. A fascinating day to study the key trends and prospects that are available to us in this dynamic market.

‘If you want to be in the battery business, you must be in China. They are the largest manufacturers and we have visited the country 7 times in the last 18 months alone‚Ä®to get a metaphorical foot in the door. The One Belt, One Roadshow was invaluable to ZAP&GO: the potential investors loved our technology and, as a result of this trip, we now have have two feet rmly on Chinese ground. This makes for a very exciting future’.

Simon Harris, Investment and Marketing Director, ZAP&GO

After the high humidity and 24c heat of Shenzhen, we were welcomed by the somewhat different but more Decemberly feel of 6c in the Paris of the Orient, Shanghai. After a short and much needed night’s sleep and with our jet lag finally fading, the Roadshow continued with all companies making formal investment presentations to Senior Management of Goldensum, a Chinese Private Equity firm with £10bn assets under management from 300 listed Chinese companies. With a mandate

by their listed clients to acquire and/or invest in global technology companies, considerable strategic interest was achieved and solid foundations built for the businesses formally presenting.

We then met with the Tus Stars team in Shanghai. Tus Stars are a subsidiary of TusHoldings, a firm owned by Tingshua University, the most prestigious university in China and an organisation that has spun out 500 listed Chinese companies. TusHoldings operate TusPark science and innovation centres, 30 of which have been built across China as incubation systems for technology and digital companies: Tuspark Beijing, for example, is home to the offices of Google, Microsoft and
Sun Microsystems. This visit was a highly strategic one for our Roadshow businesses as it allowed them to understand the support available from Provincial Government, who offer grants, incentives and ancillary benefits to UK companies seeking to establish a formal presence by setting up an office or operation in China.

SOLARIS, for example, has two innovations that have the potential to transform the energy market: The Solaris Photonics Multiplier (SPM) and the Thin Film Technology. Solaris’ SPM can be retrofitted to existing solar farms, to generate up to four times the power output within the same allocated space. In that 98% of the world’s solar panels are built in China, this was a strategically essential introduction.

Tus Stars is the investment arm of the group and the ENVESTORS companies had the chance to visit the innovation centre in Shanghai,
in addition to presenting their own opportunities to the Tus Stars team.
A strong connection was forged for SOLARIS, given that they are partly based in Cambridge where Tus Holdings are in the process of setting up a dedicated science & innovation centre in collaboration with Cambridge University. These discussions have entered a more serious phase and,
at the time of going to press, are looking like a true gamechanger for SOLARIS.

Whilst in Shanghai, we had dedicated meetings with a locally based Family Office and Launchill Ventures, an active investor into global early stage businesses. Our final meeting was with the Investment Manager of Hainan Airlines. What was once a small, provincial and domestic airline, Hainan is now listed on the Fortune 500; indeed they are so wealthy that they now own 3,000 subsidiary companies and have a mandate to invest in UK technology businesses interested in expanding into China which would, as a result, advance and benefit Chinese interests.

We then caught the impressive CRH high-speed bullet train from Shanghai to Hangzhou – a rapidly developing Tier 2 city with a population exceeding 12 million, home of Alibaba and commonly referred as the Silicon Valley of China – for the last, but no less important, event. Hosted by G5 Capital, a major Chinese real estate developer and incubator, attendees had a final chance to present to an audience of VCs, corporate ventures and private investors.

‘The ENVESTORS trip to China was extremely interesting: it was very well organised and we met with many potential investors. Our technology has the potential to revolutionise explosives, drugs and chemical weapons detection within‚Ä®the security, border control and defence industries. The technology detects trace concentrations of threat materials‚Ä®in the air at the level of a single molecule, providing levels‚Ä®of sensitivity many orders of magnitude superior to existing technologies. This has proven highly in security conscious China; coupled with the ability to manufacture our products cheaply and thus advance their economic interests, this

trip has been invaluable for us all. We were able to identify the serious, quali ed investors who want to speci cally‚Ä®put money into our revolutionary technology and, as a result, we are already in advanced discussions with several organisations that we met on the Roadshow’.

Dr Robert Muir, Managing Director, ANCON TECHNOLOGIES

Thus, through our meticulous and exploratory journeys, our strategic partnerships with CBBC, Goldensum and Tuspark, our dedicated China team, the One Belt, One Roadshow presentations and ultimately our understanding and respect of Chinese culture, we at ENVESTORS

are in the unique position of having laid the solid foundations of the hallowed ‘investment bridge’. We have the pioneering foresight to know exactly what it takes to introduce UK based technology companies to the right strategic investment partner in China, to navigate around the fundamentals of how to do begin the journey of entering the Chinese market with an eventual view to a successful exit.

Scaling the Great Wall of Opportunity? They’ll need a bigger wall to halt the ENVESTORS revolution.

For more information please contact:

Scott Haughton
Chief Operating Officer, Envestors Limited 1 Lancaster Place, London WC2E 7ED, UK T. +44 (0)20 7240 0202
M. +44 (0)7734 208638
E. scott@envestors.co.uk

Envestors Conquer China:  Scaling the Great Wall of Opportunity

By Envestors19 Feb 2018