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How to access Chinese investment

by CBBC Staff
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Investment

Kaitlin Zhang explains how UK technology firms can reach out to Chinese investors

In the first half of 2018, Chinese outbound foreign direct investment (OFDI) has dramatically veered towards Europe over North America. The value of completed Chinese investments was six times higher in Europe (£9.3 billion total with £1.25 billion in the UK) than in North America (£1.55 billion), according to    Baker McKenzie and Rhodium Group. This trend looks set to continue, with technology firms in particular considered the “crown jewel” of Britain for Chinese investors. According to Management Consultancy Firm Mckinsey, China’s outbound investment will resume its upward trajectory with a focus on “Made In China 2025” sectors and digital technology, areas such as Artificial Intelligence (AI) and the Internet of Things (IoT).

We find that UK SMEs are particularly attractive for Chinese institutional investors, due to the strength of “Brand Britain” and the UK’s status as a world leader in innovation

This upwards investment trend is partly due to China’s fluctuating stock market and lower real estate returns at home. China now has the second-highest number of billionaires globally and many of these are diversifying their investment portfolios to include UK assets, which are perceived to be more stable.

Investment firms, such as the newly established China Heritage, where I serve as Chief Marketing Officer, are responding to this need by helping private investors diversify their portfolio abroad. We find that UK SMEs are particularly attractive for Chinese institutional investors, due to the strength of “Brand Britain” and the UK’s status as a world leader in innovation. Due to the potential for a post-Brexit UK-China trade deal and the rocky China-US trade relationship, there has never been a more encouraging outlook for UK SMEs to raise Chinese funding.

“Along with capital, Chinese investors can provide important market knowledge and distribution capabilities, while the sheer size of the market enables companies to test and refine products with condensed timescales,” says Mark Hedley, technology lead at the China Britain Business Council.

Types of Investors and How to Reach Them

Angel Investors and High Net Worth Individual (HNWI)

Angel investors typically provide seed funding through a one-time investment or an ongoing injection of funds to industries which they understand and where they can offer value. The best way to find angel investors is by reaching out to your network and their peripheral relationships in the same industry or a complimentary line of business.

Family Offices

A single family office (SFO) is a private company that manages investments and trusts for a single family. Much of their wealth is in its first or second generation, so many families are still aggressively seeking greater returns instead of wealth preservation. SFOs are particularly common in China and many can be found through professional wealth management firms in Hong Kong and Singapore.

Government Grants and Funding

Both the UK and Chinese government routinely offer grants and funding to collaborative projects. In 2015, both governments collaborated on a £16 million fund for joint projects in energy, healthcare, urbanisation and agri-food. At Kaitlin Zhang Branding, we have helped UK clean tech firm Loowatt raise RMB 1 million (£110,000) joint funding from the Guangdong Provincial Department of Science and Technology. Keep an eye out on government websites for these opportunities.

Venture Capital (VC) Firms

While Chinese venture capital firms don’t often disclose financial information, there was a considerable uptick in financing activity during 2017, with total annual Asia funding activity increasing by 117 percent year on year, according to CNBC.

“A venture capitalist looks for a strong product or service that holds strong competitive advantage, a talented management team and a wide potential market,” according to Will Jiang, Partner at N5Capital, a Beijing VC firm and previous client of Kaitlin Zhang Branding.

Firms that are looking to establish their brand in China are particularly attractive to VCs because they like to lend their expertise to help their portfolio companies succeed through activities such as marketing and recruitment. The key to finding the right venture capital firm is by researching the firms that typically invest in your geographic location, funding series and industry. Websites such as Crunchbase and 36kr can help identify suitable firms.

Kaitlin Zhang is the CEO of Kaitlin Zhang Branding, a cross-border digital marketing agency specialising in technology and financial services. The company works with UK technology firms to establish their brands in China and support them with raising vital capital. The company also works with some of the top Chinese venture capital firms and private investors to build their brands outside of China, in addition to supporting fundraising efforts in excess of $200m USD.  

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