Kuang-Chi’s $300 million Israel fund isn’t just because China wants smart cities. It needs them
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A Chinese woman checks her cell phone, wearing one the now infamous face masks to protect against polluted air (Tang Ming Tung / Getty Images Israel)

A Chinese woman checks her cell phone, wearing one the now infamous face masks to protect against polluted air (Tang Ming Tung / Getty Images Israel)

Israeli startups need to know that air pollution, traffic congestion, and overcrowding are China’s main priorities as the government and private funds invest in sorely needed smart city technologies

Long a destination for Western companies to find cheaper manufacturing and labor, Shenzhen has prospered manufacturing the world’s consumer electronics. The city is now awash with native startups and corporate giants, like Kuang-Chi. That company just launched $300 million investment fund dedicated solely to investments in Israeli companies. The goal? Make China’s dozens of urban centers into the world’s leading network of smart cities.

First, a little about Shenzhen. It’s China’s manufacturing center, one of the main stops for all those companies to get their products “Made in China.” The city has benefited from a combo of modernization and fast prototyping for consumer electronics companies, plus being a short drive away from finance mecca Hong Kong.

Shenzhen isn’t a city that comes up outside manufacturing and tech circles. Its renown isn’t that of Shanghai or Beijing for Chinese cities, but it would be fair to say it’s the Chinese equivalent to Detroit, I mean, when Detroit was actually booming. It is known as an IoT megahub now, with a reputation for fast prototyping that attracts IoT companies to Shenzhen or Hong Kong, from Tokyo to Berlin.

The announcement was made by Kuang-Chi founder Ruopeng Liu, who said “Israeli entrepreneurs tend to have very big ideas, but there are limitations in the local market. We can help these companies to take big leaps.”

He is hardly the first Asian company, or specifically Chinese investor for that matter, to express that notion about Israel. Geektime had the chance to recently speak to OurCrowd founder and CEO Jon Medved about the same phenomenon. Kuang-Chi has a corporate partner in Israel, Indigo Global, whose managing partner Dorian Barak said Kuang-Chi really gets it.

It’s a subjective argument to say which company gets it the most, but this company does have a stake in the GCI Fund & Incubator and a $20 million investment in machine vision startup Eyesight Mobile Technologies (sometimes, its best to go with the simple style when looking for a name). Techcrunch reported other investments include Solar Ship, the Martin Aircraft Company, biometrics company Zwipe and HyalRoute.

China doesn’t just want smart cities. It needs them

“With the future city, we emphasize two points: environment and safety. We know the severity of the problem in China and desperately need technology to monitor and track the real data of environmental change,” Liu said last week, emphasizing the need to resolve issues brought on by overcrowding and to mitigate future natural disasters.

Samsung and Cisco have been inking smart city development deals across the planet, from Daegu, South Korea to Berlin, Germany.

But modernization and giving off an image of an advanced industrial economy aren’t Beijing’s main motivations in its massive smart city investments. The country absolutely needs to upgrade its city management, from transportation to health and pollution to overcrowding. Dozens of cities now have more than 1 million people.

Pollution is at intolerable levels in Beijing and Shanghai. Things are so bad, some fashion startups like Vogmask and HK-based Face Slap are literally strutting their stuff on the runway aiming to sell chic to keep your lungs particle-free. Hell, one Canadian charlatan startup is selling bottled air to the Chinese.

Geektime Managing Editor Laura Rosbrow-Telem also noticed it on her recent, 2.5-day trip to Chengdu, the biggest city in western China.

Swan Lake in Chengdu's Panda Breeding Park, with a smoggy overcast visible even in lesser urban areas (image, Laura Rosbrow-Telem)

Swan Lake in Chengdu’s Panda Breeding Park, with a smoggy overcast mid-day that was visible even in a lesser urban area. Photo credit: Laura Rosbrow-Telem

But for all the critique China gets for the need to clean up, it has the ability to organize a massive smart city endeavor from the top down. The topic came up in our conversation with OurCrowd Founder and CEO Jon Medved, who said in some ways it makes implementing smart city projects a lot easier.

Which Israeli companies might benefit?

For Israel‘s startups, smart cities are already a massive focus. Water tech is a major industry in Jerusalem and Tel Aviv. IoT is extraordinarily strong in the Jewish State, and cyber security companies could easily shift from private and company servers to defend large public networks of devices and utilities.

But Liu says investments may also include AI, robotics and aviation; even virtual reality. You can expect with confidence that some satellite companies might be of interest as well. Pollution and environmental management, however, should be chief among China’s smart city investment priorities.

“The data was scattered, incomprehensible to the layperson and actually for him as well,” Zvi Lautman told Geektime in 2015. Lautman is the CMO and co-founder of BreezoMeter, an Israeli startup whose app gauges air quality and maps it for you. “We decided to make air pollution visible.”

Photo Credit: BreezoMeter

Photo Credit: BreezoMeter

They already have at least one competitor app in the Far East called Air Quality China. Other corporates like Siemens are investing a lot in pollution forecasting, hoping their data will help city managers make daily decisions about redirecting public transportation or raising tolls to discourage too many vehicles from hitting the road when air quality dips.

Tesla's supercharger network in China and Japan (screenshot, teslamotors.com)

Tesla’s supercharger network in China and Japan. Photo credit: teslamotors.com

The shift to electricity is a priority in Beijing, definitely one strategy the country is pursuing to undue vehicular and pulmonary congestion in Chinese cities. Transportation infrastructure is already superb according to Tesla CEO Elon Musk, whose company has installed hundreds of Tesla superchargers across China.

“Quite frankly China is well developed, has better highways and better trains than the United States: by far,” he said during the StartmeupHK Venture Forum in January. That might lead Kuang-Chi and co to look at Israeli electric car battery companies like Phinergy and StoreDot.

Mechanizing the dragon: a national project

Several Chinese cities are already signed with those aforementioned corporate partners. Nanjing, Shenyang, Chengdu, and Kunshan all work with IBM, which has held at least 22 forums on the subject across China.

South Renmin Road in Chengdu (image, CC BY-SA 4.0 Wwklion via Wikimedia Commons)

South Renmin Road in Chengdu. Photo credit: CC BY-SA 4.0 Wwklion / Wikimedia Commons

The big dragon already had 193 approved pilot projects in 2013 according to an MIT analysis by Yongling Li, Yanliu Lin and Stan Geertman. That report went on to say, “‘Smart city’ is regarded as one of the most important measures to carry out the slogan of [the] Central Committee of the Communist Party of China and the state council about innovation-driven development, promoting the new urbanization, and building a well-off society in an all-round way.”

China is clearly aware of the need to gather more data about its overcrowded, polluted urban centers. It has invested vast sums already. Managing that urban population and making city life more bearable will be immediate priorities for a Chinese fund solely dedicated to a Smart Megalopolis. Silicon Wadi, whose urban centers are fewer and smaller, should take note of these priorities coming from an investor like Kuang-Chi.

Featured image credit: Tang Ming Tung / Getty Images Israel

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