The map of European startups financed by China

At least 36 innovative companies have received funds from the Dragon. The most active investor is the tech giant Tencent, fintech and gaming the most funded sectors

Tencent (Getty Images) A ​​German digital bank. A British manufacturer of surgical robots. A Swedish platform for medical advice. A French video game developer. To unite these companies there are at least three elements. They are European. They are startups. And they have all received investment from Tencent, one of China's leading tech multinationals. His is Wechat, the super app that in China is used not only for texting, but also for paying, exchanging business cards and for dozens of other daily activities. The Shenzhen giant, led by president, founder and CEO Ma Huateng (aka Pony Ma), has become an active investor on the European technology scene in recent years. N26 (the new German bank), the healthcare robot startup Cmr Surgical, the Doktorse platform in Stockholm and the French gaming house Voodoo are just some of the boxes on which Tencent has staked its chips.

By analyzing information from specialized databases such as Crunchbase, reports from funds such as Gp Bullhound, research and press articles, Wired has tried to map the main Chinese investments in European startups. Since 2015 there have been at least 36 rounds (in which therefore even more operators may have participated) and acquisitions, but it is a downward estimate, as industry analysts confirm, because a lot of investments are not advertised or take place through vehicles that mask the real provenance of the funds.

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Tencent is the protagonist

However, this is a starting point for identifying the most important operations (Wired will periodically update the database, at the bottom of the article it is explained how). Tencent takes the lion's share, with 20 investments. From Italian fintech Satispay to Lilium, which in Wessling, Bavaria, develops an electric single-seat aircraft. From GoStudent, an Austrian platform that connects students and tutors of all subjects, to the Dutch Bux, which offers a channel for exchanging shares and ETFs at no cost.

In 2021, the Chinese digital champion pressed his foot on the accelerator: fifteen investments from January to August. For Rebecca Arcesati, an analyst at the Mercator Institute for China studies (Merics) in Berlin, that of Tencent is a “special case. The company has devoted itself to real shopping in the last year and a half ". However, Arcesati recalls, "the interest in Europe is not new anyway: think of the acquisition of a majority stake in Supercell (Finnish mobile gaming company, ed) in 2019, which followed the previous investment in 2016 through a consortium led by Tencent itself ”.

In addition to Tencent, ecommerce giant Alibaba and its financial arm Ant Financial have moved to Europe; the Chinese anti-Uber Didi Chuxing; NetEase, another giant of online services. But also Fosun, a conglomerate which, among other things, owns the Club Med chain of tourist resorts; the Sinopec oil group; the tycoon Li Ka-shing of Ck Hutchinson (the holding company of Wind-Tre) with his Horizons Ventures; former president of Google China, Lee Kai-fu, with Sinovation Ventures.



Tencent beats everyone

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Fintech and gaming drive spending

In general, fintech and gaming are the two sectors that have attracted the most the attention of Chinese investors. "They are absolutely the two leading sectors", acknowledges Alessia Amighini, economist and co-head of the Asia Center of the Institute for International Political Studies (ISPI). For Arcesati, "the focus mainly reflects the competitive advantage of the most active Chinese players in the European ecosystem, such as Tencent", as recently told by Politico. And she adds: “Although we see a growing activity by Chinese venture capital funds in Europe in recent years, the Chinese internet giants have made significant investments, in line with their business strategies. Gaming, for example, contributed to almost half of Tencent's turnover in 2020 ”.

Fintech is the other sector in which the Dragon champions have achieved an important competitive advantage and Europe offers opportunities. “These are clear global expansion strategies that bring both economic returns, knowledge and gradual market penetration”, says Arcesati.



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The Dragon's strategy

In general, Beijing is hungry for innovation. "Although most of these investments respond to purely commercial logic, there is certainly a strong push from the Chinese government to acquire European technologies in strategic sectors - recalls Arcesati - such as those listed in the Made in China 2025 plan". See under robotics, artificial intelligence, industry 4.0, electric cars, renewable energy and the environment. Happiness Capital, the financial arm of the food group Lkk Health Products Group, has bet on the French Ynsect, which wants to breed insects for human consumption.

In addition to private individuals, the government itself is moving, with exchange and matchmaking programs, incubators, technology parks and accelerators. Thus, while Ant Financial and Fosun open incubators in Germany, according to research by the Indian study center Orf, so does "Tus-Holdings, a giant that belongs to the science and technology park of Tsinghua University and controls numerous science parks and incubators around the world. It is building one in Brussels to attract startups in innovative sectors, from new materials to artificial intelligence ", explains Arcesati.

In general, according to the quarterly reports of the Gp Bullhound investment fund, Asian capitals, from Singapore to India, from Japan to Korea, look to Europe with interest. Between April and June, 52 technology companies from the old continent raised $ 2.6 billion in investments from Asian counterparts. The protagonist, ça va sans dire, is Tencent, which has scouted at an even faster pace than the largest technology investment fund in the world: the Vision Fund of Japanese Softbank.


Europe

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Security issue

There are two unknowns about the future of Chinese investments in Europe. The first concerns the control for security reasons. “In October 2020, when the European regulation on investment screening formally entered into force, 15 of the 27 Member States had a regime, while others are developing one - says Arcesati -. In general, several countries monitor investments by non-European players in sectors with high technological intensity ". To close the investment in Satispay, for example, Tencent had to wait for the traffic light to see the Italian government, which arrived in February.

Germany is the first destination targeted by investors of the former Celestial Empire (from zero in startups in 2016 to 300 million in 2018, according to Orf). As Arcesati recalls, in 2021 “it modified and extended its control regime to protect critical technologies, such as artificial intelligence and aerospace. However, there is a "de minimis" rule aimed at facilitating the financing rounds in startups. Acquisitions of less than 20 percent of the voting rights are exempt from the notification obligation unless the company in question operates in particularly sensitive sectors, such as the defense sector ".

For Amighini the mechanism does not risk not standing up: “We are at the level of guidelines, of suggestions, but it is not a policy”. The economist thinks about the recent case of Alpi Aviation, a Friulian drone company and supplier of the Italian defense, which ended up under Chinese control in 2018 without having obtained the green light of the golden power regime, as told by Formiche. Now the government and parliament headlights have come on but now the oxen have escaped from the fence.

In general, according to Arcesati, it is necessary to ask "whether long-term risks are adequately taken into consideration by the current legislation, in a context in which the Chinese government aims at the domination of digital technologies such as artificial intelligence , big data and the internet of things and encourages investments abroad ".

And he adds: "There are certainly potential risks for the national and economic security of Europe, from access by Chinese companies to huge amounts of data to the potential loss of technological competitiveness. Balancing these considerations with the need to preserve opportunities for European startups, which obviously need capital and channels to be able to expand into global markets, is a complex challenge that European governments will face ever more regularly ”.

The squeeze on big tech

The second unknown factor concerns the squeeze on big tech in the motherland and the consequences on the maneuvers of these giants. "It is ferocious compared to what these companies thought they were doing until recently in terms of activities and revenues, but China remains a huge market: the margin is reduced but the prospects do not change", analyzes Amighini. If at home Beijing wants to put an end to distortions of competition and privacy, abroad it lets loose.

"Acquisitions or equity investments in foreign companies in the digital economy are viewed favorably and align well with Beijing's objectives in the geopolitics of technology", explains Arcesati, who recalls a Chinese government document published in the summer with the which encourages investments abroad in the digital economy. The idea is to create ecosystems and value chains increasingly dominated by China, acquire technologies from the most advanced economies and shape the standards of the future.

[This piece is the first in a series of periodic updates of Chinese investments in European startups. You can contribute by reporting transactions through social media and editorial channels or through WiredLeaks if you have sensitive material to submit to our attention]


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