Smart Tech Innovation Fund | Michael Li

And also they have the customer channels. So if a small startup has an interesting product, not only the big corporates have the factory to fill this, to scale up, they also have the distribution to help you sell the products.

Yes, that is, that is very true as well. That's, you know, during the process of go-to-scale, you really need to have the platform. You have the, you You need to have the expertise, you also have the channels and the partnerships that can help you as well.

I would say what you guys did as far as structuring your venture fund, it's a major breakthrough because venture funds used to be financial investors put money and give it to the funds, and the funds then give it to the portfolio companies, and the GPs would help the portfolio companies. So what you guys did was you bring in corporate LPs with resources and then you link them up with the portfolio companies and sort of have them work with each other. Because GPs by ourselves have limited resources.

Exactly.

But if you put in the BP, the, you know, the Applied Materials, they have, you know, tens of thousands, hundreds of thousands of sales force. They could then potentially work with the portfolio companies.

Yeah, theoretically, yes, that's absolutely true. At the practical level, you really also need to put in a lot of effort.

Not freelance.

It does not just happen automatically, because those guys are really busy as well. So the way we do it is that we have regular strategic LP sessions monthly. So every month we sit together, They view us as a channel for deal sourcing, right?

Yeah.

We are down ground in China. We see about 1,000 companies a year. So, you know, that's a valuable channel for them as well. So every month we would have the brainstorming session, see, you know, based on the particular sectors that our strategic LP are in, then we can tailor-made shortlist to say, for example, in the case of APB, say, you guys are in robotics and power electronics industries. So here are the robotics and power electronics deals that we've seen this month. Whether you have an interest in the company, what do you see, you have seen similar companies, what do you see the industry in general, and all that. So It's a very useful brainstorming session. And every quarter we have a workshop with a particular strategic LP. Say, you guys are, for example, BP. They might be interested in areas of, for example, digital analyze of trading data and all that. So for, on that particular topic, we would invite a lot of relevant industrial partners and government officials and our strategic LPs together and sit down and have a workshop. And then every time we have a pretty useful takeaway, you know, will help us to identify more relevant deals down the road in the future.

And I think sometimes you may be surprised when you think of BP as a petroleum company, you actually don't know they might be interested in things like consumer behavior. So maybe talk a little bit about the latest fund. Is it the Smart Tech Fund?

Yeah, yeah, we are, we are also evolving. So we call ourselves sustainable investor. So early this year, we have to launch an early-stage fund called Smart Tech Innovation Fund. The definition of smart tech by us is areas including IoT, artificial intelligence, robotics, EV cars, VR, AR, and all that. So you guys might be curious why you guys are doing this and what's your expertise. I think the— if you look at it this way, let's say take IoT as an example. It's not just an extension of internet. It's actually a much bigger— it's a much bigger wave than internet. And also it's much more complicated than internet. You know, it's not just purely software-based. It also involves lots of hardware technologies. We actually— we came a long way from investing in hard science and in hardware devices and all that. So we have a pretty rich experience. So the other thesis is, I think, China, as you know, back to your original question, China was copying a lot of ideas from the US. But now, as the market grows, there's a bunch of more and more mature and experienced entrepreneurs. Emerge. And they, you know, China is actually gradually leading innovation in certain areas. It's probably the most notable area is the, you know, smart hardware sectors. You guys have probably heard of a company called DJI based in Shenzhen. It's a very interesting phenomenon.

That's the largest drone company in the world, right?

It's the largest drone company in the world, and it's probably at the moment the most advanced drone company, given their resources they have been able to attract. And they're putting a lot of money into more advanced research. I think they're probably at the cutting edge of the drone industry. DJI is not the only company. we are seeing a bunch of similar companies are emerging which are leading. I think the reason is it's not by accident. It's actually because China over the years have developed a really, really sophisticated supply chain infrastructure.

Mm-hm.

So you've seen manufacturing base are migrating. Probably one of the reasons that you see new type of startup companies are emerging. So that's our thesis, is we want to invest globally, not only in China. But with one thesis in mind, we want to see the technology can be globalized. Internet services are really local business. You invest in US, it's a US business. you don't necessarily be able to expand into other countries without any difficulties.

Right.

But hardware technologies, usually they are applicable globally. So if you're doing those things, IoT, let's say sensor on a device and all that, most likely, you know, those sensors can be applied anywhere in other countries as well. And China, given its mature supply chain system, ecosystem, so you can count on that they can be a very low-cost and efficient, and nowadays I can even say reasonable quality platform. So that's why I think our thesis is we want to invest in US, in Israel. Those, those are the countries where innovation are very strong. You see a lot of impressive entrepreneurs based.