Chinese Technology Investment in the West

We believe that there will be a significant trend over the coming decades of increasing investment by Chinese (and other developing country) investors in Western technology companies. This view is based on two straightforward observations:

• The ongoing transformation of China from a low-cost manufacturing economy to a developed economy requires access to innovative technology -- Although this point may seem obvious, it is important to observe that much of Chinese success in technology business has flowed from imitation of Western technology. Global leadership for Chinese technology companies will require increasing innovation. This is not to suggest that Chinese companies do not innovate, merely that there are reasons for innovation to increase.

• Conditions for technology innovation (e.g. technology clusters, universities, culture) remain much better in the West (including Europe) than in China or the rest of Asia -- For a variety of reasons, including historical and cultural ones, the advantages for innovation in the West are unlikely to dissipate quickly.

At Lily Innovation Advisors, we are looking for ways to benefit from this trend. We have recently been involved in several China-related technology projects. Our current focus is on the idea of an investment fund with both Chinese (and other Asian) and European investment, to focus on investments in European technology companies with technologies of use in the Chinese market and significant growth potential globally.

Maury Shenk, Lily Innovation Advisors