Is it really easy to raise money from Middle East?
On June 20, 2023, Chinese electric vehicle company NIO signed a share subscription agreement with Abu Dhabi investment firm CYVN Holdings. Media reports indicate that CYVN Holdings has made a strategic investment of approximately USD 1.1 billion (about 78.76 billion RMB) in NIO through a combination of directed share issuance and transfer of existing shares, acquiring a 7% stake in the company. NIO's CEO, Li Bin, stated that the company looks forward to collaborating with CYVN to expand NIO's international business in the future.
Following this substantial investment, Chinese companies and investors have once again turned their attention to the affluent Middle East region. It is understood that CYVN Holdings, a majority-owned investment firm of the United Arab Emirates' Emirate of Abu Dhabi, was established in 2022 to promote economic diversification. The firm primarily focuses on investments in the smart mobility sector.
Among Middle Eastern investment institutions, sovereign wealth funds possess a considerable accumulation of wealth. In 2023, four of the top ten sovereign wealth funds by assets under management are from the Middle East, with these funds maintaining long-term global activity. However, Middle Eastern investors are not simply "rich and naive." Fundraising and financing in the Middle East are not easy tasks. As 36kr reports, when Chinese GPs seek funding in the Middle East, significant differences and barriers exist in terms of culture, language, and personnel backgrounds, making successful fundraising a considerable challenge. An entrepreneur in the Middle East also told EqualOcean that obtaining financing from the region is not as easy as many Chinese companies imagine, with many ultimately facing rejection.
Middle Eastern investment institutions have their own logic when it comes to investing, and the intricacies of their approach may be difficult to discern in the short term. However, by examining companies that have garnered favor with Middle Eastern investors, we can gain insight into their preferences. In this article, EqualOcean will review Chinese companies that have received investments from the Middle East.
SenseTime is a well-known AI company in China, headquartered in Hong Kong, with its business covering smart living, smart automotive, smart commerce, and smart cities, and is considered one of the "AI Four Little Dragons." In 2021, SenseTime established a joint venture, SenseTime MEA, with the Saudi sovereign wealth fund Public Investment Fund (PIF). In 2022, the Saudi Artificial Intelligence Company (SCAI) and SenseTime reached a cooperation agreement, with SCAI investing 776 million Saudi riyals (about 1.429 billion RMB) in SenseTime MEA.
The Fourth Paradigm is an AI service provider headquartered in Beijing, with advanced technology in AI application fields such as healthcare, advanced manufacturing, finance, and energy. The Wall Street Journal reported that Abu Dhabi sovereign wealth fund Mubadala Investment Company (Mubadala) has been an investor in the Chinese AI company Fourth Paradigm since at least 2021.
Megvii is an AI product and service provider headquartered in Beijing and is one of the "AI Four Little Dragons." With deep learning as its core competency, Megvii Technology has a significant presence in the Internet of Things (IoT) field. In 2019, the Abu Dhabi Investment Authority (ADIA) participated in Megvii Technology's USD 750 million Series D financing round.
Hasten is an integrated biopharmaceutical company engaged in R&D, production, and commercialization, with a focus on chronic diseases, age-related diseases, and critical care. Headquartered in Hefei, the company completed a USD 315 million financing round in 2023, with the Abu Dhabi sovereign wealth fund Mubadala Investment Company (Mubadala) as one of the lead investors. According to PEDaily.cn, Mohamed Albadr, the head of Mubadala Investment Company's China office, said: "We are delighted to collaborate with C-Bridge Capital and Hasten to build a leading biopharmaceutical platform that provides high-quality, trustworthy, and accessible healthcare products for critically ill patients in China."
Established in 2015, Oricell Therapeutics is a research and development organization focusing on cancer immunotherapy drug discovery. In the USD 45 million Series B1 financing round in 2023, the Middle Eastern investor Qatar Investment Authority (QIA) participated in the investment.
Transcenta is a clinical-stage biopharmaceutical company with integrated capabilities in biopharmaceutical discovery, R&D, process development, and production, headquartered in Suzhou. In December 2020, Transcenta raised USD 105 million in a crossover financing round, with the Qatar Investment Authority (QIA) participating as a new investor.
NIO is an intelligent electric vehicle company and one of China's "new car-making forces." In 2023, it received an investment from Abu Dhabi-based CYVN Holdings.
XPeng, headquartered in Guangzhou, is an intelligent electric vehicle company and also one of China's "new car-making forces." In 2020, ahead of its IPO, the Qatar Investment Authority (QIA) and Mubadala Investment Company subscribed to USD 100 million of preferred shares in the C++ round of financing, marking an early investment in China's electric vehicle industry from the Middle East.
Human Horizons is an innovative mobility technology company focusing on future intelligent transportation industries and owns the high-end intelligent electric vehicle brand HiPhi. According to investment reports, at the 2023 China-Arab Cooperation Conference, the Saudi Investment Ministry (MISA) signed a USD 5.6 billion (RMB 400 billion) investment agreement with Human Horizons to establish a joint venture for electric vehicle R&D, manufacturing, and sales.
Geely Auto is a subsidiary of the Geely Automotive Group, mainly engaged in automotive manufacturing and sales, and has recently been transitioning to intelligent mobility. In 2023, Geely Auto announced that Geely Holdings, Renault, Saudi Aramco, and Geely Auto signed a letter of intent, with Saudi Aramco planning to invest in cash to acquire equity in the joint venture between Geely and Renault.
DiDi is a globally renowned internet-based intelligent mobility service provider. As early as 2017, DiDi received an investment from Mubadala Investment Company, marking its first direct introduction of Middle Eastern capital. DiDi has since expanded to countries and regions beyond mainland China, demonstrating strong market competitiveness.
Shein, headquartered in Guangzhou, is a Chinese cross-border e-commerce giant and a well-known unicorn company. As an international B2C fast fashion e-commerce company, Shein is beloved by consumers worldwide. In 2023, Mubadala Investment Company participated in Shein's latest round of financing.
Meituan is a famous Chinese internet technology retail platform, with its food delivery business holding a dominant position in the Chinese market. EqualOcean found that the China-UAE Investment Cooperation Fund directly participated in Meituan's investment in 2017.
Joy Spreader is China's largest performance-based self-media marketing service provider, headquartered in Beijing. Before its Hong Kong IPO, Middle Eastern Capital Investment LLC appeared on its cornerstone investor list. Capital Investment LLC is a subsidiary of the Abu Dhabi Capital Group.
VSPO is a Shanghai-based esports ecosystem company founded in 2016, focusing on esports events and pan-entertainment content production and operation. In 2023, the Saudi Public Investment Fund announced a cash investment of USD 265 million (RMB 1.8 billion) in Hero Sports VSPO through its subsidiary Savvy Games Group, becoming VSPO's largest single shareholder.
ByteDance is one of China's most renowned internet technology companies. According to IT Home, in 2023, Sheikh Tahnoon bin Zayed Al Nahyan, a member of the UAE royal family, controlled AI company G42, acquired over USD 100 million in private shares from existing investors through its investment fund 42XFund, while another fund purchased ByteDance shares at a USD 225 billion valuation.
JollyChic was once a prestigious cross-border e-commerce platform in the Middle East, ranking first in the e-commerce app download list in multiple Middle Eastern countries for an extended period. In 2019, JollyChic announced the completion of a USD 65 million C+ round of financing, with the investor being UAE tech giant G42 Group.
JD Industrial was initially a subsidiary of JD.com, focusing on industrial products. In October 2018, as the demand for professional procurement in industrial enterprises grew, JD Industrial spun off as an independent company. In 2023, JD Industrial received investments from two Middle Eastern institutions, namely the Abu Dhabi sovereign fund Mubadala Investment Company (Mubadala) and AI company G42's Abu Dhabi investment fund 42XFund.
Rongsheng Petrochemical, based in Hangzhou, is mainly engaged in the production and sales of petrochemical and chemical fiber products. In 2020, Saudi Aramco announced a strategic investment in Rongsheng Petrochemical through its subsidiary, acquiring 10% of its total share capital for RMB 24.6 billion.
Guolian Aquatic is a seafood industry company located in Zhanjiang, Guangdong, established in 2001. Its business covers the entire industry chain, including seedling breeding, feed, marine food processing, aquatic research, and domestic and international trade. According to China Economic News, in June 2023, the Saudi Sovereign Fund (PIF) announced a USD 500 million investment or financing collaboration with Guolian Aquatic.
From the above review, several characteristics can be discerned: First, the enterprises invested in by Middle Eastern investment institutions are closely related to their development vision, whether it be artificial intelligence, biopharmaceuticals, intelligent transportation, or Internet, which are all intimately connected to the diversification of the Middle Eastern economy. Secondly, the vast majority of invested enterprises are either in their ascendant phase or are well-established companies with a certain reputation within their respective industries. This refutes the so-called assertion that "Middle Eastern tycoons are foolish with abundant funds." For Chinese start-ups, obtaining investments from the Middle East is an arduous task.
In addition to primary market investments, Middle Eastern sovereign funds and other institutions have been making acquisitions in the secondary market to varying degrees. According to information from East Money, companies from diverse sectors such as HAID Group, Gree, Oriental Yuhong, Jiangshan Shares, and SRX Media have seen the presence of Middle Eastern investment institutions, such as the Kuwait Investment Authority and Abu Dhabi Investment Authority, among their top ten circulating shareholders. However, Bao Fan, chairman and CEO of China Renaissance Group, stated in an interview with 36kr that Middle Eastern investment in China is evidently under-allocated. According to China Renaissance's research, the majority of investments in China from the entire Middle East, particularly sovereign funds, are below a 5% allocation. In the future, Middle Eastern investment institutions will play an increasingly significant role in Chinese enterprises within the investment domain.