As the volatility in China stocks market continues to increase, Cocoon Networks are setting up a £500 million ($720 million) fund in London. The fund is mainly for its purse and an ambitious plan to help British startups in fields from hardware to biotechnology.
Cocoon Networks, as the new group is called, is backed by China Equity Group and Hanxin Capital, and targets startups in UK and European. Cocoon is planning to build an incubator as it’s partnering with the University of London.
John Zai, the CEO of Cocoon Networks, said that the group plans to start investing later this year. Although he didn’t reveal what companies or deal sizes have been invested, individual capitalist have already started to put money, he said.
Zai believes that China has been too fixated on the U.S. market for investing. Compared to the startups in the U.S., those in the U.K. have more reasonable valuations. There is too much money chasing every brilliant idea in Silicon Valley which lots of Chinese companies has already backed.
The other opportunity is to look for real innovation. “I’m Chinese and hate to say this but in all of the successful companies in China, the ideas are coming from Europe and the U.S. They are all trying to imitate.” said Zai. In China the valuations is quite high, the valuations in the U.K. are about a third of that in China and a fifth of that in the U.S. so far.
It also appears to be a wider trend: A surge of Chinese companies moved into London, with 28 of those committing to setting up operations in the city in the last nine months. These companies are also investing there. One notable round is from Beijing Kunlun Tech Co. investing £23 million ($34 million) into mortgage lending marketplace, Lendinvest.