Google Capital in debut China VC investment
Google's discomfort at the growing level of censorship imposed on US internet players by the Chinese authorities after 2008 saw the company withdraw from the M&A scene. There were no deals at all until last week, when Google Capital – a $300 million growth-stage VC fund launched earlier this year – made its first foray into China.
The lucky recipient was Suzhou-based optical transceiver manufacturer InnoLight Technology. Google Capital co-led a $38 million Series C round for the company alongside Lightspeed China Partners.
"We [Google and Lightspeed] are very interested in data center technology companies because cloud computing is a big trend globally and it creates demand for new data center technologies," says James Mi, managing director at Lightspeed China. Between 2003 and 2008 Mi served as Google's head of products in Asia and director of corporate development in China.
InnoLight was founded in 2008 and previously raised about $20 million from Suzhou Ventures and Acorn Ventures. The company makes high-speed optical transceivers used by computer servers. These devices are a critical component to data centers in that they allow servers to communicate with each other by converting electrical signals to optical signals - for transport through fiber-optic cables - and back again on reaching the destination.
According to Mi, more than half of InnoLight's revenue is generated from the US, with customers including top cloud computing and technology companies. That was how Google first identified the firm and it subsequently invited Lightspeed to join the round.
"There is the perception that Chinese firms often copies US technology, but InnoLight is an example of a Chinese company that has developed world-class technologies and made it successful globally," Mi explains.
In addition to strengthening the company in overseas markets, Lightspeed will focus on helping InnoLight develop with China, through selling components to cloud computing vendors as well as providing technology solutions to 4G mobile network operators. As the biggest cloud computing company in the world, Google possesses the resources and expertise to help InnoLight upgrade its technology.
"The adoption of cutting-edge technology by domestic cloud service providers such as Baidu and Alibaba still lags behind US players, but they are catching up. We are helping the company to penetrate this market," Mi says. "Meanwhile, InnoLight is a significant player in China's mobile 4G network build out, which gives it a more diverse customer base."
The US is said to account for more than 60% of the global cloud-computing industry, with a China a distant player. Of the 40 Chinese internet companies listed in the US, few are in enterprise technology. However, as cloud computing gathers pace in the country, Lightspeed thinks InnoLight is well positioned to join this number.
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