Google Capital, a growth-stage vehicle backed by U.S.
Internet giant Google, has made its first investment in China. The firm, along
with Chinese venture firm Lightspeed China Partners, co-led a Series C round
totaling $38 million into a Suzhou-based business called InnoLight
Technology, a manufacturer of high-speed optical transceivers that are used by
computer servers.
Google joins some of China’s largest Internet businesses,
including Baidu, Alibaba Group Holding and Tencent Holding, as a
strategic investor in Chinese startups.
Until now, Google Capital’s investments have been
centered on the U.S., with existing portfolio companies including online survey
startup SurveyMonkey and financial-services business Lending Club Corp. Today
it also announced a follow-on funding round for personal finance tools company
Credit Karma Inc. However, global investors are now vying for exposure to
Chinese technology startups in the wake of e-commerce company Alibaba’s
$25 billion initial public offering in the U.S.
Competition for Chinese technology companies is even heating
up among domestic strategic investors including Baidu, Alibaba and Tencent as
they seek to acquire shares in smaller companies to supplement their own
businesses.
InnoLight’s transceivers enable servers to communicate with
each other, by converting electrical signals created by one server into optical
signals. These optical signals are then transported along fiber-optic cables to
another server, then converted back into electrical signals.
For InnoLight, it makes sense for the Chinese company to
join with Google instead of a Chinese strategic investor, given that the U.S.
giant operates one of the largest data facilities in the world. InnoLight also
derives more than half of its revenue from the U.S. market.
InnoLight’s customers include cloud operators and
communications equipment manufacturers both in the U.S. and in China. The
company and investors wouldn’t provide customers’ names due to non-disclosure
agreements.
The new funding will be used to increase InnoLight’s
production capacity, which includes acquiring additional capacity, purchasing
equipment and hiring additional people, as well as research and development. The
investors as a group own roughly two-thirds of the company, with management and
employees owning the remaining shares.
Google Capital, formed last year, has disclosed about ten
growth-stage investments and is distinct from Google Ventures, the company’s
early-stage investment vehicle.
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