Israel-based venture capital firm and technology incubator Kinrot Ventures (client registration required) recently announced it was acquired by the Hong Kong-based engineering firm Hutchinson Water. Kinrot provides seed capital between $500,000 and $1 million for water-related ventures, and also provides laboratories and operational/administrative assistance. Israel is well known as one of the primary innovation hubs for water technologies. Situated in a water-scarce region, the Israeli government invested resources into water technologies to secure its freshwater supply but also to stimulate economic growth. Israeli government as well as private entities provided capital for Kinrot. Hutchinson announced that it may invest up to $25 million into Kinrot within the next eight years.
Lux actively follows several of Kinrot’s portfolio companies, including Hydrospin (client registration required) and Diffusaire (client registration required). Despite Kinrot’s diverse water technology portfolio and the hands-on support given to each company, there have been none of the lucrative exits that investors of venture funds expect. When we last spoke with the Kinrot Ventures CEO Assaf Barne, in January 2011, Lux estimated that Kinrot had about $7.5 million in assets remaining. It’s possible that investors became impatient with the lack of return or that the fund was simply out of cash. Regardless, it is not surprising that a Chinese company acquired the technology incubator. Of the $5 billion of trade between Israel and China, about half is water- and agriculture-related (client registration required). For Kinrot’s portfolio companies, Hutchinson provides a gateway to the large and growing Chinese water markets. Expect to see one or more of these portfolio companies expedited to commercialization specifically in the Chinese market.