Tuesday, September 15, 2009

How Cleantech Investing Is Different In China

From the Wall Street Journal's Venture Capital Dispatch blog:
Venture investors in China’s clean-technology industry are looking at new investment models as fundamental differences appear between the U.S. and Chinese markets.

While U.S. investors pursue new technologies, investors in China are looking for later stage investments with more mature technologies that can be applied in new markets. Investors said that in China, the structure of the power and utility industries mean distribution partners are necessary to bring the technologies to market.

Bringing in a partner with distribution channels can make a major difference for a cleantech company, but that may involve the investors giving up some of their equity.

“The model has to be instead of us owning 40% of a company at the beginning, maybe you sell 20% to the distribution partner,” said Gary Rieschel, founder and managing director of Shanghai-based venture firm Qiming Venture Partners. “The venture community has to realize that we are going to have to give a little more away on the front end to have success on the back end.”

Rieschel emphasized that investment in Chinese cleantech companies differs from the investment models venture capitalists are accustomed to in the U.S. and Europe.

Rather than focus on research-heavy technology projects, investments in Asia tend to be more around execution, distribution and business development, he said. China’s research and development centers are coming up with new technologies, but innovation still lags....MORE