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Clean-Tech Investors Lean On China For Capital Support

Clean-Tech Investors Lean On China For Capital, Policy Support
U.S. venture capital investors in new energy technologies are beginning to groom their portfolio companies for increased business in China, given favorable government policies and more availability of capital.
Many U.S. clean technology companies already rely on Chinese manufacturers for their component parts. Now, investors said, U.S. companies are turning to China for capital as well.
“The funding crunch in the U.S. is really severe,” said Jiang Xiaodong, a managing director with New Enterprise Associates and head of the firm’s operations in China. “And a lot of the Chinese companies that are listed on the SME [board of the Shenzhen Stock Exchange] exchange and on ChiNext raised a lot of money and now they want to spend it in a way that gives them access to technology and future growth opportunities.”
These companies are beginning to look at acquisition and partnership opportunities, and that presents opportunities for venture-backed companies, investors said.
Jiang said that NEA was already discussing potential joint venture opportunities with Chinese corporations and that other firms were also pursuing a similar strategy.
“There are two issues for start-up companies,” said Melissa Guzy, a managing director with VantagePoint Venture Partners, based in Hong Kong and head of the firm’s Asia strategy. “The first one is to recognize that there may be a market for [U.S.] technology abroad that might be more attractive than the market at home. The second issue is partnering and realizing that [U.S. companies] have to have a partner and they won’t control everything in the process.”
Some companies have already made the jump to China. Electric vehicle manufacturer Coda Automotive Inc. traveled a long way from its Santa Monica, Calif., headquarters to ink its global joint venture with Tianjin, China-based Tianjin Lishen Battery Joint-Stock Co. in 2009. Lishen and Coda created a company to manufacture the lithium-ion battery systems for Coda’s five-passenger sedan.
Earlier this year, Tucker, Ga.-based Coaltek Inc. partnered with Guangdong Yi Jian Investment Co. to build a 10 million-metric-ton per year coal-treatment facility, which uses the company’s technology to turn low-grade coal into a higher burning, more powerful and less-polluting fuel. They’re building a plant together in Inner Mongolia that will ultimately cost $250 million.
Coaltek’s investors see similar opportunities with other companies in their portfolio. “We’re looking at things that have been developed [in the U.S.], but are not really ramping because of the availability of capital,” said Michel J. Maloof III, a principal with Braemar Energy Ventures, which has been an investor in Coaltek since the company’s first round.
China is also a draw to U.S. venture capitalists thanks to diverging policies on alternative energy, with China bulking up its plans to subsidize alternative energy and efficiency while the U.S. has proven to be less committed.
In late July, China said that it would spend CNY5 trillion ($738 billion) on new energy technologies and carbon-dioxide emission reduction measures over the next decade. Reports from Chinese government media also said that the country would include a carbon-trading mechanism in its 12th five-year plan.
The U.S. government has allocated about $100 billion for loan guarantees to renewable energy, including nuclear power. The Department of Energy also has $36.7 billion available to fund grants and tax incentives for energy efficient and environmentally friendly technologies.
By Jonathan Shieber