Archive for the ‘China’ Category

Wind and Solar No Longer Shine for Clean-Tech Investors in China

by Sonja Cheung

It isn’t always the natural order to go from big to small, but that’s what some venture and private equity investors are doing in the clean-technology space in China–moving away from investing in large solar and wind power deals, and instead seeing better value in downstream businesses offering services, software and solutions, say industry experts.

The amount invested into Chinese solar and wind venture-backed deals has traditionally surpassed other segments in the clean-technology space, including energy storage and recycling. For example, in 2006, solar and wind deals together totalled $176 million, far outpacing other sub sectors including energy efficiency at $8.6 million, and waste-focused transactions at $11 million, according to data provided by VentureSource, an industry tracker owned by VentureWire publisher Dow Jones & Co .

However, in the last couple of years that has U-turned. Last year, $78 million was invested into energy efficiency product venture-backed companies, compared with $26 million into solar-focused deals, and $67 million into wind-based transactions. Likewise in 2010, energy efficiency venture-backed companies saw $220 million, far outshining the $58 million that went into solar deals, while wind transactions saw no funding at all, data show.

“Clean technology is truly shifting from large, money-bleeding projects…to smaller, but profitable and scalable technological innovations applicable in clean-tech,” said Tony Luh, general partner and greater China president at Westly Group, a clean-tech venture capital firm that also has offices in Menlo Park, Calif.

Recent overcapacity and over-investment into solar and wind projects in China have prompted investors to shun these sectors, said Mr. Luh, adding that U.S.-based solar systems manufacturer Solyndra ‘s bankruptcy filing last year has also muddied the waters. Solyndra had received backing from the likes of Redpoint Ventures , RockPort Capital Partners and Argonaut Private Equity.

In fact, Chinese clean-tech companies that provide services, solutions and software have been under-invested in, deemed too small an investment for larger international private equity players, while not in a suitable sector for many local Chinese firms, said Niklas Ponnert, chief financial officer at Origo Partners PLC , a London-listed investment company that targets clean-tech and natural resources-based companies in China.

Most domestic general partners are focused on investing in consumer-related companies that are “easier to understand” and are generally expected to complete an initial public offering within a couple of years, he said. While, clean-tech investment involves a “bit more risk, is a bit more early stage, and companies take longer to exit.” Origo is targeting an internal rate of return of 20% to 25% on its investments, Mr. Ponnert said.

He cited Origo’s portfolio company, Unipower Battery Ltd ., as an example of a clean-technology company providing a “solution,” as the Beijing-based business plans to supply material and batteries to electric vehicles, which the Chinese government is promoting the use of. He added that Origo had deemed solar “past the top of its cycle” when considering investments in the mainland.

Overall, investment into the whole clean-technology sector took a hit last year, almost halving compared with 2010, VentureSource data show, with $368 million worth of venture capital backing going into clean-tech in 2011, compared with $634 million a year earlier. This year, second quarter clean-tech investment totalled $39 million, outpaced by the first quarter’s $53 million.

Westley’s Mr. Luh attributes the year-on-year fall to generally poor investor sentiment on the back of concerns about the ongoing debt crisis in Europe, which has reduced other governments’ ability to support clean tech initiatives. The Chinese government earlier this year said it aimed to pour 10 trillion yuan into developing the industry as the country battles increasing pollution.

In addition, Christiaan Kaptein, head of private equity Asia at SAM and Robeco, which focuses on sustainable investment, said the domestic Shanghai stock exchange fell sharply in 2011, but private company valuations failed to follow suit, so “investors may have been on the sidelines in the expectation that prices would adjust.”

Looking forward, Mr. Kaptein said that his firm likes sectors including energy efficiency and sustainable agriculture, while sweet spots for Mr.Luh include energy storage and light-emitting diodes.

Write to SonjaCheung at Sonja.Cheung@dowjones.com. Follow her on Twitter at @SonjaCheung

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ugust 9, 2012, 9:52 AM

$10M Would Be Seventh Heaven for China’s AngelVest

By Sonja Cheung

Shanghai-based AngelVest is targeting up to $10 million for its inaugural fund that will invest in China-based start ups, said co-founder David Chen.

Having “literally” just completed the legal documents for AngelVest Fund LP, the firm expects to close the fund in the next 12 to 18 months, with commitments largely from family offices based in Hong Kong, Singapore and the U.S., he said.

Read the full story here.

Traditionally, AngelVest members have clubbed together to invest in portfolio companies that include mobile business SmarTots and foreign language website iTalki.com. The latter recently closed a second round of angel investment that was partly backed by AngelVest, said Kevin Chen, co-founder of the Shanghai-based business. It will likely tap the venture market for a $2 million to $3 million Series A round in the first half of 2013, he added, declining to disclose the size of the recent angel round.

AngelVest invests $250,000 per company, and has no immediate intentions of increasing that amount and graduating to venture capital-size rounds, said David Chen.  “We’re sticking to our guns, if anything, we’d look to raise multiple funds in different cities,” he added, noting that AngelVest is considering setting up a group for angel investors based around the south of China in Guangzhou and Shenzhen, as well as Hong Kong.

Write to Sonja Cheung at Sonja.Cheung@dowjones.com. Follow her on Twitter at @SonjaCheung

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China Is Now Stimulating All Over The Place

Joe Weisenthal | Jul. 15, 2012
Shanghai street

A Hundred Books, a Thousand Miles

A prediction made by many China observers early in the year went like this: The Chinese economy would slow through the first half, then Beijing would step on the gas pedal and numbers would start to rebound.The first parts of the prediction are coming true.

The economy has slowed through the first half of the year. The latest GDP numbers were the slowest since the crisis.

And the gas pedal is being pumped.

China has cut interest rates aggressively.

State direct stimulus spending is starting to crank up again.

And now, according to FT, China has just cut taxes by 50% on foreign entities investing directly in China.

The full on press to lift the economy off of a hard landing is on.

Now we’ll see if the numbers rebound.


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