China’s Smog Triggers Investment in Air Pollution Mitigation
During the opening keynote at Cleantech Forum San Francisco 2014, Cleantech Group CEO, Sheeraz Haji, stepped on the stage while wearing a facemask commonly seen in China. Attendees immediately realized his reference to the infamous air pollution problem in China. According to China’s Development Research Center of the State Council, smoggy weather costs China approximately $100 billion a year. To mitigate such loss, Chinese government plans to invest $290 billion for air pollution treatment technologies from 2013 to 2017, said Xiaoqing Wu, Vice-Minister of the China’s Ministry of Environmental Protection. These investments and mandates by the government will create a huge market demand for innovating technologies within the Air sector.
Per chart below, desirable investment environment created by the urgent needs for air pollution mitigation technologies resulted in a peak in investments last year. According to Cleantech Group’s i3 Platform, deal count in the Air sector rose from just two deals to ten deals between 2012 and 2013. We saw leading global ventures such as Kleiner Perkins Caufield & Byers (KPCB), Qualcomm Ventures, and Sequoia Capital, along with local ventures such as Qiming Venture Partners and TusPark Ventures actively investing in the Air sector in China. KPCB has invested $50 million to China’s air purifier company, Beijing Yadu Science & Technology, and another $3 million growth equity round to China’s flue gas monitor and treatment company, Universtar. Another notable deal came from Qualcomm and Sequoia, who co-invested $300,000 to Broadlink for their smart indoor air monitor that is able to connect other smart home devices.
The chart above also draws noteworthy correlation between venture investments and government policy in recent years. The first investment spike occurred in 2007, when Chinese government injected $17 billion into environmental cleanup for the Beijing Olympics. During this time, industrial and automobile-based air treatment companies attracted significant venture investments. Xiamen Savings Environmental alone has received two rounds of venture investments worth $4.3 million in total. But considered this is more of a short-term remedial act, the interest of investment fell back rapidly after the Beijing Olympics. The next decent peak was during Kyoto Protocol’s first commitment period when world’s carbon credit market was starting to form. Though, as a developing country, China was free of commitment during this period. Nevertheless, the option of killing two birds with one stone – earning Green GDP while also improving the environment – makes China the largest carbon trader in the world. Then, starting in 2011, the last sharp increase is due to the outbreak of smoggy weather. As mentioned earlier, deal count in the air market soared in 2013. Moreover, seven out of ten investments in 2013 were for residential air monitor/filter startup companies.
To learn more about China’s cleantech market, attend our Cleantech Tour of China 2014. In November 2-7 2014, we will take our 4th annual tour group to China for a week of meetings and network-building.