One Bed, Two Dreams: The Critical Lesson From Our 2012 China Cleantech Tour

The stereotypical view of China for a western technology company has typically been, and still is for many: this is a place where I can source low-cost goods, but this is also a place where I could lose my shirt – and/or my cherished Intellectual Property (IP).

In cleantech, particularly, an alternative and more sophisticated view is emerging. That China is actually a potentially huge market for the right sustainable products and a source of capital, and that it is a place that has the conditions right now (and for some years to come) to help play a key global accelerator role for innovation, to help good foreign technology companies through the so-called ‘Valley of Death’ in which so many companies are caught right now. And that this could work well for the company CEO that has the technology solution that provides a strong match to the needs of China’s 12th 5-year plan’s and the identified strategic technology areas – so long as they invest the necessary time in finding the right bed partner.

There is a Chinese saying – one bed, two dreams – that continually comes up in my frequent trips to China and did so in the two annual China Cleantech Tour weeks that I arranged in 2011 and 2012. This saying, as I prepare for our third tour in November 2013, provides me, at least, with one of the most interesting reflections on how different an approach and how different a mentality is needed to be successful in China.

This phrase is used to describe the situation where you are in partnership but have misunderstood what each other wants from it. Something that can easily happen in an unfamiliar business ecosystem like China – and will certainly happen to the foreign company that does not invest the necessary time in partner diligence and jumps at the first deal being thrown at them.

In November 2012, my tour group of young western clean technology companies and investors with relevant portfolio companies had the pleasure of meeting Baosteel and LanzaTech (winner of the 2011 Global Cleantech 100 Asia-Pacific Company of the Year) at the offices of Qiming Venture Partners (an investor in LanzaTech) to discuss this case study of a foreign technology company creating a JV with a large Chinese SOE, that has proven (to date at least) an incredible accelerator of its global plans.

They started talking in 2010 and before the end of 2012 the demo plant had not only been approved and constructed, but the demo had successfully over-achieved on its milestone targets. This pace of progress is un-imagineable happening in the West. And at a cost of probably 3-4 times less than it would have been in, say, Europe. Three years ago, entering China was only a plan for LanzaTech. Today, this waste-to-energy company, by proving out its technology in China with a SOE, has been able to not only establish new Chinese partners in the steel industry but proving the technology in China has had the knock-on effect of accelerating growth and key partnerships elsewhere (e.g. in Malaysia and with Petronas) and of unlocking VC investments and setting it on a path towards a probable future IPO of the parent company.

In speaking the week before last to Jennifer Holmgren, LanzaTech’s CEO, and adding her thoughts to the hundreds I have amassed in my time in China over the last 3 years, it seems to me that that the stereotypical obsession with IP protection in China is overdone and probably leads to some young foreign cleantech companies risk-managing themselves inappropriately by denying themselves the possibility of getting a “win/win” from the very particular conditions that lead to China having appetite for foreign clean technology innovations right now.

“The opportunity to get to scale outweighed the possibility of IP loss” was how Jennifer put it. She put her faith and time into worrying about the bed-partner and structuring that correctly to incentivize both sides and to disincentive IP leakage, and into ensuring her company was about to jump into bed with someone sharing the same vision.

Only this week, this viewpoint was further corroborated by Matthew Nordan’s interesting blog-piece, 5 lessons learned from bringing cleantech to China, based on George Miller’s survey work on 15 other cleantech companies’ experiences in going to China.

How do we encourage foreign clean technology CEO’s to be braver and to approach China more with a “how do I leverage the China opportunity?” rather than the stereotypically defensive and fear-ridden approach.

Make a start today and apply to join Cleantech Group’s 3rd annual tour to China, November 3-8 2013, in partnership with Idinvest Partners, Silicon Valley Bank and Tsing Capital. It is an intense week of meetings, seminars and networking to help a select group of young western clean technology companies and investors with relevant portfolio companies (1) significantly increase their understanding of the China challenge and the China opportunity; (2) meaningfully progress their “go to China” market entry and investment strategy; (3) accelerate their acquisition of valuable contacts and insights; and (4) expose their companies to a group of Chinese industrials, entrepreneurs and investors (collectively best thought of as “China Cleantech insiders”)

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