For some years, we have been monitoring the growing number of examples of Asian and western organizations coming together to address environmental challenges for mutual economic benefit. There is a definite uptick in the activity levels in the past 12-18 months.
Here is the latest example, and some interview-style thoughts from the CEO on tackling the China market as a small foreign innovation company.
The Deal. Today, NexSteppe, founded in 2010 and twice a Global Cleantech 100 company, announced a new partnership in China with the soil remediation subsidiary of China’s leading seed company, Longping Hi-Tech. Under this agreement, Longping will provide exclusive distribution, marketing and sales for NexSteppe’s Palo Alto biomass sorghum hybrids in China for the bioremediation and biopower markets.
The Problem. The Chinese government has measured 19 percent of China’s arable land to be polluted, with the most common inorganic pollutants being the heavy metals cadmium, arsenic and nickel. This is an environmental and human health challenge of huge importance.
The Solution. NexSteppe’s biomass sorghums, with their robust root systems and fast growth, will extract heavy metals from the soil while also providing a cost-effective, low-moisture biomass feedstock for biopower. These optimized sorghum hybrids offer the opportunity to continue using contaminated land while the soil is remediated back to safe levels for healthy food and feed supply in China.
I recently had the opportunity to catch up with CEO Anna Rath to reflect on her “China journey” to this point, in the spirit of teasing out some thoughts for others on how to leverage the “cleantech-friendly” conditions of China.
Richard (CTG): Going back to the formation of the company in 2010, when did you imagine that China might become a significant part – if you did at all?
Anna (NexSteppe): I always believed NexSteppe would be a global company, and given the scale of the Chinese economy, that definitely included a presence in China. We also knew, though, that China would present a number of challenges, from the usual ones of any company trying to do business in a foreign country to very specific ones of land availability, farm size, supply chain mechanization, etc. It was really as we began to better understand not just the great need in China for biopower and biofuels, but also the nature and magnitude of the issues with contaminated land, that the opportunity really came into focus. The latter was actually something we learned about through a meeting with the World Bank on a completely different subject, so it underscores the general importance for start-up companies of marrying a well-developed strategy with the opportunism that is often required to achieve it.
Richard: How did you get the first foothold into the Chinese market?
Anna: I would describe this as three steps. The first was inbound interest from Chinese companies and the drivers behind that interest that persuaded us it was time to begin focusing on the country. The second was your company’s 2013 China Tour, Richard, and meetings scheduled around that trip that began to give us a view of what it would be like to do business in China and established some of the key connections to enable us to do so. The third was getting a team set up in Asia and specifically in China, which gave us everything from focused bandwidth to credibility to local knowledge of industry and policy to language skills.
Richard: How different was your entry point/strategy from what you imagined your China strategy would be?
Anna: On some level, the strategy ended up being exactly as we expected – focused initially on the existing biopower infrastructure and aggressive plans for expansion, and leveraging a strong local partner. However, the pairing of land remediation with the bioeconomy opportunities, and the opportunity to use this angle to overcome land availability concerns, was a significant shift as this issue only became public in 2014.
Richard: How is China different than other overseas markets you do business in?
Anna: Scale and speed. There are plenty of similarities between China and other major emerging markets where we operate. The clear differences, though, are (1) the scale of the need for renewable energy, both to meet growing energy demand and to address environmental challenges ranging from air pollution to soil contamination, and (2) the speed and aggressiveness with which issues, once identified, are addressed. As mentioned, the issue of contaminated arable land was made public only in 2014, and yet, as part of the most recent five year plan, there is an aim to address 95% of this land by 2020.
Richard: What are the top suggestions you have for other small companies that are considering taking on the “China opportunity?”
Anna: Be open-minded. Be persistent. And be patient. It was about four years from our first in-country product trials to our first sale, so don’t expect immediate results – it’s a journey. On the other hand, the focus on remediation first came into our thinking only 18 months ago, but the momentum behind it has been so strong that it very quickly re-shaped our strategy and resulted in this exciting partnership we announced today.
My personal reflection on the NexSteppe case study would be, allying it to others I have been close to, that the key takeaway for all companies to take on board is Anna’s comment about scale and speed. All small companies want and need big momentum shifts in their global growth, especially if venture-backed. China can bring such decisive shifts in momentum to the right “cleantech” companies, because of the pace at which things can happen, and because of the pace at which they need to happen. Politics and economics are well-aligned.
Putting China off until next year or the year after, and focusing on markets you are more comfortable in may have hidden costs. If you think China will be important to your growth, carpe diem. Your competitors may not be prevaricating.
CTG is accepting applications for its 5th Cleantech Tour of China on March 20-23 2017 to help more companies and investors meet some of the right people to get your China plans moving.