For a start-up to succeed, it needs a well defined map of the world. That map needs to be as distorted as the famous “New Yorker’s View of the World from 9th Avenue.” This cartoon portrays a map of the world beyond the Hudson River that is a barren landscape marked only by Utah and Las Vegas before a tiny Los Angeles lies at the edge of the Pacific Ocean. China, Japan and Russia appear as sand dunes that mark the far edges of the world. Similarly, water tech companies have to see the world not only in terms of where water is scarce, but also where customers will pay a premium for advanced technologies. They need to define their view of the world based on where new technology can gain momentum.
China is a central issue for water tech growth companies. It is set to be the epicenter of water innovation.
For decades, China has been using up its water at an unsustainable rate. 28,000 of its rivers have disappeared since the 1990s. Only half the water sources in cities are safe to drink. More than half the groundwater in the north China plain cannot be used for industry, while seven-tenths is unfit for human contact. China’s Twelfth 5-Year Plan includes ¥ 430 Billion or US$71.1 B in investment in water management.
While China’s water crisis might make it the most promising market for water, launching a water tech solution in China can ruin its value. On Wednesday, the Artemis CEO Forum tackled the China market opportunity in its inaugural session.
Dr. Xiang Wang, Orrick’s lead partner of China-focused intellectual property practice, spoke to the forum about how tech companies manage IP protection in China. Wang stated that IP protection is as much a business operations issue as a legal issue. “If you think that your IP hasn’t been copied, either your product isn’t very valuable or you just don’t know that it is being replicated,” Wang noted.
Despite the risk, China is a clear priority for the members of the CEO Forum. While it isn’t a major focus today, most of the eleven forum members surveyed see China as critical five years from now.
“How important will China be for your company in five years?”
Jim Matheson, CEO of Oasys anticipates that over the next five years, nearly 50% of bookings will be from Asia. He presented his company’s launch experience in China. Oasys is a leader in forward osmosis water treatment solutions, primarily targeting industrial applications like oil and gas drilling, petrochem and power generation. In October, Oasys raised $15 million in Series B funding, led by privately held Chinese engineering firm Beijing Woteer Water Company which was part of a broader strategic partnership between the two companies. “Finding the right partner and structuring the right relationship with them is critical for success in China,” Matheson stated. “We developed our relationship with Woteer over a period of 18 months and ultimately partnered with them exclusively for tackling industrial applications in China. Importantly, we included the strategic investment from Woteer as part of the overall relationship as we expect it will help us align our interests in the partnership.”
“What is/will be Your Business Model in China?”
Strategies for China with the forum companies run the gamut from licensing patents and know-how to joint ventures and setting up their own offices.
While launching in China requires significant management time over an extended period, cleantech companies in solar and wind energy have shown that the Chinese can move more quickly to scale projects following a pilot. Companies like LanzaTech, a producer of low-carbon fuels and chemicals from waste gases are showing how high profile government initiatives can provide an ideal combination of investment and on-the-ground partnerships to scale new technologies. Within two years of the CEO’s first trip to China, Lanzatech closed two major partnerships and completed its first full-scale project with $80M in Chinese financing.