BEIJING, Jan. 15, 2024 /PRNewswire/ -- Recently, Wei Zhou, the Founding Manager Partner of CCV CAPTAL, received an exclusive interview from JIEMIAN NEWS, discussing hot topics such as green technology and the undeniable impact of extreme climate conditions.
With nearly 20 years of entrepreneurial and investment experience, Wei Zhou, the Founding Manager Partner of CCV CAPTAL, believes that the opportune moment for green technology has arrived, considering investment timing and market maturity.
Reflecting on his experiences in green technology investments during his time at KPCB China, Wei Zhou acknowledged that the market was not mature back then. However, the overall direction proved to be correct, evolving into a mature emerging industry globally. He also provided forward-looking insights into the development trends of the green technology industry and CCV's future investment strategy in the field, stating, "Overall, we hope the companies we invest in can quickly solve problems and achieve commercialization, positively impacting our lives."
The CCV team, led by Wei Zhou, inherits the green technology genes from KPCB. Since its establishment in 2017, CCV has strategically invested in numerous innovative enterprises related to green technology. Wei Zhou emphasized that CCV will continue to deepen its involvement in the green technology industry, expressing confidence that more Chinese entrepreneurial teams will have opportunities to go global in the field of green technology.
Wei Zhou believes that, in the field of green technology, more and more Chinese entrepreneurial teams have the opportunity to go global.
The following is a verbal account by Wei Zhou.
The Timing of Green Technology Investment is Crucial
Global green technology investment was initiated by KPCB since around 2000. However, at that time, significant returns were not realized on a large scale. We learned a valuable lesson from this: timing is crucial. The overall direction of green technology was sound, but as a venture capital firm, we must focus on returns. If your vision is too far-reaching and you invest too early, it might not work.
In fact, several early projects we invested in China were successful. Besides Kejingyuan(SZSE:301372), in 2009, I invested in a company specializing in PLA biodegradable plastics. The concept is now popular, and the company was later acquired by its parent company. Additionally, I invested in a team working on water pollution control, led by a professor from Tsinghua University. They had the most advanced reverse osmosis membrane technology in China at that time and were attempting commercialization. Back then, there were many projects in the green technology sector where venture capital exited, such as the company dealing with China's earliest automotive Battery Management Systems (BMS).
This experience provides several insights: first, the overall direction of green technology is sound; second, as an investment firm, we need to consider the timing of technology commercialization and market acceptance more comprehensively. However, because we spent a considerable amount of time in the early stages of green technology, about three and a half years exploring projects with the team, including biomass diesel, solar energy, wind energy, and batteries—now called dual-carbon technology—we are not unfamiliar with these technologies. It was a costly but valuable learning experience that we can leverage today.
At that time, whether it was the maturity of technology, public awareness in the market, environmental awareness, or product costs, none of these aspects were mature. For example, the conversion rate of solar panels was only around 8% at that time. If you calculated the full lifecycle carbon emissions from raw material supply to production and installation in users' homes, the product might not necessarily bring green benefits. Today, with the combination of various technologies, the conversion rate of solar panels has reached around 30%, and with a significant decrease in production costs, the product has become viable. Solar panels, combined with energy storage devices, can even sell excess electricity to the grid for profit. So, the biggest issue back then was that the technology was not mature, and the market had not reached the point of commercialization.
As for the rationality of decision-making, it depends on how you evaluate it. As a venture capitalist, if you lack a bit of sentiment and refuse to invest in a technology because it seems too far from commercialization, how will progress be made? Relying solely on government investment is not realistic. Although the timing of green technology investments by KPCB and John Doerr was a bit too early, we cannot deny the success of these technologies today, which resulted from substantial investments made back then.
There are several considerations for commercialization. First is the cost and maturity of the technology. Second, in the case where green and environmentally friendly products have relatively higher costs than traditional products, it requires public awareness of green products and controllable costs. If there is a cost difference, most people cannot be expected to pay more for environmentally friendly services. In this case, policy encouragement and guidance are still essential.
The company that we invested in back then for PLA biodegradable plastics, founded by the chairman of Shijiazhuang Pharmaceutical Factory and his team. At that time, it was the largest biodegradable plastics company in terms of production scale in Asia. Shijiazhuang Pharmaceutical Factory was originally the largest producer of fermentation-based pharmaceuticals in China. PLA production required a large amount of fermentation technology, so this team was very experienced. Although there was already a ban on free plastic bags in supermarkets in China at that time, it was not being enforced. PLA became a hot topic again last year. According to the company's production scale of several hundred tons, it fully qualifies for listing now, but at that time, it could only be acquired because not enough people were willing to pay for slightly more expensive biodegradable plastics.
If we talk about energy-related projects, many of them involve heavy assets and have long time horizons. However, today, we can classify technologies favorable to "Zero-Carbon" as green technology, including smart grids, smart power plants, which are more like the software, systems, or platform companies we used to invest in. The investment cycle is not that long.
Including the field of home energy storage that we are currently exploring, especially products going abroad, their income has grown very rapidly in the past few years. These projects do not necessarily require a long cycle. Of course, there are tracks that require long-term investment, such as hydrogen energy. We cannot predict when it will be commercialized, but until controlled nuclear fusion is achieved, hydrogen energy is the most promising clean energy. Therefore, investment in this area is necessary.
CCV's Green Technology Investment Strategy
Firstly, our investment strategy emphasizes selecting projects that we can understand. In other words, we avoid venturing into areas where our team lacks expertise, especially in projects involving a lot of chemical theory and molecular material technologies where our team's technical capabilities still need improvement.
Secondly, some tracks in the green technology sector are already very mature, such as batteries and related supply chains, which currently offer many opportunities. However, our team still prefers early-stage investments, seeking areas that are not yet flourishing and have not reached high valuations.
Overall, we hope the companies we invest in can rapidly solve problems and achieve commercialization, positively impacting our daily lives. Our investment strategy will primarily focus on these areas:
Combining Greentech with Fintech/Platform: We are particularly interested in carbon capture technology, carbon trading, and climate fintech. Climate fintech is an interesting technology that combines with carbon trading, using blockchain and other technologies to manage carbon trading systems. We believe China has a greater advantage in this regard compared to other countries.
Combining Greentech with Smart Technology: Our main focus is on clean technology, especially in niche areas like smart electric vehicles. Existing investments also provide many opportunities for further exploration.
Combining Greentech with the Supply Chain: We place a strong emphasis on smart grids, smart power plants, energy efficiency, energy storage, and hydrogen. We believe that these niche areas will solve most problems in the near term. Smart grids and smart power plants are similar to the system integration software companies we invested in previously. The field of home energy storage is also easy to understand for us, given our experience in the battery sector.
In the fields of home energy storage and smart grids, how can small entrepreneurial teams cope if large enterprises like Huawei or Tencent enter the market? This is an eternal question; giants will always exist. However, the advantage of entrepreneurial teams lies in being more sensitive to user needs and providing better products ahead of time. So, I have always emphasized that in the 20-30 years of China's entrepreneurial investment history, the advantage accumulated by entrepreneurs is not in a specific technology but rather in the competitive environment of the dark forest, forcing these founders to provide users with needs they haven't realized themselves and make products more intelligent, with no learning curve for users. Big companies generally do not do this well. Of course, companies like Tencent still have strong entrepreneurial vitality, but we have also seen numerous vertical areas where entrepreneurial teams ultimately achieve more success, such as autonomous driving.
We have always had a criterion, which is that we hope the companies we invest in can survive independently without relying on any government subsidies or policy dividends. Although policy advantages are helpful now, we hope that the value and profits provided by the companies themselves can enable them to survive.
Secondly, we hope that the projects we invest in offer universally applicable products with value in any country. They should not only serve as imports replacements in China but also compete with other competitors abroad, providing users with another choice.
We repeatedly emphasize that the companies we invest in cannot only produce products for China; they must be capable of going global.
How does the ESG philosophy affect decision-making in CCV's target selection process?
Firstly, from KPCB to CCV, we have already ingrained ESG in our bones, and we consciously practice it when selecting investment directions. From a negative exclusion perspective, projects related to tobacco, alcohol (including e-cigarettes), and environmental pollution are never touched by us, even if they are profitable; this is our bottom line.
Secondly, many projects we have invested in over the years, including robot-related projects, are already powered by new energy, including the aforementioned city cleaning robots, electric trucks, and smart warehousing.
Thirdly, the projects we have invested in for Chinese companies going global are also in the ESG track, such as distributed energy systems. The users of these products are, on the one hand, in underdeveloped countries where energy supply is very unstable, and the originally backward energy system will generate a large amount of carbon emissions. The cost advantage of Chinese products brings them affordable clean energy. On the other hand, there are European and American countries with very old electrical grid infrastructure, and completely improving infrastructure requires a lot of time and cost. Therefore, we also have space to enter the market.
In general, we consider green factors in every investment project.
Extreme Climate, Future World
I recently returned from Silicon Valley. In Silicon Valley, there are several types of green technology startups now. One type focuses on carbon trading, and there's a new wave of enthusiasm for carbon trading platforms. There was a period of hype for carbon trading from 2005 to 2007, and now, with many countries discussing carbon taxes and trading, it has become a hot topic again. Carbon trading combined with Web3 is one direction, but whether carbon trading platforms are eventually developed by private enterprises or governments still needs observation because the platform requires universal acceptance.
Another type involves cutting-edge technologies. Commercialization for such entrepreneurial projects may be slower, such as carbon capture. We've also seen a technology from scientists with a high chance of winning the Nobel Prize. They manipulate and customize special materials at the molecular level, which can be used to adsorb various substances. For example, when thrown into water, it can selectively adsorb harmful substances in the water like a sponge, or it can adsorb carbon dioxide in the air.
The third type consists of companies helping build a global green supply chain. There's a batch of companies working on this, with many being Chinese overseas. China is a crucial part of the global green product supply chain, and a significant portion of components for new energy products come from China, including solar and wind energy. These companies integrate production processes with China's supply chain. They may utilize the Chinese supply chain for supply and then deliver products, or collaborate with Chinese companies to produce customized products for a certain brand. This is a direction we are particularly concerned about. We still hope the projects we invest in are related to China because it is our area of expertise.
In fact, there are currently many entrepreneurs in this field in China, especially in the East and South China regions. In the past, when we invested in internet companies, founding teams were usually returnees with a more international style. However, entrepreneurs in the field of green technology now not only understand overseas markets well but must also be grounded in managing production and local supply chains. They should possess both pragmatic and outgoing characteristics. These entrepreneurial companies are a bit like DJI (drone manufacturer) back in the day. They have been working diligently for many years, and when the opportunity arises, they can immediately seize it, combining new product concepts to provide what the market needs.
Our investment focus is what I call "go smart," meaning intelligence or unmanned systems. Our definition is that anything involving the replacement of human work through the combination of autonomous driving, AI, and robotics is considered smart.
One phased goal is to invest in a company within the next 10 years that can develop robots capable of taking care of the daily lives of the elderly in nursing homes. The aging issue is a common concern now. Why is elder care so expensive? Because it requires a large amount of manual labor, and service personnel need to be very patient and physically strong for tasks like bathing the elderly. If robots can replace this part of the work, it would be a phased achievement, leading to significant changes in our lives. There are also applications of AI in the medical field, such as the medical imaging diagnosis technology we have already invested in, which can greatly reduce misdiagnosis, and future applications may expand into more areas.
I believe AI can replace a large number of tedious and complex tasks, allowing humans to allocate more resources to more creative endeavors.
Another direction is green transformation. Everyone has seen the extreme climate conditions in recent years, and climate change is unquestionable. If we don't take action now, the world ten years from now is unimaginable. This is an urgent matter.
As everyone knows, when the concentration of carbon dioxide in the global atmosphere reaches a certain level, global warming may enter an irreversible state, leading to an era of climate disasters. We cannot scientifically predict when this will happen, but everyone may see some trends in the climate conditions this year. What everyone can do is try their best to do what they can within their capabilities.
In the long run, the ultimate solution to global warming is a fundamental change in the energy source, such as a breakthrough in controlled nuclear fusion or the large-scale success of carbon capture technology. It is difficult to completely change the current way of life for the masses, and ultimately, breakthroughs in technology are needed.
Media Enquiry
Jing Wu
jwu@ccvcap.com
