Westly Group targets investments in Chinese cleantech

Steve Westly—the former California gubernatorial candidate turned Silicon Valley venture capitalist—issued a wake-up call last week to U.S. entrepreneurs and venture capitalists who have hesitated to invest in cleantech—especially in China.

“No VC firm should be without a China strategy,” he told an audience of several hundred people at a cleantech conference sponsored by the law firm Cooley Godward.

“China will pass the U.S. in 20 years as the largest economy in the world,” he said. “There are only two countries that matter—the U.S. and China. They create 40% of the world’s pollution, and the other 191 countries divvy up the rest.”

Despite the massive investments the United States has been making in alternative energy, smart grids and other clean technologies, the Chinese government is moving faster and is pushing the United States, Westly said.

China has ordered stiffer fuel efficiency than U.S. standards for new automobiles (42 MPG versus 39 MPG), a bigger investment tax credit for solar energy and wind energy (50% versus 30%), and 20% use of renewable energy by 2020.

“The hottest commodity today is a Chinese-speaking CFO with an MBA from an American school. That person is worth a mint,” he said. “The number of Chinese companies going public in the next 10 years is immense.”

Chinese entrepreneurs are also better than Americans at making their companies profitable without $50 million in venture capital, he said, although sometimes their claims have to be examined because of differences in Chinese and U.S. accounting standards.

Still, the Westly Group is seeking Chinese companies to invest in from its new $120 million venture fund, which closed last month, although they’ve made no investments yet and have no offices in China, said Westly Group analyst Mike Jackson.

Jackson said he joined the Westly Group two months ago to help develop its China practice. The firm intends to invest in Series B and C rounds from the new fund and expects to see a return within two to four years, Westly said. —Deborah Gage