We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not a subscriber? Subscribe now for unlimited access to online articles.

Business Impact

China Comes to Silicon Valley at One Startup Accelerator

A year after launch, a startup program is helping U.S. companies reach China—and vice versa.

Pairing U.S. companies with Chinese manufacturing and investment could help technologies advance more rapidly.

When Jon Bonanno, chief commercial officer of the clean-tech startup Empower Micro Systems, got up to face a small, packed room in Santa Clara, California, last week, it wasn’t like the polished “demo days” run by the highest-profile Silicon Valley startup accelerators. There was no stage, not even a screen for the projector. The sound system buzzed with painful feedback. The 100 or so guests stood or sat in folding chairs under bright fluorescent lights in a space adjoining a large startup workplace that contained a distinct no-no of Silicon Valley office culture: cubicles.

“This is demo day, Chinese style,” Bonanno had joked earlier.

The presentations marked the first anniversary of InnoSpring, an incubator backed mainly by Chinese investors that bills itself as the first to focus on opportunities for startups in both the United States and China. Whatever the scene lacked in frills, it more than made up for in the real opportunities provided to the companies presenting. What was notable for Bonanno, a Silicon Valley veteran, was that some of the top clean-tech investing firms with offices in both the U.S. and China were in the room.

InnoSpring, which in the last year has grown to house 40 companies in its 13,500-square-foot space and invest a total of $2 million in 12 of them, has come along at a compelling time for the startup marketplace in both nations. In China, a growing number of investors and large companies are looking to fund, acquire, and partner with U.S. startups—especially in sectors such as clean tech, where U.S. companies have struggled recently to raise funds and commercialize their products. And in the U.S., more startups are plotting to enter the massive Chinese market at earlier stages in their own maturity.

“We received 300 applications this year,” says Eugene Zhang, the Chinese-born Silicon Valley entrepreneur and angel investor who runs the program. In addition to clean tech, he has seen a lot of interest in startups pursuing cloud computing, big data, and opportunities in the growth of the mobile Internet. “Our primary focus is to build this ecosystem,” he says.

Empower is a good example of InnoSpring’s focus. The company makes a cheaper, more efficient design for microinverters, a technology that converts DC electricity produced by solar panels into AC electricity that can be used on the grid. It developed its prototypes right in the office—and, taking to heart the InnoSpring ethos of frugality, it has spent only $800,000 so far.

Bonanno says the designs could lower the cost of installing and producing solar power and provide a powerful new competitive opportunity to solar manufacturers by allowing them to mount the boxes right on their panels (today most inverters are bulky, separate appliances). The glitch is that most manufacturers are in China, where doing business is not straightforward to U.S. companies, says Bonanno.

Advisors at InnoSpring made introductions and helped Empower navigate visits to China, and the company has already signed a customer deal with one of the world’s top three solar-panel manufacturers, Bonanno says. Last week, it was seeking $5.5 million in new investment.

“What [Empower] have accomplished is a new model,” says Lei Yang, managing director of Northern Light Venture Capital, a Chinese firm that is one of InnoSpring’s backers. “Clean-tech companies here can get to a certain point with less capital. But to scale, they should think about Chinese customers and Chinese partners. That way you can get to the end of the tunnel a lot faster.”

This is a strategy that some U.S. startups are already pursuing. For example, EcoMotors, an engine technology company, recently signed a deal to have a Chinese power company build a manufacturing plant for its engines—at zero capital expense to the startup or its investors, board member Andrew Chung, a Khosla Ventures partner, said at the event.

Not all companies working at InnoSpring are new to China, and most aren’t involved in clean tech. Some, like the file transfer and sharing services DewMobile and Zapya, already have millions of users in China; they came to InnoSpring to create strategies for setting up shop in the United States. Others, such as Netspectrum, a payments company that uses QR codes for its Flash2Pay app, haven’t had much success raising money or finding users in the U.S. and are hoping for better luck in China, where the mobile market is less saturated.

Mobile security company TrustGo Mobile is the biggest success story so far. It came to InnoSpring around the time it launched about 18 months ago (see “TrustGo Promises to Guide You to Safer Apps”). Its CEO has worked in the U.S. and China and had founded the company in Silicon Valley, but with an R&D team based in Beijing. Its app picked up traction rapidly. Today, it has five million users in 80 countries and top ratings for virus detection from independent auditors.

At InnoSpring, TrustGo has participated in some of the weekly events and “office hours” held to introduce startups to mentors and major Chinese firms, like the Internet giant Tencent. Right now, TrustGo is weighing two acquisition offers, one from a U.S. company and one from a Chinese company (it won’t disclose more). At demo day, TrustGo CEO Xuyang Li accepted a graduation certificate. Whatever he decides, it looks as if InnoSpring will have its first successful exit.

AI is here. Will you lead or follow? Countdown to EmTech Digital 2019 has begun.

Register now
More from Business Impact

How technology advances are changing the economy and providing new opportunities in many industries.

Want more award-winning journalism? Subscribe to Print + All Access Digital.
  • Print + All Access Digital {! insider.prices.print_digital !}*

    {! insider.display.menuOptionsLabel !}

    The best of MIT Technology Review in print and online, plus unlimited access to our online archive, an ad-free web experience, discounts to MIT Technology Review events, and The Download delivered to your email in-box each weekday.

    See details+

    12-month subscription

    Unlimited access to all our daily online news and feature stories

    6 bi-monthly issues of print + digital magazine

    10% discount to MIT Technology Review events

    Access to entire PDF magazine archive dating back to 1899

    Ad-free website experience

    The Download: newsletter delivered daily

You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.