Ian Zhu, Managing Partner of NIO Capital

 

From November 18th to 21st, the 37th AVCJ Private Equity Forum, or AVCJ 2024 for short, was held in Hong Kong. Ian Zhu, Managing Partner, and Carl Guan, Managing Director of NIO Capital, attended the forum on invitation and shared their valuable insights. This forum highlighted the most promising market opportunities and pressing macroeconomic issues in the private equity industry, uncovering the latest investment trends, exploring innovative fundraising strategies, and emphasizing best practices in ESG.

 

The forum attracted over 3,800 senior investors, advisors, and regulators from across Asia and beyond, making it a global gathering of industry leaders.

 

During the themed roundtable discussion "Portfolio Management: Venture Style," Ian engaged with guests on how General Partners can better create value under new trends. He emphasized that the current world is more dynamic and challenging than what people have experienced in the past. Despite the downturn cycles of the past few years making many people pessimistic, he reminded that cycles change and the true lesson is to focus on fundamentals.

 

Carl Guan, along with Sun Ziqi, Secretary to the Board of AlphaESS, a portfolio company of NIO Capital, participated in the themed roundtable "Case Study: Aligning ESG Framework with Financial Pursuit." They shared their perspectives on the opportunities and challenges faced by investors and enterprises in aligning ESG frameworks with financial goals.

 

Below is a summary of some of their viewpoints:

 

01 What the Economic Cycle Truly Teaches Us is to Focus on Fundamentals

 

 

What role should venture capital institutions play in value creation? Ian addressed this question based on his investment experience. He emphasized that entering the automotive and energy industries is challenging. Beyond merely providing financial support to startups, NIO Capital actively assists them in securing their first customers by helping to build their executive teams and offering other post-investment empowerment services, such as business enablement. Additionally, establishing mass production capabilities for startups' products is a core task in NIO Capital's post-investment efforts. This includes activities like setting up factories, developing supply chains, and other initiatives that help expedite the product-to-market timeline. While overseas, it may take three years to construct a factory, in China, with the support of local governments, factory construction can typically be completed in just six months. Bringing products to market swiftly represents the ultimate value of technological innovation and is also the paramount demand of entrepreneurs.

NIO Capital's post-investment empowerment efforts consistently focus on providing startups with the most crucial assistance at the appropriate time and with precision. Ian emphasized that cultivating a genuine trust relationship is vital, whether within the entrepreneurial team or between investors and the startup. This trust serves as a foundation for all assistance and support to be effective. He also noted that the past few years have been marked by economic downturns, leading many to adopt a pessimistic outlook. However, he cautioned against ignoring the fact that cycles change and stressed that the true lesson cycles impart is the importance of focusing on fundamentals. NIO Capital's strategy involves carefully selecting outstanding companies during upcycles and supporting the development of teams with cutting-edge technology and exceptional talent. During downcycles, the venture capital firm partners with companies to bolster their internal capabilities, steadily expand their businesses, and adeptly navigate through tough times.

Ian added that, although the current world is more dynamic and challenging than what people have experienced in the past, continuous innovations and opportunities are emerging, both in the Chinese and overseas markets. According to him, having witnessed many entrepreneurs achieve success, NIO Capital will continue to support innovative companies in seizing opportunities in the automotive and energy markets.

 

02 Aligning the ESG Framework with Financial Pursuits

 

 

AlphaESS, a leading global provider of energy storage solutions and services, is dedicated to maximizing the benefits of clean energy for people worldwide. With over 12 years of experience in this field, AlphaESS has successfully installed more than 150,000 energy storage systems across over 100 countries and regions. The company has consistently adhered to the principles of environmental, social, and governance (ESG) and has achieved remarkable business results, along with recognition from third-party authorities, for its contributions to climate change mitigation and sustainable development.

 

When asked about the motivation behind NIO Capital's investment in AlphaESS, Carl replied that many countries and regions still grapple with electricity shortages due to economic, infrastructural, and geographical constraints. AlphaESS's distributed clean energy storage solutions offer a viable path for more people to access economical, reliable, and sustainable clean energy, while also contributing to carbon emission reduction. He further underscored the significance of energy storage systems by presenting a blueprint for renewable energy. Carl noted significant shifts on both the supply and demand sides of the power sector. The power generation side is undergoing a rapid transition towards new energy sources like solar and wind, presenting fresh development opportunities. On the demand side, the surge in popularity of electric vehicles, AI, and cryptocurrency has led to a rapid increase in power demand. The traditional power supply system involves generation, transmission, storage, and distribution. However, distributed energy represents a revolutionary shift, as it allows the demand side to generate, store, and utilize electricity, providing a more efficient and convenient solution for the energy supply system.

 

 

Carl Guan, Managing Director of NIO Capital

 

In recent years, geopolitical uncertainties have had a significant impact on the global economy. Carl believes that, while these uncertainties pose challenges to the venture capital investment sector and enterprises, they also present new opportunities. China is a global leader in renewable energy development. Leveraging this advantage, NIO Capital began investing in startups in this field years ago, with the aim of helping them replicate their success in China in other countries and regions. The goal is to facilitate collaborations with global partners and accelerate the achievement of the zero-carbon goal. Specifically, NIO Capital focuses on three areas: assisting Chinese enterprises in establishing factories and joint ventures worldwide, investing in innovative companies overseas, and incubating and replicating China's supply chain in international markets.

 

Regarding why NIO Capital was chosen and its influence on AlphaESS's strategic development, Sun stated that NIO Capital possesses extensive ecological resources within the new energy industry. AlphaESS received not only financial support but also access to numerous industrial resources and business cooperation opportunities. Being part of this industrial ecosystem has helped the company uncover more opportunities and foster innovations in technology, supply chain, and business model, directly impacting cost reduction and new business development.

 

Sun also expressed his views on the profitability of the energy storage industry. He believes that the development of new technologies and business models is making the industry increasingly attractive. He explained that achieving the zero-carbon goal hinges on the development of a new energy system. In the past, discussions around energy focused more on physical and chemical aspects. However, the advent of AI, digital platforms, and other technologies is changing this paradigm. AI not only accelerates cost reduction for enterprises but also serves as a core driving force for business growth. Therefore, the integration of new technologies and business models in the energy storage industry transforms the zero-carbon goal from a pressure into a real value creation opportunity, aligning the ESG framework with financial objectives.

 

The guests also shared their insights on future development trends, details of ESG practices, and other relevant issues, engaging in in-depth discussions with other participants, inspiring and fostering innovative ideas.