VIDEO: Khosla Ventures' Andrew Chung

"While it is true that the US probably has more depth and breadth in terms of fundamental research, and a lot of the things we invest in, Chinese companies are incredibly innovative when it comes to go-to-market strategy," Chung says. "We are seeing the emergence of a middle class that is thirsting for new products. The Chinese are very creative and innovative on how to get to this new class of consumer in way that American companies don't need to be as innovative."

As head of Khosla's investment and partnership activities in China, Chung has to a large extent focused on bringing technologies into the country that address particular sustainability issues. The success stories include Lanzatech, a New Zealand-based company with a platform that converts toxic gas produced by steel mills and other industrial facilities into fuels and chemicals that can be sold on the open market.

However, he also sees plentiful opportunities in other areas of sustainability, such as technologies that improve land productivity and food safety, as efficiency-boosting solutions in LED lighting and building materials. Transportation is another focal point, given rising car usage and the emissions produced as a result of that. However, Chung is not yet confident in electric vehicles, citing the cost and lack of charging infrastructure.

"From our perspective, addressing the transportation problem is a big issue in China and other parts of Asia," he says. "We have several technologies that do that, including Ecomotors, which is a technology that we think it is the next generation of combustion engine. It has twice the power density of a normal engine and if you put two of these together in the same space you can get 30-50% better fuel efficiency."

Khosla currently has 12 companies with some exposure to China, through joint venture partnerships, licensing deals or equity investments. The challenge is coming up with a structure that satisfies a US technology provider, which might be wary of doing business in China, and a Chinese partner with preconceived notions about investment and ownership.

"Our partners in many cases have never worked with an American company and we are building a deal structure from scratch. Many want to come in and buy a company or get 51% of the equity in a company, and that is a no-go. We have to find a way to structure something whereby it is culturally compatible with how they think about ownership or involvement in a company, but also suitable for the type of investment needs we have," he says. "It is very challenging."

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