Over the last week, 10 lucky companies have been getting the calls from HAXLR8R: they’ve been admitted to the inaugural session of the startup world’s newest venture incubator. Following the popular model pioneered by TechStars and Y Combinator, HAXLR8R will provide teams with a stipend of $6,000 per founder and about three months of mentorship, in return for a 6- to 10-percent equity stake. At the end of the session in June, companies will pitch their businesses to investors at a “demo day” in San Francisco.

There are just two big differences between HAXLR8R and all the other incubators. First, the program isn’t admitting software or Internet startups. It’s designed for companies building real stuff, rather than the usual mobile apps or consumer Web services. Second, it’s not actually located in San Francisco or any of the other typical U.S. startup hubs, like Boston, New York, or Boulder. In fact, it’s not even in the same hemisphere. HAXLR8R will gather its first class of startups at the Shiling Industrial Park in the Nanshan district of Shenzhen, a high-tech manufacturing city north of Hong Kong.

A recruiting poster for HAXLR8R

The theory behind the new program is that successful gadget builders—whether they’ve developed a toy, an appliance, or some kind of consumer device for health, fitness, or travel—will eventually have to figure out where to mass-produce their products. And chances are the answer will be China. Despite the new scrutiny being applied to U.S. consumer electronics companies over labor conditions in Chinese plants, China still has the world’s richest supply of low-cost manufacturing facilities, along with the engineers who know how to get them tooled up to make new things.

But to get something built in China, you have to know who to talk to, and the program at HAXLR8R is intended to smooth the way. Startups in the program will be “coming into an environment where they can work on their product and figure out how to manufacture it,” says Cyril Ebersweiler, one of the program’s co-founders. “They will get instant access to relationships which would take a year or more to develop on their own.”

HAXLR8R finished its selection process last week and began notifying the admitted companies. Ebersweiler says the program received “way more applicants than we expected,” from all over the world. The majority of the applications came from U.S. startups, but the organization also heard from companies in Europe, Asia, and India. The mix of applicants included “startup entrepreneurs, hackers, makers, and [people from the] open source movement; social entrepreneurs as well,” Ebersweiler says. “Most of the applicants have a working prototype.”

The 15-week HAXLR8R program starts on March 1. Teams will spend the first 13 weeks in Shenzhen, building their prototypes and gathering feedback from potential customers. Then they’ll decamp to San Francisco, where they’ll … Next Page »

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Merry Christmas, Boston. You asked for it, and you got it. A big, publicly traded consumer tech company to put us on the map alongside the Silicon Valley bad boys and uppity New Yorkers. I present to you: TripAdvisor (NASDAQ: TRIP).

Sure, we already have Zipcar (NASDAQ: ZIP), Carbonite (NASDAQ: CARB), iRobot (NASDAQ: IRBT), and privately held but well-established companies like Wayfair, Kayak, and Harmonix. But TripAdvisor is different. Although the online travel firm is not new—it’s been cranking here in Boston for more than a decade—it has become one of the biggest consumer-focused Internet companies on the East Coast, with more than 1,100 employees; 50 million-plus unique visitors a month checking out hotel, restaurant, and travel reviews; and, oh yeah, a market cap north of $3 billion. Yet it hasn’t received as much media coverage or tech-community-adulation as you might expect over the years. (An exception to the former would be this in-depth story by my colleague Wade Roush; the latter would be this commentary from investor Chris Dixon.)

I spoke with TripAdvisor CEO Stephen Kaufer on Wednesday, the day his company officially became independent from Expedia (NASDAQ: EXPE) and started trading on the Nasdaq under its own stock symbol. Here are my takeaways from our chat:

1. TripAdvisor wants the spotlight now. “We have generally been very, very surprised at how little attention the press have paid to TripAdvisor,” Kaufer said. He pointed to his company’s size, number of employees, traffic, revenues, and profits, calling it “the $3 billion company in our own backyard.” On the local training and ecosystem front, he says college interns are turning down offers from Facebook and Google and working at TripAdvisor instead.

2. TripAdvisor is global. Seventy-five percent of the traffic to the company’s branded websites comes from outside the U.S. Think about that for a minute. “We’re almost unchallenged in most countries in the … Next Page »

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Anyone who says cleantech companies are having a tough time raising money should take a look at Boston-Power. The Westborough, MA-based advanced lithium-ion battery maker is announcing today that it’s taken in $30 million in equity funding, just three months after announcing a massive $125 million Series F funding round. The company has now attracted more than $346 million in financing since its founding in 2005.

Of course, that recent money has come with some strings attached. The newest investment was led by Beijing-based GSR Ventures, a firm that led Boston-Power’s $125 million Series F round and is focused on building companies in China. Along with the September financing, Boston-Power announced that it was moving the majority of its operations to China to chase the electric vehicle market, and said it was reducing its 80-person Bay State workforce by about 35 percent.

Boston-Power, which also sells its batteries to customers like Hewlett-Packard for portable electronics, plans to add between 600 and 800 jobs in China across manufacturing and engineering roles. The company has begun construction of a manufacturing facility near Shanghai in Liyang and has established a temporary R&D site in Beijing, which will focus on customer applications of its battery technology. Both sites are expected to be complete in 2012, said founder and international chairman Christina Lampe-Onnerud.

Boston-Power also has an executive search underway, in China, to fill positions like CEO, said Lampe-Onnerud, an Xconomist. In September, Boston-Power’s Westborough-based CEO, CFO, and vice president of marketing left as part of the shift to China. Lampe-Onnerud said the pool of CEO candidates the company is considering is mixed, comprising both engineers earlier in the careers and more senior managers.

For her part, Lampe-Onnerud says she is excited to think about what she’ll do next. Alongside the September financing, Lampe-Onnerud committed to remaining with Boston-Power for at least another year, in the role of international chairman, and is helping to oversee the shift in operations.

“This opens up opportunities for me to do what I love to do, which is executable innovation,” she says of when this one-year commitment period ends. “I’ll have a chance to look at other problems that need attention.”

She says she’s interested in staying in high-tech or cleantech, and that water-related energy and transportation are areas of particular interest. We’ll have to keep our eye on her.

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Last week, Forbes magazine announced that Auburn Hills, MI-based ALTe Powertrain Technologies, developer of the first range-extended plug-in hybrid electric vehicle powertrain for light commercial fleet applications,  made its list of America’s most promising companies. ALTe is one of only three companies listed in the Capitol Goods industry category, the only hybrid technology company, and the only company from Michigan.

“We’re ecstatic, but we’re also humbled,” says John Thomas, CEO of ALTe. “It’s rare that a pre-revenue startup gets attention of this magnitude from such a prestigious publication.”

To determine which companies made the list, Forbes enlisted CB Insights, a New York City-based data firm that tracks investment in high-growth private companies, and its Mosaic software, which helps lenders and investors allocate capital more efficiently. Mosaic created an algorithm by pulling data from 30,000 sources, including court filings, press releases, news articles, and social media, and used the algorithm to create a score that measures a company’s potential. Forbes then took the Mosaic scores and combined them with “old-fashioned reporting” to create the list of most promising companies. [CB Insights also provides the data behind Xconomy's companies database.]

ALTe’s series of significant announcements in 2011 no doubt contributed to their placement on the Forbes list. These announcements included a long-term supply agreement with battery maker A123 and electric motor supplier Remy, a preferred installer partnership with vehicle remarketer Manheim, a collaborative effort with Pacific Gas & Electric Company to test their technology on PG&E’s fleet of trucks, and a joint venture with Inmatech to produce and sell hybrid electric storage devices.

Thomas says he’s not worried at all about A123′s recent announcement of layoffs because he’s looking forward to getting the focus of their resources. Thomas’ optimism extends to the electric vehicle market as a whole, regardless of what appears to be a slower-than-expected response from consumers despite relatively high customer satisfaction.

“We’re confident, because we’re being told by our customers that we have the right plug-in technology,” Thomas says. “The lack of battery-charging infrastructure and concerns for range—all those things add up to a need for range-extended powertrains. We offer comfort to consumers.”

I spoke to Thomas as he was packing to leave for China, his second time visiting the country in less than four weeks.

“We’re absolutely engaged in business opportunities for both domestic Chinese consumption and export,” Thomas says. “China has embraced our technology even more so than the United States.”

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There seems to be a theme in Massachusetts venture investing right now. Things aren’t quite as hot as they were earlier this year, but are still trumping last year’s numbers for the same period. That’s what my colleague Greg noted about the MoneyTree report for Q3 2011 venture investing. And that’s what I’ve observed here with data from CBInsights FundingFlash—a daily roundup of companies receiving venture capital, angel investment, and growth equity funding—surrounding startup deals last month in Massachusetts.

On to the specifics. Twenty-nine Bay State startups raised a collective $253.8 million in equity-based deals in September. That’s an increase from the August ($156.5 million) and July ($250 million) funding totals. And September 2011′s funding is well above the total from September 2010, when startups pulled in $146.7 million in 25 transactions. But it’s still nowhere close to June’s massive $564.7 million pot, so talk of a bubble might have been premature.

The surge in September financing can largely be attributed to a $125 million Series F funding round for Westborough, MA-based Boston-Power, an advanced lithium-ion battery developer. (Note, this deal wasn’t included in the MoneyTree Report, likely because SEC documents for it had not yet been filed.) While the financing—which came largely from the Chinese government and a Beijing-based venture firm—helped plump up the deals total for the month, its overall effect on Massachusetts is mixed. As part of the deal, Boston-Power cut about 35 percent of its 80-person work force in the state as it shifts operations to China to pursue electric vehicle applications for its technology there.

The Boston-Power deal handily made energy the leading sector for the month, with $131.8 million raised across three deals. Healthcare followed with $71.2 million raised in eight deals, which included $23 million for Tokai Pharmaceuticals and $15 million for Tensha Therapeutics, both of Cambridge, MA. An SEC filing in September showed that Watertown, MA-based Arsenal Medical had raised $12 million, but just this week the company announced an $18 million financing round, which included $15 million for its new spinout, 480 Biomedical.

The Internet sector had the highest number of deals last month, with 10, and came in third for funding raised, at $39.2 million. The top deal in that sector and the fourth-largest deal of the month was a $13 million Series D financing for Boston-based Visible Measures, a maker of software that helps advertisers and publishers track the performance of online video. Massachusetts companies also raised another $10.5 million in 10 debt- or rights-based financings last month.

Check out the list below for details on the top 5 deals:

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When Ecomotors International set out to change the way car and truck engines are built, it set up shop in Livonia, MI, a suburb of Detroit, in hopes of eventually licensing its technology to the big U.S. automakers. It was a calculated risk. As radical as Ecomotors’ opposed-piston engine design may be, at least the company’s founder, Peter Hofbauer, has unquestionable auto-industry credentials—he’s the guy who helped Volkswagen build its first mass-production diesel engine.

Pinnacle Engines isn’t even bothering with Detroit. The San Carlos, CA, startup, which recently won the backing of the world’s largest venture capital firm, is also developing an opposed-piston engine, one that promises to marry the fuel efficiency of diesel technology with the lower cost structure of gasoline-burning engines. But Pinnacle’s founder, James Montague “Monty” Cleeves, is a veteran of the semiconductor industry; for him, designing engines and tinkering with cars was always an avocation, not a profession. He’s pretty convinced that Detroit will never listen to his ideas—so Pinnacle is looking farther east for its first commercialization opportunities. Much farther east. To India, in fact.

“This ought to be music to Detroit’s ears, but to them I’m just some whacko in California,” says Cleeves. “This is Silicon Valley, and what does Silicon Valley know about making engines? Folks in Asia have almost zero ‘not-invented-here’ issues, whereas it’s pretty prevalent all over the U.S.”

Pinnacle won its first funding in 2007 and has been testing prototype engines based on its patented “Cleeves Cycle” since the spring of 2009. This year, Pinnacle struck a joint development agreement with an Indian scooter manufacturer—it can’t yet reveal which one—that could see the technology move to the test track by next year and into commercial production by 2013.

But to buy a Pinnacle-powered scooter, you’ll have to go to Mumbai or Bangalore. With gas prices here stable at around $3.50 per gallon, “I don’t know what it’s going to take to get somebody in the U.S. excited” about fundamental improvements to the venerable internal combustion engine, Cleeves says. “But most of Asia is sensitive enough about fuel economy that they get it.” For many families in India, a two-wheeler is the main mode of transportation, and a scooter engine that consumes 25 to 50 percent less fuel, as Pinnacle promises, could be a big boon for the household budget.

Cleeves says his engine can also be scaled up for larger vehicles, and can easily be modified to run on diesel, ethanol, or even compressed natural gas, which means it could also turn up in light commercial vehicles or even cars in India or China. But the startup, which has raised $13.5 million from venture giant New Enterprise Associates (NEA) as well as Bessemer Venture Partners and Infield Capital, doesn’t see its engine as a cure for petroleum addiction. Instead, Cleeves describes it as a bridge technology, incrementally improving the efficiency and lowering the emissions of internal combustion engines as a warming world weans itself from carbon-spewing technologies.

“It’s going to take a long while for Detroit to adopt new technologies,” says Pinnacle CEO Ron Hoge, a veteran of diesel engine maker Cummins. “They may surprise us—it may happen faster than we think. But it’s not even important to us on a business level, because the opportunities we are uncovering in Asia are going to be massive and much more accelerated and have a bigger impact on world consumption of petroleum.”

The basic concept of an opposed-piston engine is so simple that it’s remarkable how long automakers have been ignoring it. In a traditional engine, each piston sits in its own cylinder, and combustion occurs inside the cylinder head, where intake and exhaust valves regulate the inflow of air and vaporized fuel and the outflow of exhaust. In an opposed-piston engine, there’s no cylinder head: two pistons move toward and away from one another inside the same cylinder, with … Next Page »

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Just after I wrote that no Massachusetts-based cleantech companies inked funding last month, Westborough-based Boston-Power bucks that trend for September.

The developer of advanced lithium-ion battery technology is announcing today that it has raised $125 million. The deal, which brings Boston-Power’s total funding pot to more than $316 million, has some serious implications for the company’s place in Massachusetts and its executive structure, though.

Beijing-based GSR Ventures led the round, which also included Oak Investment Partners, Foundation Asset Management, and grants, tax incentives, and other funding from the Chinese government, Boston-Power founder and now international chairman Christina Lampe-Onnerud says (she was executive chairman prior to the transaction announced today). GSR managing director Sonny Wu will now chair Boston-Power’s board of directors.

“We are embracing the electric vehicle opportunity in China,” Lampe-Onnerud, an Xconomist, told me over lunch Monday. While the vast majority of Boston-Powers operations will be moving to China (read on for more on this), she herself has elected to stay in Massachusetts.

The funding announcement follows last week’s news that Boston-Power CEO Keith Schmid, chief financial officer Steve Byram and vice president of marketing Sally Bament were leaving the company. Lampe-Onnerud says those moves were part of Boston-Power’s overall plan to shift its operations and most of its product marketing to China, where the company is building a new factory. Boston-Power will be searching over the next few months to fill the CEO, CFO, and marketing positions in China; meanwhile, “between the board and management team, we’re hosting those functions,” Lampe-Onnerud says.

What’s staying in Massachusetts, in addition to Lampe-Onnerud, are the R&D, designing, and fine-tuning of the company’s battery cells. All of these operations will take place in the Westborough office, while China-based teams will focus on developing the battery technology for customer applications. Boston-Power will be reducing its roughly 80-person workforce in the Bay State by about 35 percent, as those functions shift abroad, says Lampe-Onnerud. The global sales staff will also remain in Westborough, though Boston-Power expects most of its customers to come from China. The company plans to … Next Page »

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Lean startup, schmean startup. There’s more than one way to build a Web company.

Just ask Coach Wei, the founder and CEO of Yottaa, a two-year-old tech startup in Cambridge, MA. Yottaa (pronounced sort of like the green Jedi master) makes software tools to help business websites run faster, monitor their performance, and generate sales more efficiently—a field known as Web performance optimization. In a previous life, Wei worked at data storage giant EMC (NYSE: EMC) and founded business software firm Nexaweb Technologies. He is a graduate of MIT and Tsinghua University in Beijing, China, which foreshadows the approach he is taking with his current startup.

Over lunch recently, Wei talked in depth about what he’s doing with Yottaa. You might call it the “anti-lean startup” (my description, not his). In some ways, it is the opposite of the lean startup model, coined by Silicon Valley entrepreneur Eric Ries, which involves having a small team, creating software prototypes quickly, and using customer feedback to rapidly iterate code. The process is much faster than traditional software engineering and uses methods such as “agile” software development and “customer development.”

As Wei explains, that approach works well for some social media and Web startups, but not all. In particular, he says, if you’re trying to build a company that will be able to grow from, say, $1-5 million in revenue to $50 million, you could run into difficulties with the lean startup model. If you start small and local, ramping up to hire a team of 100 people in Boston or San Francisco will be almost impossible because of the current talent crunch and skyrocketing cost of good developers. “There’s a huge scalability gap,” Wei says.

So he’s trying something different at Yottaa—and he’d probably be the first to acknowledge that it might not necessarily work. The idea, he says, is to be “global from day one and have scalability built in.”

Translation: hire most of the team in Beijing and the rest in the Boston area, from the start. “We try to integrate the best of here, and the best of China, to build a company,” he says.

This is different from offshoring, he says, because it’s not about cost, and the Beijing employees are not seen as second-class citizens. “You don’t do it for the sake of cost saving,” Wei says. “You have to think of building a scalable growth engine into your company. You have to build it into your DNA.” More specifically, he says, it’s about “how to leverage the global workforce.”

Here’s how I see it. Plenty of U.S. tech startups—and big companies—make use of developer talent in other parts of the world like Brazil, China, and Eastern Europe. But few are building their … Next Page »

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It has been a rough spring and summer for American Superconductor.

The Devens, MA-based energy tech company (NASDAQ: AMSC) said today it has cut 30 percent of its workforce, about 150 positions, since March 31 and expects to employ nearly 600 people worldwide after the cuts.

The firm also said it expects to submit a plan to the Nasdaq Stock Market by August 16 to regain compliance with the market’s listing rules. American Superconductor is working to restate financial statements from its fiscal year that ended March 31, 2011, and the quarter ending on June 30, 2011, because of unpaid product shipments that were expected to be made to Chinese customers.

Back in April, the company disclosed that its biggest customer, China-based Sinovel Wind Group, “refused to accept contracted shipments” of wind turbine electrical components and spare parts. That development has led to major problems for American Superconductor, including difficulty in closing its intended $265 million acquisition of Finnish power tech firm The Switch Engineering Oy.

In May, American Superconductor went through a CEO transition, with Daniel McGahn (former president and chief operating officer) succeeding founder Gregory Yurek at the helm. And in a regulatory filing today, the company said Charles Stankiewicz, executive vice president of operations and grid segment, and Angelo Santamaria, senior vice president of global manufacturing operations, are leaving the firm this month.

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Today Natick, MA-based Boston Scientific (NYSE: BSX) announced second-quarter sales of $1.975 billion and earnings excluding special items of $0.17 a share, which beat analyst expectations by nearly a dime. Sales of its neuromodulation devices were up 16 percent, and the company reported sales increases in many of its product lines. It also said the recent introduction of its new drug-eluting stent, Ion, has gone well. To cap it all off, Boston Scientific announced its intention to repurchase $1 billion of its common shares—a classic sign of optimism, and a common tactic companies use to boost their stock price.

But much of the focus on the earnings call with analysts was on news the company announced yesterday: It’s greatly expanding its presence in China. Boston Scientific said it would invest $150 million in China over the next five years, and it expects to expand its employee base there from 200 to 1,200 as it builds out a fully staffed manufacturing presence. The company also intends to invest in R&D, with the goal of developing innovative devices designed for the China healthcare system.

Boston Scientific’s outgoing CEO Ray Elliott said during the call that the China expansion would help bring the company’s products into a market that’s still largely untapped when it comes to less-invasive cardiac devices such as stents. What’s more, Elliott said, “Longer term, the products we develop in China may ultimately reach other markets.”

During the question-and-answer session with analysts, Morgan Stanley analyst David Lewis asked what the return on investment might be with the China program, and how the initiative differed from previous emerging-market strategies the company had initiated. “It’s additive,” responded Boston Scientific chief financial officer Jeffrey Capello. “We enjoy over 20 percent growth in India and China, and we see it as a situation in which we’re just getting started.” He noted that the buildout would take four to five years, but that investors could start seeing an upside from the initiative as early as next year.

In the shorter term, Boston Scientific expects to capitalize on a surprise announcement from stent rival Johnson & Johnson. On June 16, J&J (NYSE: JNJ) announced it would exit the stent business that it’s credited for creating, and it will stop marketing its flagship drug-coated Cypher stent by the end of the year in the face of declining sales. “It’s a rare opportunity, and frankly a rare gift,” Elliott said during today’s analyst call. Some analysts predict Boston Scientific will grab … Next Page »

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When Tianhai Electric North America won a $300,000 incentive from the Michigan Economic Growth Authority to establish a world headquarters in Orion Township this past May, it was the latest example of a Chinese automotive company choosing to locate operations in Southeast Michigan—and part of a growing trend that has the Detroit area playing an increasingly prominent role in the Chinese auto industry.

According to the Detroit Regional Chamber, at least 50 Chinese companies serving the auto industry have established new ventures in metro Detroit during the past decade—up from 5 in 2000. (See the list on the next page for some prominent players.) The companies range in size from a handful of employees to several hundred, but all are united in a common goal: to make better cars.

“China’s auto industry is booming,” said LianneYan, Executive Vice President of the Detroit Chinese Business Association. “But it’s trying to raise the quality of the cars it produces. Detroit’s strength is in auto parts and research and development, and that’s why the companies come here.”

Hong Su, Vice President of the Changan US Research and Development Center in Plymouth—which is wholly owned by Chongqing Changan Automobile, the first major Chinese automotive manufacturer to open a facility in the United States—said that Detroit is like no other place in the world in terms automotive know-how.

“Detroit has more than 100 years of design and development expertise, in addition to many experienced engineers and a whole spectrum of service providers, from tooling to testing to consulting firms,” Su said. “The biggest plus to doing business in Southeast Michigan is its concentration of talent, resources and supplies.”

Detroit’s century-plus of experience is something the burgeoning Chinese auto industry needs, as it wasn’t until 1956 that China’s very first road vehicle rolled out of the Changchun No. 1 Automotive Works. In late 2000, the first car to be made … Next Page »

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Natick, MA-based medical device firm Boston Scientific (NASDAQ: BSX) announced today that it will invest $150 million over five years to establish a manufacturing facility in China. Boston Scientific said that it will use the site as a medical device training facility, and that it will also invest in R&D activites in China and increase its employee base in the country from 200 to 1,200. The company said it expects these moves to push its revenues in China to more than $500 million at the end of 2016.

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Busy day for a couple of well-known cleantech companies around Boston. One public company has signed a big deal in China, while the other, an ambitious upstart, is carefully protecting its intellectual property as it heads toward large-scale commercialization.

—A123 Systems (NASDAQ: AONE), the Waltham, MA-based maker of lithium ion batteries, said today it has won a contract with China’s Dongfang Electric, a large manufacturer of wind turbines and power equipment. A123 will provide an energy storage system for Dongfang’s manufacturing facility in Hangzhou by the end of this year. Financial terms weren’t given. If all goes well, this will be A123’s first storage system installed in China.

A report in CNET today has more context on the deal: A123’s battery bank will be attached to a 1.5-megawatt wind turbine and diesel generator to test how well the batteries can smooth out the dips in wind energy production. A123 has car battery manufacturing facilities in China, but no grid storage systems there yet, the report says.

—Joule Unlimited, the Cambridge, MA-based biofuels startup, said today it has been awarded a pair of U.S. patents that cover its method for producing ethanol at high volumes and high efficiencies. The method involves genetically engineering “photosynthetic bacteria”—microorganisms that convert sunlight and carbon dioxide into ethanol without fermenting sugars from cellulose or other types of biomass. The patents (#7,981,647 and #7,968,321), which were granted in the past month, cover various enzymatic mechanisms that Joule has engineered into cells to maximize their ethanol productivity.

Joule has received plenty of media attention since it started in 2007. The company is also applying its method to produce energy in the form of diesel fuel, which could power trucks and planes. Joule has previously been awarded patents in the area of diesel production. The overarching idea is to replace fossil fuels, but most biofuels makers have found “they can’t compete on a cost basis,” said Joule senior vice president Troy Campione, on a panel at our XSITE conference last month. Joule, of course, believes it is different.

The company has a pilot plant in Texas that has been producing ethanol and is slated to start producing diesel later this year. Joule says it has also signed a lease for land in New Mexico on which it is building a demonstration-scale plant that will begin operations next year.

While the new patents should help distance Joule from some of its competitors, they don’t necessarily get the company to commercialization any faster. George Church, the Harvard geneticist (and chairman of Joule’s technical advisory board), was quoted in the New York Times in March saying, “It’s not a totally obvious organism and they’ve changed it pretty radically, so it’s not clear they can protect everything by patents.”

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China has been a Godsend to Detroit. Even as Ford Motor, General Motors, and Chrysler have stumbled in recent years, the country has provided a nice boost to sales of American cars equipped with traditional internal combustible engines.

But when it comes to electric vehicles…well, China has its own plans.

The country is spending billions of dollars to develop home-grown battery and motor technology, hybrids, and full plug-in cars, trucks, and buses. And to protect its nascent industry, the Chinese central government has recently issued draft guidelines that limit foreign investment in certain electric vehicle components and require overseas firms to disclose intellectual property secrets to Chinese companies.

“China wants to place some serious restrictions” on foreign auto makers, says Kevin See, an analyst with Lux Research in Boston. “Clearly, the companies inside China are well positioned to benefit. China wants to protect its value chain all the way to the vehicle.”

The proposed restrictions have alarmed American officials. In an April  letter to U.S. Trade Representative Ron Kirk, Michigan Senators Carl Levin and Debbie Stabenow said the guidelines would block U.S. auto makers from accessing a potentially huge market for electric vehicles.

“We are concerned that these draft regulations continue China’s long history of breaking international trade rules,” the letter reads. “These new draft regulations appear to represent another attempt to illegally gain an unfair advantage over the U.S. automobile industry that will cost our country jobs.”

“If China does implement these practices, [Kirk's office] must use all its available resources—including possible legal action at the World Trade Organization—to end China’s discrimination,” the letter warns.

Since 2009, China has overtaken the United States as the world’s largest auto market. One trip to the country and you’ll see why.

Three years ago, I visited the Changan Ford Mazda car factory in Chongqing, China’s largest municipality, … Next Page »

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I recently had the pleasure of taking a two week academic trip to China with Babson’s MBA program, where several dozen of my classmates and I were led through Beijing, Dalian, and Shanghai by the inimitable Robert Eng. During the course of the journey, our group visited with government officials, leaders from state-owned enterprises, and a number of businesses operated by domestic and foreign owners. While there are many interesting and non-trivial idiosyncrasies of doing business in China, such as the need for government contacts, I thought it would be more informative to share some of the broader business trends that became clear during the course of our visit.

First, China is beginning to capture more of the value chain. As the world’s third largest manufacturer, China has developed a solid reputation as a nation that builds products for Western companies to attach their brands. Apple is one of the most famous examples of this. Perhaps more surprisingly, Nike and Reebok both have their shoes manufactured in the same facility. Li Ning, China’s leading sports apparel maker and the number four sports apparel company in the world, also has its shoes made there. If you’ve heard of Li Ning, you’re ahead of the curve. If not, you probably will soon. Li Ning has begun opening stores in the United States and other countries overseas. In the U.S., it decided to launch its pilot store in Portland, OR, which seems like an odd choice until you realize that it’s right in Nike’s backyard. It’s a bold statement from a bold company and serves an appropriate example for the changing mentality of Chinese business; no longer content with the margins available to them making things for others to sell, the Chinese are now looking for ways to move up the value chain and capture the margins commanded by being a globally recognized brand.

Second, China is starting to look inward for markets. While the rest of the world is still staggering from financial crisis to financial crisis, China’s chugging along at a brisk 9 percent annual growth rate. Shanghai has joined the list of top tier metropolises, on par with London and Moscow, complete with a Starbucks and a McDonald’s around every corner. Shopping malls are awash in luxury brands. With that kind of affluence at home comes increased spending power, and Chinese companies are beginning to recognize the potential of the domestic market. (By Chinese companies, I also mean the Chinese government. State-owned enterprises still command roughly half of the country’s industrial assets, and the government has tentacles in just about every successful business in the country, private ownership or no.) As evidence of this, the 12th Five Year Plan explicitly discusses the yawning trade imbalance that China has created with the U.S. and other nations, and proposes to address this dependence on foreign consumption by directing more goods to the domestic market. It’s uncertain what the government will do about Chinese households’ astronomical savings rate.

Third, national stability is not a guarantee. Incidents of social unrest have been growing more frequent in the past couple years. Chaffed by a widening wealth disparity and the trampling approach to development, Chinese citizens are expressing their dissatisfaction in a way that makes government officials and many members of the business community nervous. Restrictions on freedom of speech and the flow of capital have done a great deal to boost the Communist Party agenda of security and growth, but they’ve also created an economic and social pressure cooker. The 12th Five Year Plan seeks to address these concerns by explaining how the government plans to handle rising inflation and housing costs (regulatory controls), the income gap (higher taxes for the rich), and the blistering pace of development (cleaner environmental standards and lower growth targets). Perhaps more revealing, social stability was a concern voiced by several businessmen we visited during the trip. One Chinese business leader who spoke to our delegation put it especially elegantly: “China will continue to grow as long as the Communist Party is in power. The Communist Party will stay in power as long as China continues to grow.”

The state of Chinese development offers an interesting puzzle: free market incentives bounded by strict financial and political controls. The tremendous opportunities of doing business there are matched by equally tremendous challenges. From this point in history, it almost seems possible that Communist China will continue growing in perpetuity, achieving global dominance in our lifetimes. Or the entire system could collapse spectacularly, and we will ask each other why we didn’t see it coming. 

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[Editor's note: Cross-posted from The Economist, 6/16/11]

As the G8 last month pledged $10 billion to aid the Arab Spring to support the building of economic and political institutions, the May 24th NASDAQ debut of Russia’s $10 billion Yandex was but one of many green shoots of an equally significant Entrepreneurial Spring blossoming out from Chile to China, and Israel to India. Led by two brilliant entrepreneurs who knew how to take native search engine technology and implant it in the emerging Russian marketplace, for over a decade, Yandex, a Moscow-based Internet venture, had been growing inside of its language-walled garden. Finally, after a planned 2008 IPO was foiled by the economic crisis, this ambitious venture burst onto a global stage with the largest NASDAQ Internet offering in recent history.

Like its Middle East counterpart, the Entrepreneurial Spring is a grass roots movement, and, although fertilized by innovations originating in the United States, it is fundamentally global and only loosely connected to America. China’s RenRen, Estonia’s Skype, Japan’s Rakuten, and Bangladesh’s GrameenPhone represent ripe fruits of the last decade’s entrepreneurial investments in environments outside the U.S.

Also similar to its Middle East counterpart, the global Entrepreneurial Spring can lead to the democratization of opportunity and increased control by citizens over their own economic fates. However, just as the Arab Spring is a first fraught step on a long, even treacherous, path, so is the Entrepreneurial Spring neither a panacea nor a fait accompli. Left unaided, exposed to the vicissitudes of climate and availability of resources, the fragile shoots can easily be stunted or trampled. To take root, they will require enlightened leadership and the patient cultivation of a rich environment of institutions and norms in order to become part of a self-sustaining ecosystem.

To sustain and spread these new ventures, like political democracy, leaders everywhere—not only publicly elected leaders, but a broad base of leaders of public and private, formal and informal, institutions—need to democratize the entrepreneurial choice without over-controlling it. That will require deliberately fostering an entrepreneurship ecosystem that (a) is conducive to increasingly broad numbers of citizens making the choice to take their economic futures into their own hands, and, (b) after that choice is made, facilitates the broad, merit-based access to the resources—capital, human, cultural, institutional, educational, and legislative—required in order to be successful. The helping hand and the invisible hand must clasp each other.

Fortunately, there are also green shoots of such enlightened leadership. Startup America, StartUp Britain, Startup Africa, and Start-Up Chile are but a few outward manifestations of the new national priority that leaders are assigning to entrepreneurship. Kauffman Foundation-initiated Global Entrepreneurship Week, launched less than three years ago, already conducts 100,000 discrete activities in more than 100 countries. In four years, Startup Weekend has spread to more than 100 cities in 30 countries with 30,000 participants. These two private initiatives, impressive by themselves, show that leadership of the Entrepreneurial Spring can and must go beyond government.

The bubbling up of the Entrepreneurial Spring shouldn’t be confused with the capital market bubble of social media valuations. Up-and-coming next generation stars from Lebanon (SABIS; management of K-12 schools in 15 countries), to Slovenia (Studio Moderna; multi-channel retailing in 20 countries), to Brazil (Tecsis; wind-turbine blades for the US and Europe) to Iceland (Actavis; generic pharmaceuticals in 40 world markets) show that entrepreneurship spreads far beyond the latest Internet technology. These rapidly growing, high potential ventures––and thousands like them––may still be under the public radar, but they are already having huge impact in their respective fields; no less importantly, they are making their economies more competitive, their citizens more prosperous, and they are creating jobs for many and inspiring further entrepreneurship in others.

For those countries not yet blooming with new ventures, get ready. As the successes become more visible and prove that value-creating entrepreneurship can and does happen anywhere and everywhere, the cultivation of a conducive ecosystem will not be a “nice-to-have” opportunity but a “must-have” necessity. Citizens everywhere will expect and demand the equal access to the possibility of prosperity that entrepreneurship can provide.

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Han Solo was once frozen in “carbonite.” Now Boston’s namesake tech company is emerging from a different kind of deep freeze.

When we last spoke this winter, David Friend said his online data backup firm, Carbonite, was in the late stages of filing for an IPO. The man is true to his word.

Boston-based Carbonite has indeed filed its S-1 registration statement with the SEC and is officially planning to go public as of today. According to the form, the proposed maximum offering is $100 million, but that doesn’t mean much right now. The company isn’t saying yet how many shares it will offer, or the price range for the offering, but if all goes well, its stock will trade on the Nasdaq under the ticker symbol CARB.

The tech IPO market appears to be thawing in New England after a nearly two-year freeze. In recent months, Connecticut-based travel firm Kayak has filed to go public, and Cambridge, MA-based Zipcar held its initial public offering last month. (Meanwhile, e-mail software firm SMTP took a much less conventional route to its IPO a couple weeks ago.)

But back to Carbonite. The company, led by Friend the CEO, has raised more than $67 million in venture capital to date. It first rolled out its data-backup service for consumers in 2006, and more recently has increased its focus on business customers, who Friend said account for between one-third and one-half of Carbonite’s total revenue. Its main competitor over the years has been Mozy (now part of Hopkinton, MA-based EMC). As of January, Carbonite had about 160 employees in Boston, plus some 200 additional full-time equivalents.

More recently, as of April 30, Carbonite had more than 1 million subscribers (both consumers and business users) in more than 100 countries, according to its SEC filing. The company says it has backed up more than 100 billion files since 2005, restoring 7 billion-plus that might have been lost forever. It currently backs up more than 200 million files a day worldwide.

Carbonite is not yet profitable, but its business is growing. The company had revenues of $38.6 million in 2010 (up from $19.1 million in 2009), and $12.8 million in the first three months of 2011. It incurred a net loss of $25.8 million last year, and $5.3 million in the first quarter of this year. The company says the losses are primarily because of large investments in advertising to acquire customers.

A few other strategic nuggets from the SEC filing: Beyond the U.S., Carbonite plans to roll out a data-backup product for businesses in China over the next year. And it plans to start marketing in Europe in 2012. Another big potential growth area is backing up smartphones and tablet computers. The risks to Carbonite’s business, according to the form, include not bringing in enough new customers, not retaining customers, not gaining widespread adoption on mobile devices and with business users, and data security issues.

If the IPO goes through, a number of investors and company execs stand to gain from it. Menlo Ventures, led by managing director Pravin Vazirani, is the lead investor and owns 31.7 percent of the company. Performance Direct Investments owns 5.8 percent, Crosslink Venture Partners owns 5.7 percent, and First Plaza Group Trust is next in line with 5.4 percent. Among executive officers, CEO David Friend and chief architect Jeff Flowers are tops with 9.7 percent and 8.3 percent of the stock, respectively.

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A New England energy giant is making big strides overseas. Devens, MA-based American Superconductor (NASDAQ: AMSC) said today it plans to acquire The Switch Engineering Oy, a power technologies firm based in Finland, for 190 million Euros (about $265 million) in cash and stock. The deal is expected to close by the end of August.

American Superconductor, which focuses on wind power and other renewable energy technologies, says the acquisition will make money immediately and will support the firm’s growth to $1 billion in annual revenue by 2014. The Switch makes power converter systems, permanent magnet generators, and other equipment for wind turbine manufacturers in China, Europe, Korea, and the U.S. The Finnish company made a profit of about $15 million on $179 million in revenue in calendar year 2010.

AMSC’s fiscal year 2009 (ending March 31, 2010) was its first full year of profitability, thanks in large part to its wind power business. The company says it expects “another record year of revenues and earnings in fiscal 2010,” which ends this month.

AMSC, which was founded in 1987 by four MIT professors (including current CEO and chairman Greg Yurek), initially entered the wind power market in 2006-2007. The company has a strong presence in Europe, China, and India.

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Former Washington Gov. Gary Locke’s nomination as the U.S. ambassador to China puts someone the state’s business community knows very well at the forefront of one of the nation’s most important global relationships.

That doesn’t mean every Seattle-area company can expect the red-carpet treatment in Beijing—after all, presuming he’s confirmed by the Senate (which seems likely), Locke will be representing the entire country, not just his home state of Washington.

But some folks we talked with said that, essentially, it can’t hurt to have a familiar face manning the desk in what is perhaps the country’s highest-profile ambassadorial posting. China, by the way, is Washington state’s largest export market and second only to Canada in two-way trade, according to the state Commerce Department.

“We’re not going to be expecting Gary to be spending all his time thinking about Washington state,” says state Commerce Director Rogers Weed. “But I think the fact that he’s coming right out of the [federal] Commerce role, and being a connection to industry in the Obama administration, means he’s going to be tuned in to the trade and industry issues pretty naturally, which I think is a positive for any industry our state.”

Weed also notes that Locke’s legal background—he’s a lawyer by training and spent his early post-gubernatorial years at Davis Wright Tremaine—is a bonus for technology businesses that face tons of intellectual property worries in China. As Microsoft CEO Steve Ballmer has prominently noted, the company estimates that only one of every 10 Microsoft users in China is actually paying for the products.

And don’t forget the people who worked for Locke during his days in the governor’s office who are now sprinkled throughout the private sector in Washington. That group includes Fred Kiga, a former Locke chief of staff who now works on policy issues for Amazon.com, and Roger Nyhus, a former communications director whose eponymous firm represents clients in life sciences, technology and clean energy.

Joseph Borich is president of the Washington State China Relations Council, a private nonprofit business association that works to strengthen ties with China. Borich sees plenty of growth potential in China for companies in Washington’s innovation sector.

“Many of them are fairly new. Some of them are still looking for more capitalization. Most, if not all of them, have international products and technologies, but they’re still trying to find some footing,” Borich says. “My sense is, for most of them, there is some interest in China but most of them are not ready to take that plunge.”

However, Borich adds, that could change significantly in the coming years.

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Foreign competition is rising, and U.S. consumers haven’t departed from their penny-pinching mentality of The Great Recession, and behind this double whammy the cleantech industry is feeling the squeeze. That’s one of the big impressions I came away with after polling a crop of cleantech experts from Xconomy’s network of advisors and op-ed contributors for their predictions for 2011. But take heart; there’s plenty of room for optimism, especially in the fields of energy efficiency and monitoring, where the U.S. may be leading the way to a greener future that’s much more achievable—at least in the short term—than through any form of alternative energy.

One sub-theme was pretty overwhelming among the responses I received: the actual materials manufacturing side of cleantech (i.e. the production of components for generating solar and wind energy, efficient batteries, and LED chips) is struggling, but energy-focused software and services are rising to the occasion. A number of Xconomists and contributors have pointed out that the U.S. cleantech manufacturing base is weakening due to competition from countries like China, which offer cheaper production and strong government incentives (or mandates) for adopting the new technology.

“It’s a rapidly commoditizing good,” Ray Demeo, VP of worldwide sales at Marlborough, MA-based Coolcentric, says of solar equipment. “The price that China can produce the product at is lower than U.S. manufacturers.”

Additionally, consumers and investors are nervous about spending upfront on things like efficient appliances, electric vehicles, or solar power, to get cleaner sources of energy into their homes (or cars), and would rather find ways to save. Makes enough sense. That’s actually the silver lining for the cleantech space, though, several experts say.

“The fundamental business proposition is we will go in and evaluate some aspect of your energy utilization and we will cut your cost—-I won’t be surprised to see those kinds of business models continue to thrive,” says Tom Ranken, president and CEO of the Washington Clean Technology Alliance. “Ten to 15 years from now, people might be slapping themselves upside the head saying, ‘how did I miss that?’”

Here’s a roundup of some specific predictions we gathered from our network of cities:

—Stephen Mayfield, director of the San Diego Center for Algae Biotechnology and a professor in UC San Diego’s Department of Molecular Biology, said we can expect to see a slew of biofuels advances this year:

• The first synthetic algal genome.
• The first significant scale-up of

… Next Page »

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