(Yicai) July 21 -- As China rolls out more policies aimed at boosting technological innovation, more opportunities are being created for private equity and venture capital firms that are focused on investments in hard and core tech, the founding partner of venture capital firm CAS Star told Yicai in a recent interview.

“We’re clearly seeing stronger support from China’s capital markets for hard tech firms. The business environment for these companies is becoming more favorable, and the industry is moving in the right direction,” said Li Hao, whose company CAS Star has issued more than CNY400 million (USD55.7 million) in science and innovation bonds in the past month alone.

The China Securities Regulatory Commission, for instance, further eased initial public offering restrictions on unprofitable tech companies last month. The regulator expanded its previous policy, which targeted biotech firms, to include sectors such as artificial intelligence, commercial aerospace and the low-altitude economy, giving more pre-profit science and technology companies the chance to go public as soon as possible.

“Allowing unprofitable tech companies to list has a positive impact on the primary market for early-stage investments. It changes the investment dynamics for these kinds of firms,” Li said.

“Taking a startup from zero revenue or even losses to profitability requires a lot of time and capital. It is difficult to only rely on primary market investors, and requires synergy with the secondary market,” he added. By allowing a wider range of unprofitable tech firms to go public on the Shanghai bourse’s Star Market or the Shenzhen Stock Exchange’s ChiNext Board, the CSRC’s new measure is seen as a significant move to support the growth of these firms.

And another new policy rolled out in May permits tech-focused investment institutions to issue science and innovation bonds, which should help alleviate current fundraising challenges, Li said. This policy, which allows venture capital firms to issue bonds in the interbank bond market for the purpose of fundraising, will help broaden funding channels for venture capitalists and ensure capital flows more efficiently to tech firms working on critical, cutting-edge technologies.

As of the end of last year, CAS Star, which was founded in 2013, had already invested in and incubated over 500 hard tech startups. Just last year alone, the Xi-an based firm invested in more than 80 projects across a wide variety of sectors including optoelectronics chips, renewable energy, new materials and biomedicine.

Li has led investments in promising startups such as Wayzim, a leading supplier of intelligent logistics equipment, solid-state battery firm Welion New Energy Technology, robotics manufacturer Agibot and other tech startups. Notably, Wayzim went public on Shanghai’s Star Market in 2021.

Apart from direct investments, CAS Star is also supporting hard tech startups through bond issuances. In the past month, the firm issued CNY400 million in science and technology innovation bonds and has also teamed up with several limited partners to form a pioneer venture capital investment fund, targeting investments in key sectors such as AI, optoelectronic chips and biomedicine.

Editors: Tang Shihua, Kim Taylor