
Chinese venture funding in U.S. startups has slowed under new regulatory regime - skilled
https://www.reuters.com/article/us-venture-china-regulation-insight/chinese-tech-investors-flee-silicon-valley-as-trump-tightens-scrutiny-idUSKCN1P10CB
======
JumpCrisscross
> _Chinese venture funding in U.S. startups has slowed to a trickle, Reuters
> interviews with more than 35 industry players show_

Garbage article based on a small sample of anecdotes. In that spirit, I’ll add
one.

I work with international investors. Chinese interest in American technology
companies continues to rise. If I were to characterise recent shifts resulting
from politics, it’s one from controlling interests to minority interests and
one from funds to direct investments. My guess is this Reuters author only
spoke to VCs and M&A bankers.

(Counterfactual: China’s biggest cheque writers were historically state-owned
companies and mainland-listed companies buying earnings. The former is being
politically checked. The latter lost steam when the Chinese stock market
tanked. But neither is a major direct source of investment for early- or
growth-stage companies, nor even the funds that invest in them.)

~~~
ThomPete
I don't think the question is whether chinese are interested in investing in
US technology companies but rather whether they are allowed to. Several
countries within the EU are also working on rules which will make it much
harder for Chines investors to acquire access to technology IP or important
infrastructure companies.

Other than that I agree the article is poorly researched.

~~~
JumpCrisscross
> _Several countries within the EU are also working on rules which will make
> it much harder for Chines investors to acquire access to technology IP or
> important infrastructure companies_

Many private companies resist disclosing even financials to their investors
[1].

Venture investing is characterised by non-controlling interests. The
restrictions you describe limit controlling investments. Those investments
count as technology investments. But not as “venture funding in...startups.”

[1]
[https://www.google.com/amp/s/mobile.reuters.com/article/amp/...](https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSKCN1G62NK)

~~~
ig1
The new Foreign Investment Risk Review Modernization Act has bought minority
investments into the scope of CFIUS reviews.

~~~
JumpCrisscross
> _Foreign Investment Risk Review Modernization Act has bought minority
> investments into the scope of CFIUS reviews_

Not all minority investments. Simply ones “in a critical technology company
that gives the foreign entity:

\- access to any material non-public technical information of the company;

\- membership or observer rights on the company’s board or equivalent
governing body; _or_

\- any involvement in substantive decision-making of the company, other than
through voting of shares” [1].

[1] [https://techcrunch.com/2018/08/17/a-new-foreign-
investment-b...](https://techcrunch.com/2018/08/17/a-new-foreign-investment-
bill-will-impact-venture-capital-and-the-u-s-startup-ecosystem/)

~~~
ThomPete
"\- access to any material non-public technical information of the company;"

wouldn't that cover more or less any relevant investment in a startup?

~~~
JumpCrisscross
No. Many private companies routinely disclose much less to investors [1].

Technical information rights go beyond standard and statutory investor
information rights, and are typically reserved for strategic investors,
knowledgeable lead investors and board members.

[1] [https://www.reuters.com/article/us-palantir-technologies-
law...](https://www.reuters.com/article/us-palantir-technologies-lawsuit-
idUSKCN1G62NK)

~~~
ThomPete
I am not so sure that's correct in reality. Maybe technically but not in
reality especially not for small startups.

------
zavi
Having spent the last few weeks in Beijing, I can't help but think that any
reasonable trade compromise should essentially require that China get rid of
its Great Firewall. When you block and throttle essentially any foreign
digital product and service in this day and age you are not practicing free
trade. Tariffs / IP protections / dumping / FDI restrictions are all important
but so long as the Firewall is in place international community should block
China from selling any digital and physical goods. WTO rules should be updated
to forbid digital blocking and throttling.

~~~
chj
strange thing is that it is often ignored in trade negotiations.

~~~
adventured
The firewall and aggressive social repression in general is a red line for
China, much like their claims of owning Taiwan and the inevitability of
annexation. The dictatorship that runs China - both the remaining old party
system and the new system run by Xi - can't exist without the firewall, it's
off limits accordingly.

China won't come to the table if you put the firewall in the list of things to
be negotiated, that's why it so rarely comes up. For them what that means is,
they'd rather suffer any external consequences in trade & economy, and the
domestic suffering that passes on to the people, than give up their reign.

~~~
piiswrong
The firewall will disappear when China has a strong enough propaganda machine
that can counter the western propaganda machine (think Hollywood & BBC). China
has been working on it for a few years. Shouldn't take too long. Maybe a
decade or so.

------
ThomPete
Everyone wants improvement but hate change. I for one welcome this stance and
although I fear it won't help much as this is about technology and technology
> the policy but hopefully the consequences of this will have some
illuminating outcomes.

------
aaavl2821
I've been tracking venture investment in biotech and Chinese investment was
pretty steady through all of 2018, though they began leading fewer deals and
doing more follow on investments

Anecdotally, there's a big healthcare conference in SF this week, and several
of the Chinese investors we planned on meeting canceled their trips

~~~
thesausageking
What data are you using? Was there a change after the CFIUS rules went into
affect on Nov 10th?

~~~
aaavl2821
I'm using data I collected myself. No guarantee that it's comprehensive but it
seems not far off the data collected by Pitchbook per this report [0]

Don't have the data in front of me but I think the change happened a bit
before november

[0] [https://www.prnewswire.com/news-releases/silicon-valley-
bank...](https://www.prnewswire.com/news-releases/silicon-valley-
banks-2019-healthcare-report-reveals-record-venture-investment-in-the-us-and-
europe-300773638.html)

------
Roritharr
I wonder if this will accelerate Chinese Investment in EU Startups?

~~~
mark_l_watson
Not in France. I just read that they are working on blocking foreign
investment in key tech like AI, crypto, etc.

~~~
nopetrain
> _key tech like AI, crypto_

Crypto is not a key tech.

~~~
StreamBright
And it never will be. I don't understand why so many people on Hn are obsessed
with this utter garbage what crypto means.

------
jaimex2
Only 3 billion? Thats chump change in SV.

~~~
bassman9000
Indeed. $140B in 6 years

[https://www.cbinsights.com/research/report/global-tech-
hubs/](https://www.cbinsights.com/research/report/global-tech-hubs/)

------
shanghaiaway
I guess the US are against free markets

~~~
spricket
China is notorious for requiring "joint ventures" and other rediculous hoops
to invest in China. The US wants free markets to go both ways.

This is just like the trade tarrifs, some pressure to convince China to play
by the same rules as other developed countries when it comes to trade and IP

~~~
shanghaiaway
This is whataboutism. The US is restricting the free market - regardless of
what any other country does.

~~~
spricket
It's only restricting foreign investments from certain countries like China
that don't play by the rules. It's like banning someone from your store
because they steal stuff.

The "free market" isn't anarchy, it's essentially a bunch of bilateral trade
agreements

~~~
shanghaiaway
Nonsense. The US is restricting trade. Frankly, I'd like to see WTO step in
here.

~~~
dageshi
WTO will have little to say on the matter in the same way that it had little
to say on the restrictions on trade China has enforced for its domestic market
for decades.

------
coliveira
Another case where the US is shooting itself in the foot. Chinese money will
now invest in local Chinese startups, which are growing very quickly, and in
other countries other than the US.

