Chinese venture capitalists are retreating from Silicon Valley's start-up scene as the Trump administration ramps up scrutiny over critical U.S. technologies.
over the past few years is gone and most such deals "are not even attempted anymore." He sums it up this way, China has "become a negative for all start-ups in the ecosystem. China is off limits."
Fueling the rush were several well-known, privately held Chinese VC firms such as CSC Upshot, ZhenFund and Kai-Fu Lee's Sinovation Ventures, Chinese conglomerate Tencent, financial institution Ping An, accelerator TechCode in Beijing, numerous angel investors and state-owned funds such as Shanghai International Group's Sailing Capital.
This stepped-up scrutiny was extended to include deals involving minority stakes below 10%, which takes in venture deals, many of them from China. The vetting also encompasses detailed information on venture fund structures and board seats, and has led to greater caution by U.S. venture firms about inviting limited partners with Chinese citizenship, the Rhodium report notes.
Meanwhile, some China acquisitions involving U.S. companies that were made several years ago are now under retroactive reviews. For instance, a deal by Shanghai-based social media service Musical.ly to buy short video app TikTok in 2017 is being re-examined by CFIUS, the Committee on Foreign Investment in the U.S.
Moreover, ZZ Ventures, a San Francisco venture shop investing in technology start-ups and backed by real estate developer Zhongzhi Enterprise Group, has shut down and is selling most of its U.S. portfolio companies. Former managing director Tracy Wang is staying put in the San Francisco Bay Area, and expects to soon launch a new, U.S.-focused fund Agate Capital Partners.
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