US-China Tech Cold War Starves Some Silicon Valley Startups

split, Ji, Trump
KEY POINTS
  • Chinese venture capitalists are retreating from Silicon Valley’s start-up scene.
  • Venture capital deals in the U.S. with at least one China investor fell to 163 deals and $6.5 billion of investment in 2019, according to private equity data tracking firm Preqin.
  • That’s down from 236 deals in 2018, which had amounted to $10.8 billion.
  • Read more of Rebecca Fannin’s article at CNBC here:

San Jose-based virtual reality start-up uSens was ramping up quickly until late last year when issues over the U.S.-China tech cold war intervened. The fast-charging computer vision company hit a dead end when it couldn’t raise funding from its previous Chinese investors including IDG Capital and Fosun Kinzon Capital that had pumped $27 million in the startup.

Now uSens has shut down its U.S. office, laid off everyone except one salesperson, and moved remaining staff to China.

“Terrible things were happening,” said He, recalling the succession of events. “Now we are trying to survive,” says CEO Anli Hi. She blames fallout from the U.S.-China tech cold war for investor reluctance, both from China and American funds, to put more money into her high-tech start-up. “It was too easy to get capital from China-backed venture capitalists that had investment branches in Silicon Valley and liked to invest in cross-border deals at pretty high valuations,” she noted, adding that “lots of Chinese investors withdrew from the U.S., and then U.S. investors decided not to invest, too,” in U.S.-China-rooted start-ups.

Issues over national security threats and competition with China for future technology leadership are stopping the flow of China investment in tech companies. In the process, cross-border U.S.-China collaboration that has long fueled next-generation innovations is being stifled.

The outbreak of the coronavirus is taking its toll, too, as travel to and from China in the Mainland is being restricted and partners are staying put outside the country.