Start-ups are caught in middle of US-China tech cold war as investors pull back
- Chinese venture capital investment in the US plummets amid more stringent regulations in Washington along with a slowdown of China’s economy
- The trade war and other tensions are starting to affect early-stage investment patterns and start-up innovation
Cici Zuo is working seven days a week to raise the necessary funding to expand and diversify her start-up software firm and its Asian-focused customer base in the US. But she has been running into walls, primarily because her team is too Chinese, which in the current environment is increasingly interpreted as a national security threat.
With more American investors staying away from projects with China ties and Chinese investors becoming reluctant to jump through hoops to invest in the US, Zuo is behind schedule to complete a new funding round by the end of September.
“As a US start-up founded by Chinese, we are in a very awkward position right now. We are seen as a foreign entity to investors on both sides,” said Zuo, who asked that her company’s identity not be revealed for fear of harming business prospects.
“We are not going to die without the money. But we will not live well either,” she said. “Scale and speed are critical for any start-up, neither of which can be delivered without money.”
The four-year-old company, which has raised over US$10 million from US and Chinese investors, is caught in the middle of a tech cold war between the world’s top two economies. A digital iron curtain was drawn when US President Donald Trump moved against Chinese telecoms giant Huawei Technologies, citing national security concerns.
The tensions are not only forcing corporations along the global supply chain to choose sides, but are starting to affect early-stage investment patterns and start-up innovation.