US tech start-ups are increasingly pressuring Chinese investors to reduce their stakes amidst tighter controls on foreign ownership, leading to a trend of divestment and relocations to access advanced technologies and higher-paying markets.
US Tech Firms Push Chinese Venture Capital Out of Start-Ups
Tech start-ups in the US are increasingly pressuring Chinese investors to reduce or divest their stakes due to growing expectations of tighter controls on foreign ownership from Washington. HeyGen, a generative AI start-up founded in Shenzhen and now based in Los Angeles, recently requested its Chinese investors, including IDG Capital, Baidu Ventures, and HongShan, to sell shares to US counterparts. This move resulted in a significant reduction of stakes held by Chinese investors.
HeyGen, co-founded by former Snap software engineer Joshua Xu, completed a funding round led by Benchmark in March. The start-up’s relocation to the US allows it to access advanced AI chips, which are barred from export to China, and target higher-paying customers like Salesforce, Nvidia, Volvo, and Amazon.
This trend of pushing out Chinese investment is becoming more common as US investors grow wary of potential new regulations against Chinese stakes in tech companies. Legal experts point out that while there are no current US rules preventing Chinese minority investments in US companies, the increasing scrutiny and tightened controls could affect such investments.
At the same time, US regulators are escalating antitrust investigations into the dominant roles of AI firms like Microsoft, OpenAI, and Nvidia. The Justice Department and the Federal Trade Commission (FTC) have divided responsibilities, with the former focusing on Nvidia’s potential antitrust violations and the latter examining Microsoft and OpenAI.
These regulatory moves highlight the growing concern over the influence and control of leading AI technologies by major tech players. The investigations are part of a broader effort by the Biden administration to curb the dominance of big tech companies in emerging fields, including artificial intelligence.
