At the AVCJ HK conference, I enjoyed talking and listening about — How Asia VC’s are executing deals in Silicon Valley.

Exploding growth of Chinese investments in US tech

The Asian VC’s commented on the growing role of Chinese investors in Silicon Valley. Some quick facts:

25% of investments in US startups last year came from China. Javier David (CNBC Aug 13, 2016).

China cross-border M&A in the technology sector has grown from $8b in 2015 to over $40b in 2016 thus far. Morgan Stanley on Nov 3, 2016.

On a personal basis, the Asian VC’s said that they know many Asian VC’s who have moved to Silicon Valley.

But, will it last?

In Silicon Valley, we have seen many outside investors — come and go. We call them tourist investors.

As China lost nearly $1 trillion of foreign currency (as shown on the left), we wonder if the Chinese investment in US Tech will continue at the same pace.

The WSJ just noted that: Foreign Companies Face New Clampdown for Getting Money out of China. “Until this week, big companies could ‘sweep’ $50m out of China; now, cap is equivalent of $5m.”

Suggestions from the Conference

Is the money already outside China? A US VC noted that, in structuring deals with Chinese acquirers, it is extremely important to know the source and location of the acquirer’s funds. They charge a premium if the funds are still inside China. He also strongly encouraged a back up plan until the deal actually has closed.

Will US government approval be required? A Chinese VC raised a different issue — whether US government approval is required. He highlighted some major transactions which were discouraged by CFIUS.

Below is a picture of the conference.