China VC Flocking to Silicon Valley

Note from the CEO:  China capital restrictions on money fleeing the country? Well yeah, their people may not be able to get cash out of an ATM in Macau (to gamble?) BUT no problem investing in Silicon Valley startups. Seems funding US technology firms are NOT subject to the new capital restrictions. Or, the tech savvy folks know how to beat the system.

It seems pretty simple. United States startup technology firms need capital to get off the ground (demand) and the liquidity for them (supply) is coming from……….China. Big time. Way back in 2011 the Chinese made around two dozen deals but that has increased to roughly 50 deals per quarter. Although the actual dollar amount has decreased slightly, the number of investors has increased. It seems that more Chinese have “discovered” the US and its tech smarts. Interesting read.

“It seems counterintuitive that a more pedestrian tech market like the U.S. should be drawing funds from China, where the scene is vibrant and growing at a rapid clip. Even more so when there are still buckets of money in the world’s largest economy waiting to be deployed.

A demand-side model would suggest that when startups need cash to expand, they tap whatever funds they can, and with liquidity close by, there’s no reason that shouldn’t come from North America. But currently, it seems the supply side is dictating things, and Chinese money has the loudest voice in the trading pit.

From barely two dozen annually back in 2011, investors from China have been joining around 50 U.S. technology-financing deals per quarter over the past two years, according to data from CB Insights. What’s interesting is that while the amount of Chinese money being pumped into U.S. tech has tapered off, the number of investors is headed for a new annual record.”

Source: Bloomberg