Chinese venture investments in the United States, 2010–2017

• Author: Frank Ohara,John Gonzales
• Published date: 01 March 2019
• Date: 01 March 2019
• DOI: http://doi.org/10.1002/tie.22017

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Chinese venture investments in the United States, 2010–2017

John Gonzales | Frank Ohara

Department of Finance, School of

Management, University of San Francisco,

San Francisco, California

Correspondence

John Gonzales, Department of Finance, School

of Management, University of San Francisco,

2130 Fulton St, San Francisco, CA 94117.

Email: gonzales@usfca.edu

This article contributes to the understanding of Chinese venture investors in the United States

by comprehensively measuring the amount and type of venture investments coming to the

United States from China. Venture activity is examined by focusing on the number of invest-

ments made by venture capital funds, both U.S.- and China-based that include Chinese corpora-

tions undertaking corporate venture capital (CVC). Chinese participation in venture funding of

United States emerging companies increased from 21 investments in 2010 to 407 in 2016 and

2017. Venture capital funds account for 78% of the investment activity, with Chinese CVC

undertaking 22% of the investments. We contribute to the literature of CVC by providing defini-

tions of three specific types of investing firms: corporate funds, strategic investors, and strategic

partnerships. In addition, we provide data and examine the motivations of Chinese firms forming

strategic partnerships with United States startups.

KEYWORDS

Chinese venture outflows, corporate venture capital, cross-border ventures, strategic

investors, strategic partnerships, venture capital

1|INTRODUCTION

Chinese participation in venture funding of United States emerging

companies has increased from 21 investments in 2010 to 407 invest-

ments in 2016 and 2017. In this article, we examine the types of Chi-

nese venture investors, initially grouping these into venture capital

funds and corporate venture capital (CVC). We also focus on invest-

ments in terms of the stage of development of the firm receiving

funding and the sectors in which the money has been invested. There

has been a significant amount of discussion in Silicon Valley in recent

years regarding venture money coming from China, but limited docu-

mentation as to what has taken place. Our research contributes to the

understanding of Chinese venture investors in the United States by

comprehensively measuring the amount and type of venture invest-

ments coming to the United States from China.

1

We are examining the venture and startup world, and, therefore,

do not include mergers, acquisitions, and private equity. The data

reported here are publicly available, and were mostly based on a press

release of the funded company. In a few cases, the data were provided

by information on the investor's website or a news article. It is likely

that we have underestimated the number of Chinese investments, as it

is not possible to be aware of an investment unless the funded com-

pany issues a press release or the investor includes the companyin its

published portfolio. Anecdotal evidence indicates there are manydeals

where both parties decide to not divulge the investment information.

More specifically, we have likely undercounted the number of angel

investors,as there is no public record for many angel investments.

In only a small number of cases, it is possible to identify the

amount of money invested by a specific Chinese investor. The major-

ity of the investments examined here involve a syndicate of investors,

and data are not available on how much each investor contributed. In

addition, the majority of investments involving Chinese investors are

through a venture capital fund, and information is not available about

the contribution of Chinese limited partners to any given venture

fund. Therefore, the focus here is on the number of investments made

by Chinese corporations with a venture arm and venture capital funds,

both U.S.- and China-based, that include Chinese limited partners.

This is a better indicator of Chinese venture activity in the United

States startup world than the amount of money invested (even if

these data available). Suppose in a given year there were 128 invest-

ments totaling $980 million and in the following year there were

162 investments totaling $920 million. The view in this article is that

1

A number of venture capital and startup news and data providers have exam-

ined this topic, but report only a limited number of Chinese venture investments

in the U.S. See CB Insights (2016a, 2016b), Fannin (2018), Pitchbook (2015) and

TechCrunch (2016).

DOI: 10.1002/tie.22017

Thunderbird Int. Bus. Rev. 2019;61:123–131. wileyonlinelibrary.com/journal/tie © 2018 Wiley Periodicals, Inc. 123