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American VC Firms Investing Billions into PRC Companies Fueling the CCP Military
- adventured 3y ago(1990-2020) American corporations investing trillions into PRC companies, fueling superpower.
- spamizbad 3y agoIt's interesting that the VC industry likes to talk about how American must do XYZ to stay competitive with China - and how that typically means more dollars flowing into them. A portion of those proceeds then get funneled into making China more competitive as well. Playing both sides - a brilliant system!
- alephnerd 3y ago> the VC industry VC is a broad term. Most of the time the Chinese and Indian operations of VC funds are separated from the American fund, and have a different set of partners and a different pot of money. It was because of this that international funds like Sequoia divested their American fund from their Chinese and Indian funds. This was a reason behind why YC ended up shutting down YC India and YC China around 2018-19 (but also because they couldn't compete with Sequoia India-now-Peak XV Surge or Antler in Asia)
- Mistletoe 3y agoDoes all the money made from Sequoia China and India just go right to the top to Sequoia though?
- alephnerd 3y ago> go right to the top to Sequoia They go to the partners managing the individual fund. A VC Fund is basically like a bottle of wine. Each fund raises a vintage, and any profit (or loss) from that vintage is kept within the vintage itself. VCs make money from their operating funds - they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. That money goes to the staff of the Fund who are operating the vintage to pay for salaries, office space, business expenses, etc. Most VCs end up making way less money than if they remained a PM or Engineer, but the work is intellectually rewarding and upsides/fame can be massive.
- mattmaroon 3y agoBottles of wine are not separately incorporated. A “vintage” of wine is just one product put out by a winery. If one somehow went really bad (like it killed people and lost a big judgement or something else far fetched) it would bankrupt the vintner and the other wines would stop being made. Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building. If one VC fund lost money, only the LPs would suffer, the firms other funds would still operate independently.
- alephnerd 3y ago> Perhaps a better way to phrase it is that each firm is like a real estate patent corporation and each fund is its own separate but owned corporation, the way commercial real estate companies incorporate every building Great point! Wasn't sure if most readers on HN know that fact though. Though, > Bottles of wine are not separately incorporated is starting to happen in a way. Lots of Wines are just a brandname now with different vintages just being sourced from different growers and fermenters directly, so a no-name Winery could rent out an established brand and it's associated cache
- Mistletoe 3y ago>they charge investors around 1.5-3% (depending on fund size) in Annual Management Fees. https://www.sequoiafund.com/performance/ https://www.sequoiafund.com/performance/ Do the numbers here include that 1.5-3% or should it be subtracted out? It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years.
- alephnerd 3y agoThat is fund performance, not Asset Managament fees. > It looks like they have severely underperformed the SP500 for the last 3, 5, 10 years. Yep! That was why Sequoia Fund (the US operation and brand owner) had India+SEA and China funds created in the 2010s and why they began restructuring in 2020-23 [0] [0] - https://www.axios.com/2021/10/26/sequoia-capital-fund-venture-capital-model https://www.axios.com/2021/10/26/sequoia-capital-fund-ventur...
- mtillman 3y agoNo idea about Sequoia but they tend towards conservative on the legal side of things. Some VC firms license the name so there's a franchise fee which often includes carry and/or fee percentage participation even though there isn't direct ownership.
- alephnerd 3y ago> license the name Accel and Sequoia did/do this. Seqouia's got tricky because their US fund is heavily invested in US Sustainability tech, and they were overinvested in China leading to reputational issues for their US fund
- atlasunshrugged 3y agoI always thought that was quite funny too. Like a16z with an American Dynamism practice while also having massive investments in crypto where many (like Balaji for instance) are advocating for exit from the U.S. and looking for ways to circumvent the US monetary system, which is one of the most powerful tools the US has to enforce its will globally Edit to add that this also goes for plenty of companies: See Microsoft with their AI center in Beijing despite being a major provider of services to the U.S. government. https://thedispatch.com/article/microsoft-issues-warning-about-chinese-ai-that-microsoft-itself-helped-create/ https://thedispatch.com/article/microsoft-issues-warning-abo...
- tschellenbach 3y agoMeanwhile, TikTok and Agora are still going strong. Shouldn't they address that?
- jamesredd 3y agoYou want politicians to restrict the freedom of speech of US citizens?
- loandbehold 3y agoBanning a social media platform controlled by a geopolitical enemy has nothing to do with free speech. The ban wouldn't be on a specific type of speech by rather on a platform. Users can still post all those videos outside of TikTok.
- nickthegreek 3y agoAddress what? The lack of privacy laws for American citizens across all social media?
- adventured 3y agoPrivacy laws don't fix the TikTok problem. It's wildly popular in the EU just the same. Whatever China is getting out of TikTok in terms of data behind the scenes, they're getting it just the same from the EU as they are the US. The issue is the fact that Chinese companies have dramatically better access to the US market than American firms have access to the Chinese market. This is a regulatory and trade failure of extreme incompetence that has never been properly addressed by Congress or the President. If Facebook, X, Pinterest, Reddit, et al. can't exist freely in China, then TikTok doesn't get access to the US (until ByteDance becomes a minority shareholder etc).
- ramblenode 3y ago> If Facebook, X, Pinterest, Reddit, et al. can't exist freely in China, then TikTok doesn't get access to the US (until ByteDance becomes a minority shareholder etc). TikTok follows US law. The companies you mentioned exited China because they didn't want to build out their own part of the Great Firewall. The irony in this criticism is that the US companies were mostly responding to domestic political pressure not to abet Chinese censorship. So it was more like export controls that caused the exodus of US companies rather than import controls.
- ThisIsMyAltAcct 3y ago> The five firms used as case studies in the investigation are GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital China, and Walden International https://selectcommitteeontheccp.house.gov/media/letters/letters-venture-capital-firms-funding-problematic-prc-companies https://selectcommitteeontheccp.house.gov/media/letters/lett...
- whimsicalism 3y agoEconomic decoupling only makes conflict more likely. Is that obvious to everyone in government and everyone just wants conflict? Or are there voices trying to de-escalate?
- woooooo 3y agoIt's like being "tough on crime", nuanced takes can't compete with slogans.
- atlasunshrugged 3y agoI think there is quite a lot of skepticism about Ostpolitik and the benefits of close economic integration given it did little to prevent Russia entering a war with Ukraine.
- whimsicalism 3y agoThe West and Russia have been decoupling economically since the 2010s. People are too easily swayed by 'current thing'. Russia's invasion is in the context of centuries of declining conflict globally - and even in Europe an unprecedented level of peace for the past 70 years.
- throwaway4good 3y agoAnd this particular thing is silly. China's investment into the US is much larger than the US's investment into China.
- tikkun 3y agoIs there a good book or blog post on what a good approach is for US-China relations, based on historical analogies and other frameworks? I'm curious because at first glance, it seemed bad that US VC firms are investing in these PRC companies, but then reading your comment, that makes sense too. So, I'm wondering if someone smart has already woven together a nice book that makes sense of it all - either China specific or generally for avoiding global conflict amongst superpowers.
- azinman2 3y ago
- jhp123 3y agois there any allegation of illegal behavior here? Or are VCs supposed to go out ahead of Congress in sanctioning supposed enemies?
- lenerdenator 3y agoDepends on how far you want to go in making accusations of "aid and comfort".
- jhp123 3y agoWe're not at war with China! edit: the same document that defines "aid and comfort to the enemy" as treason has a specific procedure for declaring war which hasn't happened.
- bequanna 3y agoWe are rapidly decoupling and I think most in the US/West consider China a strong threat at best and enemy at worst.
- alephnerd 3y ago> most in the US/West consider China a strong threa North America and the Pacific does. The EU is still indifferent as they feel Russia is the larger threat. And it makes sense. Living in the West Coast, China is much closer than where the fighting would happen in Eastern Europe. For most of Europe, it's the other way around.
- lenerdenator 3y agoThis will change. Actually, it's changing as we speak. The 2022 invasion of Ukraine basically slammed the door on Western investment/business in Russia. Sure, some companies have yet to divest, but the obvious ways to make money (and thus influence Russia through market forces) are now mostly gone. Russia has since become more and more of a vassal state of China and India. The country's vast natural resource wealth must be sold somewhere, and a large part of the market will not buy at any price. Europeans and North Americans were fairly lenient on just what they wanted of Russia in order to buy their output. Basically, don't launch an invasion of Ukraine. Since Putin couldn't hop over that bar, he now gets to hop over the bar set by China and India, which means selling things at a bargain-basement price purely on the customer's terms. If China doesn't like something the Russians are doing, they get to say "it'd be a real shame if Rosneft couldn't sell that oil and natural gas this quarter".
- mostlysimilar 3y agoAmerican Corporations have no particular loyalty to America or Americans. People begin to pay attention when it impacts national security (like in this case), but consider how many Americans Google is laying off and replacing with cheaper labor in Latin America, India, etc.
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- beaeglebeached 3y agoOf course. American government has no particular loyalty to the Americans, the people running the companies. These Americans have no loyalty to the people who hate them, regulating them through a Byzantine network of unelected autocratic regulatory officials via Chevron deference .
- vkou 3y agoLook, you can't both claim that the government is responsible for the behaviour of the executive agencies, while also claiming it's unaccountable for the behavior of the executive agencies. Congress delegated some parts of rulemaking authority to them. It can do that. It has done that. Congress can always undelegate it, if it thinks that the agencies are doing a poor job. Or it can pass laws that modify their mandates. Given that it doesn't do much of that, it seems to be pretty happy with the job they are doing. (You know who isn't happy? A bunch of unelected, unaccountable, partisan life-time appointees, who seem to be have a habit of legislating from the bench, ruling on hypothetical cases, or on straight-up fabricated facts...) If you don't like a legislature that doesn't do anything, consider electing a legislature that actually wants to legislate (the current Congress ain't it.)
- pphysch 3y agoSmells like projection. If Washington actually cared about not funding draconian surveillance states that are currently committing genocide, China would not be first in line. Cynical.
- Leary 3y agoGlad to see the House Un-American Activities Committee is well and alive. In fact, the current iteration was established by none other than someone named McCarthy, Kevin McCarthy, that is.
- lenerdenator 3y agoIs anyone surprised? The investor class argued that shutting down factories in the American Midwest (where almost none of the investors live, of course) and moving production to China would bring political liberalization to the nation. That's why the US didn't slam the door shut on China after Tienanmen Square with Bush 41, and why Bush 43 was supportive of China joining the WTO. Of course, they didn't liberalize, and now China's using its massive industrial base that Americans funded to increase its capabilities for a showdown with the US (and other Western nations) for global economic and political supremacy. Really, it was all BS from the start; investors just didn't want to pay working-class Americans anymore and couldn't have cared less about the political implications of the market forces they were unleashing. It's arguably treason.
- kirubakaran 3y ago> It's arguably treason. If I can give some feedback, this last line undermines the rest of your points. Not everything selfish is treason.
- engineer_22 3y agoNo, it's cogent to the argument. Undermining US economic and industrial capacity could be argued treasonous.
- wbl 3y agoWe literally have a clause in the Constitution defining what treason is, and that's not it.
- lenerdenator 3y agoAid and comfort to the enemy, or making war against the US government. I'd say the terms under which many investments in PRC were made fall under the first standard.
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- breathen 3y agoI've spent my whole life forced to invest in the US military. I'm just trying to diversify!
- 2OEH8eoCRo0 3y agoI have a feeling that moderation around here has shifted in the last week or so. Usually things like this were flagged/removed immediately, even when tech/VC related. I wonder if dang changed some of the 'flamebait detectors' after the recent thread about articles that HN removes from the frontpage.
- ThinkBeat 3y agoYes fueling the Uyghur Genocide¹ is bad as is the US fuling the Gaza Genocide¹. House should spend a bit more time on its own conscious And its own deeds. ¹ Personally I am not in favor of the term genocide in these instances but since the House used it, it applies to the other event as well.
- dathinab 3y agoHonestly instead of a conscious some of they seem to only have pride. Pride which sometimes makes them act as if they had a conscious and not that seldomly makes them act worse then a person just acting out of (monetary) self interest. Through only some, but definitely too many.
- dathinab 3y agoIt's a bit strange to write it on a site kinda powered by VC money. But non small parts of American VC do either not seem to have much of a ethical bottom line outside of when it might cause costly PR disasters, or put themself on a moralistic pedestal convincing themself they know better whats right (often with some very twisted version of the American dream where money makes might and might makes right), or don't look too closely into this kind aspects of companies because the "don't want to know" as if they knew they had to act different.
- mitthrowaway2 3y agoBy "a site powered by VC money", I presume you aren't talking about selectcommitteeontheccp.house.gov, but rather hacker news? Hacker news links are submitted and voted on by the website members, and you don't need to be part of a ycombinator startup to be a member.
- consumer451 3y agoOne of the best things about HN is that in some cases it tolerates discussion which could, theoretically, be against its owners’ interests. BTW, I don’t even think that this is one of those cases. I personally don’t pin the issue discussed in OP on YC in any way.
- dedpool 3y agoSo much for American Dynamism. LPs in those funds should pull the plug right away.
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- beardyw 3y agoDid the US declare war on China? I must have missed it.
- nimbius 3y agopump the brakes. the "The Select Committee on the Chinese Communist Party" is actually "United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party" so its a bit misleading to assume they dont have a vested interest in slamming companies that invest in Chinese firms. https://en.wikipedia.org/wiki/United_States_House_Select_Committee_on_Strategic_Competition_between_the_United_States_and_the_Chinese_Communist_Party https://en.wikipedia.org/wiki/United_States_House_Select_Com... The organization is basically a last-ditch bipartisan effort to put the tiger back in the cage and was formed after most of the octogenarians in congress were made aware that China was somewhere less than a decade away from eclipsing US GDP. Whatever your views on the CCP are, these guys are largely in it to maintain US hegemony by slandering trade in the hopes it inspires investors or CEO's to reconsider a country that not only beat the US to 5G technology, but built its own space station in four years time and its own competitive sub 10nm chipset to comply with US bans on imports. https://www.theregister.com/2022/07/22/china_smic_7nm_chips/ https://www.theregister.com/2022/07/22/china_smic_7nm_chips/ If you honestly wanted to play this nationalist game, it arguably should have started about 30 years ago. no 'beacon on the hill' burns forever, but the capital class certainly did their best to douse the light along the way through profiteering and unchecked globalization.
- borbtactics 3y agoIs it just me or does selectcommitteeontheccp.house.gov have a very suspicious design including stress-inducing red and black colors, weird layout, low-res header images, and "Click HERE" links that look like social engineering?
- dkn775 3y agoIt’s not just you. That site is not consistent with any other US gov design language. It also looks cheap and like a QAnon conspiracy news site.
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