Unlock Editor’s Digest for free
FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.
International investors are returning to China’s startup scene, with a series of small venture capital fundraisers marking the first signs of a thaw in a sector hit by geopolitical tensions and a tech crackdown.
People familiar with the fundraising efforts said some of the country’s top VC funds are close to raising up to $1.1 billion in total dollar-controlled funds this year.
Source Code Capital, an early investor by the owners of Tiktok, has raised $150 million, while BA Capital, an investor in Labubu Maker Pop Mart, is closed to a similarly sized fund.
Lightspeed China Partners, which backed Ecommerce Group PDD Holdings, pulled in more than $200 million for the still-closed fund. Qiming Venture Partners, which funds many of China’s most promising biotech startups, is on track to raise approximately $600 million.
Although the funding total is modest compared to past years, it signals a tentative return for global capital in Chinese technology after new outbound investment rules from Washington and a deteriorating Chinese economy sidelined investors in 2023.
Data from Research Provider Preqin shows that China-focused VCS raised $1.3 billion in funding in 2024, up from $300 billion raised in 2021-2022.
This figure does not include Renminbi funding, which is more readily available and which startups increasingly rely on.
Still, the relative lack of funding compared to the US has left many promising Chinese startups raising funding at significantly higher valuations than their American peers.
“China’s top robotics companies would probably be valued five to 10 times higher if they were in the United States,” said Xing Meng, a partner at 5Y Capital, a Shanghai-based venture capital group.
Meng said there is a huge opportunity to invest in Chinese robotics startups that make everything from autonomous lawn mowers to artificial intelligence-enabled smart devices. They benefit from a deep pool of product managers and engineers with experienced production experience. “The entire robot supply chain is in China,” he said.
US-China tensions prompted many managers to raise money in dollars globally, rather than primarily in the US as in past years. New funding commitments are coming from Asia, the Middle East, Europe and other parts of the United States, people familiar with the fundraiser said.
Some of the obstacles that have kept money from flowing to Chinese startups are also starting to subside. After reining in Chinese tech companies, President Xi Jinping held a high-profile meeting with entrepreneurs in February and pledged to improve the business environment.
Hong Kong’s booming stock market, which early public filings brought in $135 billion in the first eight months of the year, has started offering VCs and their investors a path to liquidity after the IPOs of major startups in mainland China and the US market due to policy issues.
Other barriers remain, including U.S. rules restricting American investment in Chinese AI, semiconductor and quantum startups that were first announced in 2023 and took effect in January.
Washington tested the new rules this spring by initiating a review of U.S. venture firm Benchmark’s investment in Manus, a Chinese-founded AI agent provider.
Recommended
The rise of Chinese AI groups such as Deepseek and Robotics like Unitree has focused global attention on China’s fledgling tech companies. But for now, many investors are trying to gather information rather than pouring capital.
Yair Reem, a partner at Green Tech Investor Extantia Capital, traveled to China this summer with a group of foreign VC executives to assess “where not to invest anymore.”
Reem praised China’s manufacturing capabilities in technologies ranging from batteries to green hydrogen. “You realized it was impossible to compete with them,” he said.
Source Code, BA Capital, Qiming, and Lightspeed China did not respond to requests for comment.
