Over the past eight years, U.S.-based venture firms have set up shop in China to invest in startups serving its massive emerging market. But now, dollars are making a return trip across the Pacific as Chinese investors make investments in Silicon Valley startups, according to The Wall Street Journal.
Tencent Holdings, for example, is angling to be lead investor of a $200 million round for the now-you-see-it, now-you-don’t messaging app Snapchat. Last month, China’s high-profile Alibaba Group Holdings led a $206 million round in ShopRunner and formed a San Francisco investment group.
Apparently, times are tough for Chinese VCs in their native country, prompting them to expand their reach. With the Chinese economy slowing and some startups preferring to go private rather than provide investors with a windfall IPO or buyout, venture investors are feeling that the “days of the low-hanging fruit are over,” says Forbes.
The Chinese Connection
Chinese investors like Tencent are delving into Silicon Valley to increase their knowledge of how the U.S. market works and transfer information and technology to China’s market, says the Journal. In the end, such efforts may bolster the performance of Tencent’s portfolio companies in China while at the same time offering U.S. startups a guide for entering Asia.