by Philip Lenczycki
Five U.S.-based venture capital firms have participated in Chinese government-backed entrepreneurial contests that effectively aid Beijing’s “technology transfer” strategy, according to a Daily Caller News Foundation review of Chinese-language contest records.
U.S.-based venture capital (VC) firms GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden International are variously identified as “participating institutions” and/or “angel investors” in Chinese government-backed “start-up” contests supporting the Thousand Talents Plan, according to the contest’s brochures and promotional videos. Executives from these five VC firms have served as Thousand Talents Plan start-up contest judges, steering committee members and mentors for contestants going back to the first 2012 contest, according to a DCNF review of contest records.
For example, the first contest’s website identifies GSR Ventures’ co-founder, Sonny Wu, and IDG Capital’s global chairman, Hugo Shong, as steering committee members. The website also lists GGV Capital’s managing partner, Jixun Foo, and Sequoia Capital’s global executive partner, Neil Shen, as judges. and mentors for contestants as including Walden International’s managing director, Bill Li.
“Launched in 2008, the Thousand Talents Plan incentivizes individuals engaged in research and development in the United States to transmit the knowledge and research they gain here to China in exchange for salaries, research funding, lab space and other incentives,” a staff report by the Senate Committee on Homeland Security and Governmental Affairs said in 2019.
In January 2022, Jeff Stoff, a former U.S. government analyst and linguist, warned the U.S.-China Economic and Security Review Commission about how China is using “start-up contests” to obtain U.S. technology.
“A key element of China’s technology transfer apparatus are the tethers it has built to tap into the R&D and innovation occurring inside the U.S.,” Stoff testified in 2022. “In addition to benefitting from informal research collaboration and partnerships with U.S. academic institutions described in the previous section, China’s party-state deploys official and unofficial proxies; investment structures such as venture capital funds, incubators and innovation centers; start-up contests; talent programs and supporting recruitment networks; and partnerships with diaspora organizations, at least some of which are part of China’s United Front apparatus commonly and myopically viewed in terms of political influence operations.”
In July 2023, the House Select Committee on the Chinese Communist Party (CCP) announced it was launching “investigations into U.S. venture capital firms funding problematic PRC companies.” Chairman Mike Gallagher and Ranking Member Raja Krishnamoorthi, the announcement said, “sent letters to four U.S. Venture Capital Firms — GGV Capital, GSR Ventures, Qualcomm Ventures and Walden International — expressing serious concern and demanding information about the firms’ investments in Chinese artificial intelligence (AI), semiconductor and quantum companies in the People’s Republic of China (PRC).”
“Advanced technologies — even if they start out with an innocuous, consumer focus — can be integrated into the CCP’s techno-totalitarian surveillance state or into China’s military modernization,” Chairman Gallagher told the DCNF. “In fact, that is exactly what China’s policy of military-civil fusion requires.”
“While all four firms have begun producing information, we still have a lot of unanswered questions,” Gallagher said.
None of the VC firms targeted by the House committee have been accused of illegal activities, nor have they been charged with any crimes.
‘I Have An Ambition To Transfer My Achievements’
The Chinese government launched its Thousand Talents Plan in 2008. Four years later, the Thousand Talents Plan Venture Capital Center and the Thousand Talents Plan Expert Association jointly held the first Thousand Talents Plan contest in 2012, the contest’s website states.
The inaugural contest — called the “East Sand Lake Thousand Talents Plan Start-Up Contest” — shared its name with the Chinese city of Suzhou’s East Sand Lake, which is near the Thousand Talents Plan Venture Capital Center, according to a brochure on the center’s website.
The Thousand Talents Plan’s contest “gives entrepreneurs the chance to find investment backing to establish companies in China,” according to a 2021 Department of Defense (DOD) report concerning China’s state-sponsored technology transfers.
The inaugural contest’s organizing committee was “composed of Thousand Talents Plan Venture Capital Center and Thousand Talents Expert Association representatives,” according to the contest’s website.
In addition to executives from U.S.-based VC firms, executives from China-based VC firms with U.S. offices also served as judges and/or on the steering committee for the inaugural contest. This includes Sinovation Ventures‘ founder, Li Kaifu; Northern Light Venture Capital‘s founding managing director, Deng Feng; and Qiming Venture Partners‘ founding managing partner, Kuang Ziping, according to the contest’s records.
Sinovation Ventures, Northern Light Venture Capital and Qiming Venture Partners did not respond to multiple requests for comment. Li, Deng and Kuang could also not be reached for comment.
The inaugural contest proceeded in several phases between April 2012 and March 2013, according to the contest’s archived website. Contestants first submitted business plans, which then underwent preliminary evaluation, before the contest’s semi-finals and final in-person competition, the contest’s website states.
In the run up to the finals, the judges evaluated contestants’ business proposals and narrowed down a pool of at least 400 applicants to 66 contestants, from which 20 finalists emerged, according to the contest’s website.
During the March 2013 finals, contestants presented their business proposals for six-minutes, before a 10-minute question-and-answer session, with judges from the various VC firms scoring the finalists’ projects and determining the winners, according to the contest’s rules and procedures.
In the end, the inaugural Thousand Talents Plan contest awarded first prize to a project involving nanomedicine and tissue regeneration products, according to the contest’s website. After the finals, the contest’s main page featured a photo of first prize being awarded to the winner who was identified as Wen Xuejun, a professor in the Department of Chemical and Life Science Engineering at Virginia Commonwealth University.
“After winning the championship, he received 10 million yuan ($1.6 million) in strategic funding from venture capital investors, as well as 300,000 yuan in prize money,” Chinese state-run media outlet China Daily reported several months after the finals.
Before the contest, Wen’s U.S. lab had “mastered a core technology to make collagen-coated medical catheters, which are more resistant to bacteria and cost less,” China Daily reported. Wen told China Daily that he established Ryan Nanomedicine Co. Ltd. in Suzhou, because “the cost of commercializing the technology in the U.S. would have been too high.”
“I have an ambition to transfer my achievements in the lab into useful medical products, and I chose to realize this ambition in China, after careful consideration,” Wen said, according to China Daily.
A Virginia Commonwealth University spokesman referred press inquiries to Wen.
“Yes, Ryan Nanomedicine took part in the ‘Thousand Talents Plan Start-Up Contest,’” Wen told the DCNF via email, adding that his start-up never actually received any prize money.
“Ryan nanomedicine got 300K (~$41K) for participating in the competition to cover the expenses attending the contest,” Wen told the DCNF. “But Ryan nanomedicine didn’t get 10 million yuan venture capital investment because no investment company was interested in investing Ryan nanomedicine. I felt we were cheated by the competition organizer.”
‘Overvalue Opportunities And Undervalue Risks’
In 2019, the East Sand Lake Thousand Talents Plan Start-Up Contest rebranded as the “Jinji Lake Thousand Talents Plan Start-Up Contest,” taking its name from another nearby Suzhou lake. The contest, however, remains backed by the Chinese government and administered by members of the Thousand Talents Plan Venture Capital Center and the Thousand Talents Plan Expert Association, according to a review of the contest’s website.
Executives from GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden International have continued to participate in the Thousand Talents Plan’s contests since their 2012 inception, and members of each VC firm are listed on the contest’s 2023 roster, contest records show.
“These judges are likely in it for the connections and the money that comes from the connections,” Dan Harris, a lawyer specializing in emerging markets and the editor of China Law Blog, told the DCNF. “By participating, they are aiming to be the first person called when these companies — or other Chinese companies — seek foreign funding.”
However, maintaining a bullish investment approach towards China may be financially risky “given the laundry list of political, economic, security and geostrategic risks,” Steve Yates, senior fellow at the America First Policy Institute and China Policy Initiative chair, told the DCNF.
“It truly is remarkable that venture capital firms would continue to overvalue opportunities and undervalue risks in China,” Yates said, citing the possibility of war in the Taiwan Strait and China’s apparent real estate bubble.
Far too few companies investing in China have realistic exit strategies, Harris added.
“Getting the money out has become increasingly difficult,” he said, “but this has not received much coverage because few want to be viewed as not having seen this coming.”
‘The Interests Of The State’
Although brochures and promotional videos for the Thousand Talents Plan’s contests identify GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden International as “participating institutions” and/or “angel investors” for the contests, it remains unclear with which contestants these VC firms may have invested, if any.
In July 2023, the House Select Committee on the CCP sent a letter to GGV Capital stating that from “2015 to 2021, GGV Capital conducted 43 investment transactions in PRC AI companies — more than every other firm examined by the Center for Emerging Technology in a recent study.”
“GGV,” the letter said, “has invested in Megvii, which actively supports the surveillance of Uyghurs.”
The Treasury Department in 2021 identified Megvii as “party of the Chinese Military-Industrial Complex.”
For their part, Sequoia Capital and Walden International have both invested in Chinese drone manufacturer DJI, according to the investment portfolios on the VC firm’s websites. The Treasury Department identified DJI as “part of the Chinese Military-Industrial Complex” in 2021.
GSR Ventures, IDG Capital and Sequoia Capital have likewise invested in Chinese AI chip manufacturer Horizon Robotics, according to Horizon Robotics’ website. In 2021, the Department of Defense identified Horizon Robotics as a “Chinese Military Company.”
In June 2023, Sequoia Capital China was split-off from Sequoia Capital’s main operations, according to Nikkei Asia. Despite this split, Sequoia Capital China’s website and the 2023 Thousand Talents Plan contest steering committee roster identify Neil Shen as both Sequoia Capital’s “global executive partner” as well as Sequoia Capital China’s “founder and executive partner.”
GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital, Sequoia Capital China, Walden International and their executives did not respond to multiple requests for comment.
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Philip Lenczycki is a reporter at Daily Caller News Foundation.
