The founders now have a way to ensure investors aren't losing money from countries like China, Russia, Iran and Cuba.
More than 20 venture companies have signed the Clean Capital Certification, certifying that they have not received or intend to receive funding from foreign adversaries. Signatories include Marlinspike Partners, Humba Ventures, and Snowpoint Ventures. “We need to ensure that America's adversaries do not directly benefit from our successes, and publicly signing the Clean Capital Certification is an , it's a way to address that obligation as a community.”
The pledge was created by Future Union, an advocacy group that works on issues related to foreign interference in the private sector. The pledge declares that new technologies, in the wrong hands, can “cast a shadow of authoritarianism, misinformation, and division.”
Future Union executive director Andrew King has been working on the pledge for about three years, but he was concerned that China's intervention would become more protracted. He spoke with friends at the Pentagon about “how pernicious China's operations in the United States are” and how the United States “influences venture capital and private equity through funding and other incentives to gain access for the United States.” I remember having a long conversation about “How does it affect you?'' Important technology. ”
Mr. King said if a company has Chinese investors, those investors, and the Chinese government, could potentially obtain confidential information about portfolio companies.
In the venture capital world, it's mostly a hypothetical fear, but more and more people are sharing it. In September, the Financial Times reported that the FBI was investigating California-based venture capital firm Horn Capital for allegedly passing information on to Chinese investors. And in February, a Congressional committee report accused five U.S. investment firms of investing in Chinese companies, saying these investments helped support China's military and enabled human rights abuses in the country. .
Congressman John Moolener, chairman of the Communist Party of China Select Committee, praised the pledge. “America's national security and economic prosperity are at risk when American companies invest in our greatest adversaries or welcome investors backed by the Chinese Communist Party onto their boards,” he said in a statement. “Instead, thanks to these patriotic investors, we will establish a clean capital certification standard that Americans can use to evaluate their investments.”
Foreign capital in defense technology
It's no coincidence that many of the companies on the list invest in defense technology startups. For defense companies, accepting funds tied to a particular country could jeopardize their ability to do business with the Pentagon.
Of the roughly 20 companies that signed the pledge, major defense-investing funds like Andreessen Horowitz and Founders Fund are conspicuously absent. While neither company typically signs open letters like the pledge, a Founders Fund spokesperson clarified that the company does not receive money from countries covered by the pledge. Partner Derian Asparoukhov has in the past called companies that bring in Chinese capital “traitors.”
Similarly, a16z partners Katherine Boyle and David Ulevich made their position clear in a Wall Street Journal op-ed last year. “While some American investors previously pursued investments in adversarial countries such as China, it is now clear that they are betting on the wrong government,” they wrote.
This could have been a not-so-subtle bargain against Sequoia, one of the A16Z's biggest long-time rivals. Sequoia famously had a large China investment arm until splitting that division into a separate entity in mid-2023.
This pledge itself is not perfect. This is a voluntary certification and there is no formal review process to ensure companies are sticking to their promises. Additionally, even if a company can prove that a limited partner is not based in China, the limited partner itself may still be receiving funds from a Chinese entity.
King said the pledge is a first step, and that future efforts could include a third-party vetting the company's investors or another certification vetting the limited partners themselves. emphasized.
He hopes the voluntary pledge alone will hold companies accountable. “Self-certification will be made public,” he said. “And there can be reputational risk and damage from proving it and then other limited partners or other people finding out that it wasn’t true.”