TREE NEWS reports: Three partners from Founders Fund — Sean Liu, John Luttig and Joey Krug — traveled to Beijing, Shanghai and Shenzhen last month to meet with Chinese technology companies, marking one of the more visible recent scouting trips by a top-tier US venture firm into China’s startup ecosystem.
A Thaw in a Deep Freeze
The visit lands against a backdrop of sharply reduced US venture activity in China. Since 2021, geopolitical tensions, tightened export controls on advanced semiconductors, and a wave of US restrictions on outbound investment in sensitive technologies have pushed many American funds to the sidelines. Data from multiple industry trackers shows US dollar-denominated venture funding into Chinese startups has fallen from its peak by well over 80%, with several prominent firms formally spinning out or winding down China-focused vehicles.
Yet the trip signals that a subset of investors is not willing to write off the market entirely — particularly in artificial intelligence. China’s AI ecosystem has produced globally competitive model developers, a dense hardware supply chain, and a fast-growing base of application-layer companies in sectors ranging from robotics to enterprise software.
Why AI, and Why Now
Several factors are driving renewed interest:
- Model efficiency: Chinese labs have demonstrated that competitive performance can be achieved with far less compute, a compelling proposition as global AI capex balloons.
- Hardware and robotics: Shenzhen’s manufacturing density gives Chinese firms an edge in embodied AI, drones and consumer hardware that US investors cannot easily replicate elsewhere.
- Valuation reset: Private market valuations in China have compressed dramatically, creating entry points that look attractive relative to US AI deals trading at record multiples.
- Talent density: China continues to produce a large share of the world’s top AI researchers, many of whom now lead domestic startups.
Deal Mechanics Remain Complicated
Meeting founders is one thing; closing deals is another. US investors face a thicket of constraints: outbound investment screening rules covering AI, quantum and semiconductors; limited partner caution about China exposure; and the practical difficulty of structuring exits when Chinese listings and US IPOs are both uncertain. Founders Fund itself has historically taken a contrarian posture — Peter Thiel’s firm was an early backer of companies in sectors others avoided — so the trip may reflect a willingness to accept complexity in exchange for differentiated access.
The Crypto Overlap
Notably, Joey Krug’s involvement brings a crypto and decentralized-compute lens to the delegation. The intersection of AI and blockchain — decentralized GPU networks, inference marketplaces, and on-chain agent infrastructure — is one area where Chinese and US builders are both active, and where cross-border collaboration faces fewer regulatory barriers than frontier model development.
Forward Look
Expect more quiet trips before any headline deals. If US funds begin deploying again in China’s AI sector, it would mark a meaningful shift in global venture capital flows — and a signal that the decoupling narrative, at least in early-stage technology investing, is more nuanced than the headlines suggest.
