Founders now have a way to ensure their investors haven't taken money from countries like China, Russia, Iran or Cuba.
On 20 venture capital firms have signed the Clean Capital Certification, attesting that they do not and will not accept money from foreign adversaries. Some of the companies that have signed include Marlinspike Partners, Humba Venturesand Snowpoint Ventures. “We must ensure that America's adversaries do not directly profit from our success, and publicly signing the Clean Capital certification is one way to commit to fulfilling this duty as a community,” said Craig Cummings, partner at Moonshots Capital, in a press release.
This pledge was created by Future Union, an advocacy organization that works on issues related to foreign interference in the private sector. The pledge states that new technologies, in the wrong hands, can “cast a shadow of authoritarianism, disinformation and division.”
Future UnionChina Executive Director Andrew King has been working on this commitment for about three years, but he has feared Chinese interference for much longer. He recalls having long conversations with a friend at the Defense Department about “how deleterious the Chinese operation was in the United States” and how the country was “influencing venture capital and capital -investment – through money and other incentives – to gain access to critical technologies.
King said that if a company has Chinese investors, then it is possible that those investors – and then the Chinese government – will receive proprietary information about the portfolio companies.
In the world of venture capital, this is mostly a hypothetical fear, but one that more and more people share. In September, the Financial Times reported that the FBI was investigating California-based venture capital firm Hone Capital for allegedly passing information to its Chinese investors. And in February, a report from a congressional committee called out five U.S. investment firms for investing in Chinese companies, saying the investments helped support China's military and enabled human rights abuses in the country.
Congressman John Moolenaar, chairman of the CPC Special Committee, applauded the commitment. “America's national security and economic prosperity are put at risk when American companies invest in our primary adversary or welcome CCP-backed investors onto their boards,” he said in a statement. . “Instead, thanks to these patriotic investors, there will now be a clean capital certification standard that Americans can use to evaluate their investments. »
Foreign capital in defense technologies
It's no coincidence that many of the companies on the list are investing in defense technology startups. For defense companies, taking money tied to certain countries can compromise their ability to do business with the Department of Defense.
Among the twenty or so companies that signed the pledge, the largest funds that invest in defense are notably absent, such as Andreessen Horowitz and Founders Fund. Typically, neither company signs open letters like the pledge, although a Founders Fund spokesperson clarified that the company does not take capital from any of the countries covered by the pledge. In the past, his partner Delian Asparouhov has companies called who consider Chinese capital “treacherous”.
Similarly, a16z partners Katherine Boyle and David Ulevitch wrote an opinion piece in the Wall Street Journal last year that made their position clear. “While some American investors previously sought investments in hostile countries like China, it is now clear that they are betting on the wrong government,” say the two men. wrote.
This may be a not-so-subtle dig at one of a16z's longtime main rivals, Sequoia, which had a large Chinese investment arm until it split that unit into its own division. own entity in mid-2023.
The pledge itself isn't perfect: it's a voluntary certification that has no formal monitoring process to ensure companies keep their word. And even if a company can attest that its sponsors are not based in China, the sponsors themselves can still take money from Chinese entities.
King emphasized that this commitment is a first step and that future initiatives could include a third-party organization to vet the company's investors or another certification that vets the limited partners themselves.
He hopes that even a simple voluntary commitment will hold companies accountable. “Self-attestation is public,” he said. “And there's reputational risk and damage that could come from attesting and your other sponsors or other people finding out that wasn't the case.”
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