Within the U.S., it’s accepted that the majority startups fail — and when that occurs, VCs (usually) settle for their losses and transfer on. However that’s not the case in China, the place VCs try to claw again their investments in failed startups by pursuing the non-public property of their founders in courtroom, The Monetary Instances experiences.
As China’s financial system stalls, the nation’s VCs are implementing redemption clauses written into funding phrases that had been beforehand not often enforced, in response to the FT. That is leading to some Chinese language founders owing tens of millions of {dollars} to their traders and ending up on debtor blacklists, blocking them from reserving motels, taking planes, or leaving China.
The pattern is elevating considerations about China’s startup ecosystem being irreparably harmed, since this strongly discourages founders from elevating capital within the first place. China’s startups are already struggling amid a authorities tech crackdown and tense U.S.-China relations, TechCrunch has reported.
