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BG2 · 3 min instead of 1 h 7 m · Aug 28, 2025

Why Western venture investment in China has dried up

Bill GurleyHost

General partner, Benchmark

Backed and sat on the boards of Uber, Zillow, OpenTable and Stitch Fix.

  • Brad GerstnerHost · Founder & CEO, Altimeter Capital

    Started Altimeter with under $3M in 2008; an early backer of Snowflake.

About this segment

Gurley explains why VC activity in China is in a lull, from regulatory shocks to split firms and thin local capital. Only a few firms remain active.

From “China, China, China. Breaking Down China’s Tech Surge | BG2 w/ Bill Gurley and Brad Gerstner”, Aug 28, 2025. Watch the full episode

“you don't have the foundations and university endowments that you do here. And the billionaires that have made wealth typically are looking to diversify offshore.”
Bill Gurleyat 57:21 · BG257:21

Takeaways

  1. Sequoia and GGV split, so far fewer Western dollars are available
  2. Few RMB dollars exist because endowments are absent and billionaires move money offshore
  3. Provinces now invest and ask for terms Western VCs consider non-starters
Watch 2:59 from 55:24

In this episode

Full episode
  1. 13:51Xiaomi built a car factory in three years with 2,000 workers7:03
  2. 42:27The subsidy and theft story about China doesn't explain its success2:10

  3. 55:24Why Western venture investment in China has dried up2:59

Up next · BG2AI productivity could bend the US debt-to-GDP curve5:46

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

  1. 55:37

    then what does the Chinese venture ecosystem look like? So a couple different things. So first of all, there's a real lack of Westerners. For all my trips, this was the fewest Westerners that I've ever seen. And the high-end hotels and the high-end restaurants were fairly empty. And I think that it just has to do with the thawing of the relationship. That's caused less travel from Westerners. The VC market is in a bit of a lull because when when these policies all changed and when, you know, the Jack Ma thing happened, when DD got pulled back from the U.S. markets, when the for profit education companies got taken out and when, you know, WeChat went, I mean, Tencent went flat for a couple of years because of games reforms.

  2. 56:28

    All those things took a lot of air out of the system and caused a lot of people to reconsider. And then you also had, and I don't even know if this was more led by the U.S. government or the China government, you had the splitting of the venture capital firms. Sequoia split in half, GGV split in half. And so there are much fewer Western dollars available to invest in China. And so, you know, there are a few firms that have stayed.

  3. 56:54

    You know, Neil Shin at Hongshan had raised a ton of money right before all this happened. He's very active, has a huge staff of people. Anna Fang and Zen Fund, which is an angel group, are very active. And IDG is highly present and has been active. But that's only three firms, you know, and compared to where things were six years ago when every one of our competitors in the venture industry were making an annual trip, it's kind of night and day. And then there's not that many R&B dollars available to the venture market. A lot of the, you don't have the foundations and university endowments that you do here. And the billionaires that have made wealth typically are looking to diversify offshore. And so you just don't have a lot of R&B dollars seeking a home. And now you have the province is entering the investment space, which is an uncomfortable reality for some of the VCs.

  4. 57:57

    I hear they're asking for terms that you and I would consider non-starters, you know. And so it's all a little bit messy. It's funny because it's simultaneously with some of these markets,