Within the U.S., it’s accepted that almost all 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 are attempting to claw again their investments in failed startups by pursuing the non-public property of their founders in court docket, The Monetary Occasions studies.
As China’s economic system stalls, the nation’s VCs are imposing redemption clauses written into funding phrases that had been beforehand not often enforced, based on the FT. That is leading to some Chinese language founders owing tens of millions of {dollars} to their buyers and ending up on debtor blacklists, blocking them from reserving lodges, taking planes, or leaving China.
The development is elevating issues 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.
