The FBI is investigating whether a U.S. venture capital fund handed over trade secrets to Beijing after investing $115 million worth of Chinese money to become one of Silicon Valley's most powerful early investors.
California-based Horn Capital invested Chinese money in 360 U.S. tech startups between 2015 and 2018, including payments group Stripe, aerospace engineer Boom and self-driving car maker Cruise, the Journal reported. Financial Times.
Federal investigators are now looking into whether the venture capital fund leaked inside information “about the startups' technology, finances or customers” to benefit Beijing, the outlet reported on Wednesday, citing “people familiar with the matter.”
“The people said that during the FBI interviews, concerns were raised that some of Horn's portfolio companies had contracts to provide services to the U.S. government and that some of Horn's funding may have come from Chinese government funds,” the Financial Times reported.
The possibility was exposed in February by the Washington Post in a story highlighting the national security risks associated with a surge in U.S. venture capital investment in Chinese technology companies.
At the time, venture capitalist Andrew King told The Washington Post that while there were financial concerns when the US invested in Chinese companies, “the intangible relationship elements and knowledge, if transferred to an adversary, are much more impactful and dangerous.”
“In exchange for access to China's rife with corruption, these investors are also providing Chinese startups with the nearly priceless value of a lifetime of experience and learning,” he said.
King, who serves as counsel to the House Select Committee on China Communist Party, founded the nonprofit venture capital watchdog group Future Union and exposed the threat in an explosive report first published by The Washington Post earlier this year.
“Venture capitalists have a responsibility to their limited partners to use all available recourse.
“This means ensuring the success of our portfolio and startup investments,” King told The Post on Wednesday.
But that tool shouldn't include trade secrets; it should include “the knowledge, experience, business best practices and go-to-market know-how that venture capitalists accumulate from meeting and tracking thousands of startups,” King said.
The FBI did not respond to The Washington Post's request for comment Wednesday.
