Are Chinese Tech Startups Dependent on U.S. IPOs?

In this video I take a look at a building problem with VC investment into Chinese tech startups; a lack of realized cash returns. Distribution to paid-in ratio, or DPI, measures the cash being returned to a firms limited partners divided by the amount of capital raised. With increased U.S. scrutiny and an overall down IPO market, Chinese companies are struggling to find exits. Domestically, the China Securities Regulatory Commission is dismissive of unprofitable tech growth businesses so a listing on the Hong Kong or Shanghai stock exchange can be challenging to achieve (and carries an additional 10% tax on profits to overseas accounts). Even if a Chinese startup can get listed on a foreign market, daily turnover on these exchanges is a only a fraction of what happens in the United States. With this plethora of headwinds, one could argue the “growing” Chinese tech scene is looking less like a self-sufficient startup ecosystem and more akin to a ponzi scheme.

Why China’s Startup Investors Depend on U.S. IPOs:

#China #venturecapital #ipostocks

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