Tech venture firms pledge to spurn Chinese and Russian investors

About 20 U.S.-based investment firms backing sensitive technology like artificial intelligence and semiconductors have signed a new initiative pledging that they are and will remain free of any funding from China, Russia or other American adversaries.

The voluntary pledge, which has the support of the House Select Committee on the Chinese Communist Party, is being led by Future Union, a San Francisco-based nonprofit advocacy firm that has advised lawmakers, including the committee and the Commerce Department, on the risks of Chinese investment in the U.S. technology sector.

“American national security and economic prosperity are put at risk when U.S. companies invest in our foremost adversary or welcome CCP-backed investors on their boards,” Rep. John Moolenaar (R-Michigan), chairman of the select committee, said in a statement. “Instead, thanks to these patriotic investors, there will now be a standard [that] Americans can use to evaluate their investments.”

Among those signing on to the initiative, called Clean Capital Certification, is Moonshots Capital, which has invested in Elon Musk’s xAI. Early investors in defense tech start-ups, such as Snowpoint Ventures and Scout Ventures, also signed the certification, as did Marlinspike Partners, an investor in defense contractor Anduril, which sells AI-driven weapon and border surveillance systems.

By joining the pledge, firms promise that they have not raised and will not raise capital from designated foreign adversaries, a group that also includes Iran and North Korea.

The pledge does not oblige them to disclose or turn down funds from authoritarian regimes in the Middle East, which have been heavily investing in leading American AI firms.

On Monday, President-elect Donald Trump announced a $100 billion investment pledge from the Japanese tech firm SoftBank, which upended the Silicon Valley investment landscape in 2017 when its Vision Fund, backed primarily by Saudi Arabia’s Public Investment Fund, funneled billions into Uber, WeWork and others. Earlier this year, Microsoft and OpenAI announced deals with G42, the United Arab Emirates’ flagship tech firm, and OpenAI’s recent $6.6 billion funding round included investment from MGX, a new UAE-based technology investment company launched by G42 and Mubadala, an Emirati sovereign wealth fund.

Foreign sources of capital are getting increased scrutiny just as Silicon Valley venture firms are aggressively pushing into areas such as defense tech and policing. The investors are adopting more patriotic rhetoric and positioning their portfolio companies as key to competing with China, but they provide little transparency into the limited partners that fuel their firms.

Self-policing within the tech sector is a necessary first step, said venture capitalist Andrew King, Future Union’s executive director. The transfer of critical U.S. technology over the past 15 years has enabled American adversaries to use homegrown innovation to strengthen their military arsenals and stifle dissent, he added.

Government controls have proved insufficient to stem this growing national security crisis, King said, arguing that even recent efforts were ultimately watered down.

President Joe Biden’s executive order on national security technologies, proposed last year and implemented in October, narrowly applies to only a few sectors, including semiconductors, quantum computing and certain types of AI, said King, who also noted that attempts to restrict some forms of foreign investment were removed from the newly passed National Defense Authorization Act.

“We’re hopeful that the changed political landscape will bring a renewed focus on this issue,” King said.

Given the uncertain geopolitical environment, start-up founders want to be aligned with their investors on serving the U.S. government and its allies, said Greg Castle, managing partner for Anorak Ventures, which has backed Anduril as well as Flock Safety, a license plate reader company that works with police departments around the country.

“As Anorak continues to invest in critical infrastructure and defense, we see the Clean Capital Certification as an important signal for our founders that they can trust us and our sources of capital,” Castle said.