Chemistry VC partner Lou Bohan said in a recent essay that his visits to top Chinese venture capital firms and executives at robotics and biotech companies pointed to something larger than China’s technical progress: a venture ecosystem that operates very differently from Silicon Valley.
Bohan wrote that Silicon Valley is increasingly framing China as a rising force across three future-facing sectors: open-source AI, biotechnology and robotics. Still, he said the part that stood out most was not the technology alone, but the financing structure around it. In his view, startups in China face tougher fundraising conditions than their US peers, a near-absent M&A market for venture-backed companies and a capital system shaped deeply by government participation.
That mix, he argued, has produced founders with unusually strong execution and a willingness to go all in, while also creating an innovation model that looks very different from the one associated with Silicon Valley.
Silicon Valley is paying closer attention to China’s position in frontier sectors
Bohan said a broader narrative has been taking shape in Silicon Valley: China is starting to lead in key areas of future technology.
He pointed to open-source large language models developed in China, which he said have become some of the most commonly used AI models among Silicon Valley startups. After the US government restricted access to certain AI technologies, China, in his telling, became an important supplier to the global open-source AI ecosystem.
In biotech, Bohan wrote that most clinical trials in China are now focused on novel therapies, while about half of the drugs in US Food and Drug Administration clinical trials were originally licensed from Chinese companies.
In robotics, he said China benefits from a complete supply chain, rapid hardware iteration and a strong capacity to generate data, allowing products to be tested and improved quickly.
At the same time, he said China has not stopped studying Silicon Valley.
Chinese tech circles closely track what Silicon Valley does
According to Bohan, the level of attention Chinese tech circles devote to Silicon Valley is greater than many outsiders assume. He said one top Chinese VC told him that whenever Benchmark or Sequoia releases a new podcast, the entire investment team is asked to watch it.
He added that posts he publishes on X and LinkedIn are often translated by Chinese tech media within hours, and even discussions in the comment sections are sometimes compiled into Chinese screenshots and circulated.
That ability to absorb information quickly has helped China narrow its knowledge gap with the West, he wrote. Even so, China still broadly sees Silicon Valley as the center of global innovation, at least for now.
Many startups are pushing for IPOs because other exit paths are limited
One of Bohan’s strongest impressions from the trip was that nearly every AI and robotics startup he spoke with said it would go all out for an IPO next year.
What surprised him was that many of these companies were nowhere near the scale of firms such as Unitree or Moonshot. He said some would struggle to qualify for a Nasdaq listing in the US, yet they are still actively planning to go public.
Bohan tied that behavior to common venture terms in China. Many VC deals, he wrote, require an exit within six to eight years and a certain return level. If those conditions are not met, founders may even have to repay investors with personal assets.
He pointed to the Chinese phrase “ming gu shi zhai,” which describes arrangements that appear to be equity investments on paper but function more like debt in practice. In his view, that structure leaves founders carrying high personal risk from the moment they start a company.
That pressure also helps explain why Chinese startups often run leaner and pursue success with unusual intensity. Bohan said they are not taking a casual shot at entrepreneurship. They are all in.
China has little of the startup M&A market common in the US
In the US, startups can exit through IPOs or acquisitions by larger companies. Bohan said China has almost no mature M&A market for startups.
- Large companies can build products internally at low cost
- Labor costs are relatively cheaper
- Big companies tend to have strong cross-industry operating ability
- They often prefer to build rather than acquire
As a result, acquihires and strategic acquisitions of the kind often seen in the US are rare in China.
He also noted that Hong Kong’s capital markets are relatively more open to still-growing tech companies. That leaves room for startups with limited revenue, or even those that are still unprofitable, to list successfully. In practice, that has made IPOs close to the only viable exit route for many Chinese startups.
He divides China’s VC capital into three main funding groups
Bohan separated China’s venture capital base into three buckets.
RMB funds
The first group is RMB funds, which are often backed by local governments. These funds seek financial returns, but they also carry policy mandates tied to investment attraction, job creation and talent recruitment. Because of that, they often require portfolio companies to set up offices, factories or R&D centers in the jurisdictions providing the capital.
He added that in sensitive sectors such as AI and semiconductors, many companies can only accept RMB funding. DeepSeek was cited as one example.
Local USD funds
The second group is local USD funds, including firms such as Sequoia China, now renamed HongShan, Hillhouse Capital, ZhenFund, Matrix China and IDG.
Bohan described these funds as more market-driven than RMB funds and said they are often the preferred source of financing for Chinese founders, especially those planning to expand overseas.
Overseas venture funds
The third group is overseas venture capital. Bohan said international investors such as Coatue and Tiger Global once generated strong returns in China, but their participation in Chinese tech startups has dropped sharply in recent years because of geopolitics and regulation.
He added that investing in China now may have become one of the market’s more contrarian strategies.
FA firms act as a core part of venture infrastructure
Another feature that stood out to Bohan was the large presence of FA, or financial advisor, firms in China.
Despite the name, he said these firms function more like early-stage investment banks. They package companies, match them with investors, help run fundraising processes, coordinate different financing rounds and collect commissions of roughly 2% to 5% of the amount raised.
Many venture firms, he wrote, even outsource deal sourcing and early-stage due diligence to FA firms before those advisors arrange introductions to founders.
Bohan said this model barely exists in Silicon Valley, but in China it has become an important layer of venture infrastructure.
Business networks rely heavily on relationships rather than cold outreach
Bohan also wrote that business activity in China depends heavily on personal relationships. LinkedIn never truly established itself in the Chinese market, and no successful local replacement has emerged.
Most business opportunities, he said, come through introductions from existing contacts. Reaching out through unsolicited messages, cold emails or LinkedIn is uncommon. He described China as a society with almost no cold outreach.
That, in turn, helps explain why FA firms occupy such an important middle position between founders and investors.
Government is not a bystander in innovation capital
Bohan said the Chinese government plays a major role in the country’s innovation system. Beyond serving as the largest limited partner in many funds, local governments also use land incentives, tax breaks and various subsidies to attract companies.
More importantly, he said, government policy can shape where capital flows. Over the past 10 years, Beijing’s support for domestic semiconductors has directed large amounts of venture capital into the chip sector. He cited a line circulating in investment circles: backing industries the government says must exist is the right move.
He also mentioned Shanghai’s brain-computer interface, or BCI, sector. Because Shanghai Party Secretary Chen Jining has long supported BCI technology, local government-backed venture firms have continued investing in companies including StairMed and Neuracle. Bohan said the goal there is not mainly venture returns, but the buildout of a strategic national industry.
He concluded that, compared with the broad US focus on AGI debates, China shows stronger technological optimism toward deep tech and science-fiction-style futures. From central policy to local governments to venture capital, he wrote, the system is aligned around building the next generation of strategic technology industries.
That alignment, in his account, has produced a startup system that is harsher and more high-pressure than Silicon Valley, but also one with stronger execution and a clearer policy orientation.