Earlier this year, the US government places tariffs of an extra $200 billion in Chinese imports, with some indications that a further $267 billion is incoming, while Chinese acquisitions and investments in the USA have fallen significantly. Augmented reality (AR) start-up company Meta says this is starting to affect investments for US tech startups – itself included.
Meta reports that it was on the verge of securing a new round of funding from Chinese investors, when the deal was frozen by the lead investor, apparently working on instructions from a Chinese official who identified the trade tariffs as the reason.
Bloomberg reports that the US tariffs and increased restrictions on foreign investments is having a significant effect on Silicon Valley. Smaller hardware companies are complaining about the rising tariffs, and start-ups are increasingly struggling to gain funds from China, one of the worlds largest economies.
Meta’s CEO Meron Gribetz says an initial agreement for $20 million in investment from a Chinese private equity firm had already been drawn up when the lead investor backed out. Other investors might also choose to pull out without the lead investor. The stumbling block meant that Meta were forced to furlough two-thirds of its roughly 100 employees for 30 days.
“The Chinese government sent an official request to our lead investor to re-evaluate the deal based on the recent actions from the Trump administration,” Gribetz told Bloomberg. “This was a big shock to us.”
With the investment now on hold, Meta is accelerating other plans to raise capital, such as pushing forward with opening new Chinese subsidiary, which can generate funding separate from the US company. This means Chinese investors can put money into the local version of the firm without falling foul of the tariffs.
“The Chinese government understands that augmented reality and virtual reality are the future of computing,” Gribetz said. “Any company that needs to raise significant amounts of capital and manufacture goods in a cost-effective way and conquer markets hungry for early adoption must have a presence in China.”
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