China hasn’t held the same opportunities for U.S. venture capitalists it once did, given a crackdown by both countries on cross-border tech investments. But U.S. VCs are still hungry for insights into the country’s tech startups, whose fast growth holds clues to the future of U.S. AI companies. In one sign of their interest, a group of investors from Dimension Capital, a VC firm focused on AI and biotech founded by former general partners at Lux Capital and Obvious Ventures, spent a week in China visiting AI labs, investors and entrepreneurs. The firm’s partners, in a letter to their limited partners, characterized the visit as a chance to understand the competitive nature of China tech, from open-weight AI models to data labelling.
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China hasn’t held the same opportunities for U.S. venture capitalists it once did, given a crackdown by both countries on cross-border tech investments. But U.S. VCs are still hungry for insights into the country’s tech startups, whose fast growth holds clues to the future of U.S. AI companies.
In one sign of their interest, a group of investors from Dimension Capital, a VC firm focused on AI and biotech founded by former general partners at Lux Capital and Obvious Ventures, spent a week in China visiting AI labs, investors and entrepreneurs. The firm’s partners, in a letter to their limited partners, characterized the visit as a chance to understand the competitive nature of China tech, from open-weight AI models to data labelling.
In the letter, it discussed how Chinese open-weight models like Moonshot’s Kimi and Zhipu’s GLM have succeeded in getting Western customers to use them, a feat a generation of past Chinese enterprise software startups failed to achieve.
However, the letter, which The Information obtained, noted that China’s hot AI startups are just capturing “Western workloads, not Western revenue.” That means that even though American developers are increasingly using these Chinese models, the startups behind them aren’t capturing all the revenue. That’s flowing in part to U.S. inference startups such as Modal, Baseten and Fireworks AI, which provide access to these models.
Indeed, as my colleagues reported earlier this week, open-source model maker DeepSeek generated about $70 million in revenue in the first seven months of this year, tiny compared to the tens of billions of annualized revenue Anthropic and OpenAI each are generating.
In fact, the Dimension partners ended the five page letter noting that the leading Chinese labs are trading at revenue multiples that are five to ten times higher than U.S. frontier labs. “For all the talk of frothy valuations of AI in the West, the climate seems to be meaningfully frothier in China.”
Dimension, which conducted a similar research trip to Shanghai in 2025, isn’t the only investor trying to get a pulse of what’s going on with China tech startups. Former Benchmark General Partner Bill Gurley last year spent 10 days visiting major tech companies like Xiaomi and talking to entrepreneurs. We hear big mutual funds have also made trips this year.
Dimension earlier this year co-led a $787 million funding in AI drug discovery startup Earendil Labs. The company, an affiliate of China’s Helixon Therapeutics, has been plotting a Hong Kong IPO. The listing has faced opposition from China’s regulators, according to The Wall Street Journal.
The VC firm, which closed a third, $800 million fund in July, also invested in AI drug discovery startup Chai Discovery and inference startup Modal Labs. Earlier this year, Anthropic bought one of its investments, AI biotech startup Coefficient Bio, for roughly $400 million.
Of course, field trips like the one Dimension’s investors just made are a far cry from the 2000s, when U.S. VC firms such as Tiger Global Management and Sequoia Capital built up substantial portfolios in what became high-flying global startups, such as TikTok-owner ByteDance and ride-hailing company Didi. U.S. venture firms largely retreated from China in 2023 and 2024, after rising restrictions from both global superpowers increased the risk one of the countries would intervene to derail the investment or make it hard for investors to get back their money.
Investors in ByteDance, for instance, have only been able to sell shares on the secondary market, as General Atlantic did earlier this year, at a $550 billion valuation.
The few U.S. venture capitalists who have returned have faced a bumpy ride. After Benchmark led an investment in Manus last year, the U.S. Treasury Department reviewed Benchmark’s investment in Manus—which started in China and later relocated to Singapore—to see if it violated U.S. restrictions on certain Chinese tech investments, according to Semafor. Benchmark was able to hang onto its stake, which resulted in a payout just months later after Meta said it was buying Manus for $2 billion.
Beijing forced Manus to unwind the sale to Meta this summer. But by then, Benchmark had already distributed returns from its investment to its limited partners.
In fact, the Manus situation may not be as discouraging to U.S. venture capitalists as it would seem. As our Asia bureau has reported, Manus’ revenue soared after Meta announced its plans to buy the startup in December. Growth like Manus’ and the ingenuity that’s driven Chinese entrepreneurs to find seemingly endless workarounds to U.S. chip and compute restrictions continues to fascinate U.S. investors.
“If the [Chinese Communist Party] can ever assuage regulatory risk for crossover and specialist tech and biotech investors, there’s a large opportunity for the right investor,” the Dimension partners wrote.
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