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U.S. Startups Set to Get a Boost with a $400 Million Chinese Seed Fund – CSC Upshot

U.S. Startups Set to Get a Boost with a $400 Million Chinese Seed Fund – CSC Upshot

by Samburaj DasOctober 12, 2015

AngelList, a platform that connects investors and startups with a track record of investments in startups such as Uber, is set to announce a deal today with a Chinese private-equity firm –  CSC Venture Capital, involving a $400 million fund called CSC Upshot. The fund is to be set up for investments at early-stage tech startups in the U.S.

According to the Wall Street Journal, the fund is “the largest single pool of funds devoted to early-stage startups – ever.”

Money from the CSC Upshot will be used to invest in existing AngelList investments in start-ups, deemed by them as ‘syndicates,’ which typically involves a single ‘angel’ investor leading the way in an investment with others also investing alongside him. The fund will also, of course, be used to invest in new start-ups as well.

The new deal, at $400 million will dwarf the total investment raised through AngelList in the past two years, at $205 million.

CSC Upshot and the Trouble with Excessive Liquidity

Naval Ravikant, the founder of AngelList notes that excessive liquidity in the investor space and financial markets generally could lead to a bubble. He claimed that a deal involving the investment fund CSC Upshot was originally offered to him at over $1 billion. However, it was capped at $400 million to not inflate the seed market.

The cash coming in from the fund invest in U.S. startups through AngelList will also be capped at $20 million, for the first year. Subsequently, the cash from the new fund will be raised to $50 million every year thereafter.

The bottom line, according to the report:

China is slowly—but surely—liberalizing its rules about investing overseas, giving investors in China’s overheated stock market the chance to diversify into startups in the U.S. more directly than ever before. What those investors lacked was the expertise to make smart investments.

Furthermore, AngelList will also be getting deals done a lot quicker because CSC, according to the deal, will have the means to invest in any syndicate on AngelList. This is likely to rapidly reduce the time taken to complete investment deals which otherwise typically depends on individuals investing within syndicates.

Veronica Wu, president of CSC’s U.S. arm, says the private-equity firm has more than $12 billion under management.

“$400 million is just the tip of the spear,” added Ravikant. “Unlike a normal venture fund, we never stop.”

Image from Shutterstock.

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