Sources paint a bleak picture for startup founders in China; IT Juzi report: only 1,202 startups were founded in the country in 2023 compared to 51,302 in 2018
Venture capital finance has dried up amid political and economic pressures, prompting a dramatic fall in new company formation X: @carnage4life , @tonytassell , @michaelxpettis , @eleanorolcott , @hsu_steve , @yrechtman , @scottlincicome , @alecstapp , @georgenhammond , @pmarca , @kayjebelli , @eleanorolcott , @alecstapp , @ruima , @pt , @stevesi , @alecstapp , @snowmaker , and @pitdesi . LinkedIn: Francis Bassolino Forums: r/Economics and r/China X: Dare Obasanjo / @carnage4life : China has completely fumbled the bag when it comes to tech dominance. In 2018, 51,302 start-ups were founded in China. By 2023, that figure had collapsed to 1,202 and is on track to be even lower this year. The government got jealous of tech's rising power and killed startups. [image] Tony Tassell / @tonytassell : Charts that tell an important story - How China has ‘throttled’ its private sector and entrepreneurs - great reporting from @EleanorOlcott and Wang Xueqiao. The VC market has shrivelled https://www.ft.com/... [image] Michael Pettis / @michaelxpettis : 1/8 China' private secret is suffering. Among other things, ""China used to be the best VC destination in the world after the US," says one Beijing-based executive, but “the industry has just died before our eyes. The entrepreneurial spirit is dead.” https://www.ft.com/... Eleanor Olcott / @eleanorolcott : Under such conditions, why would VCs make big bets on high risk companies doing pioneering research? I travelled to Suzhou, Shanghai and Shenzhen to see the impact the industry's “death spiral” is having on entrepreneurship in China. https://www.ft.com/... Steve Hsu / @hsu_steve : If this article is at all accurate the situation for venture-backed startups in China has deteriorated horribly in the last couple of years. Very bad for the innovation ecosystem. https://www.ft.com/... I seem to hear constantly about Chinese startups in chips and AI, just to Yoni Rechtman / @yrechtman : Today, VC firms have to explain to the state why their companies failed and why they have lost the country's money. This is so bleak. I hope the US can welcome these talented would-be entrepreneurs from China. https://www.ft.com/... [image] Scott Lincicome / @scottlincicome : “China used to be the best VC destination in the world after the US... The whole industry has just died before our eyes.... The entrepreneurial spirit is dead. It is very sad to see.” https://www.ft.com/... [image] Alec Stapp / @alecstapp : This sucks for ambitious and innovative people in China. We should be actively recruiting the best and brightest to come build their startups in the US instead. https://www.ft.com/... George Hammond / @georgenhammond : If you thought a tax on unrealised gains was bad, it could be a lot worse. “We require our founders to put their house and car on the line. In this market it is mandatory” Great reporting by @EleanorOlcott and @xueqiao1994 on China's VC squeeze https://www.ft.com/... Marc Andreessen / @pmarca : It can all just be killed. Kay Jebelli / @kayjebelli : This is actually a tremendous opportunity for Europe to hit the accelerator on the opposite approach Eleanor Olcott / @eleanorolcott : Since arriving in China, meetings founders and VCs have left me with a very dim view of the current state affairs. Things are so bad. In 2018, 51,302 new startups were founded. Last year, that number was down to 1,202. It took a while for that number to sink in. [image] Alec Stapp / @alecstapp : VCs in China now spend most of their time suing the startups they invested in to get their money back. Founders are also now required to be personally liable for their company's loans. Hard to imagine why anyone would start a company under these conditions. [image] @ruima : Not really sure how that's possible when this is the chart for fundraising amounts and # of transactions for the past 5 happy years from the same source, IT Juzi [image] Parker / @pt : This definitely can't be good for China, but China is also a very different country than the US. They already pick corporate winners and CEOs serve at the pleasure and in the best interests of the State. So one possibility is they innovate less from the bottom, but national Steven Sinofsky / @stevesi : People in the US might gloat. There is a more informed reaction which is how fragile this environment is—fosters a cycle of risk capital, talent starting or joining companies, and an environment that supporting this. It can all be killed by heavy-handed government very quickly. Alec Stapp / @alecstapp : One of the most striking charts this year: China's startup ecosystem has almost completely collapsed in the last 5 years. [image] Jared Friedman / @snowmaker : Since Xi's crackdown, if you raise VC in China and your startup fails, the government seizes your house. Not exactly surprising no one wants to sign up for that. [image] Sheel Mohnot / @pitdesi : China cracked down on tech companies not aligned with Communist party values; it had a real chilling effect on startups/VC in China Sad to see an amazing entrepreneurial spirit get killed so quickly [image] LinkedIn: Francis Bassolino : Some of the quotes and statistics in this article are astounding: — “The downbeat mood [in China's VC market] is reflected in the statistics. … Forums: r/Economics : How China has ‘throttled’ its private sector r/China : How China has ‘throttled’ its private sector
Context & Ripple Effects
The reported collapse in company formation extends a longer deterioration in Chinese tech financing: startups were already struggling to raise capital and cutting staff in an earlier venture-funding squeeze.
The pressure has also reached the exit market, where a wave of suspended or cancelled Star Market IPO applications narrowed a key route for investors to realize returns. This report ties those financing constraints to a far sharper reduction in new founder activity.
First-order effects
- Prospective Chinese founders face a materially thinner pool of venture funding, making it harder to finance new companies at formation.
- VCs must manage weaker portfolio prospects and, according to the reported accounts, may devote more effort to recovering capital from existing investments rather than backing new founders.
Second-order effects
- A weaker startup pipeline reduces the future pool of companies that can mature into IPO candidates, reinforcing the exit bottleneck already visible on Shanghai's tech-focused market.
- Tech workers and would-be founders have fewer domestic paths into new ventures; the earlier rise in unemployed Chinese tech workers amid the crackdown suggests the talent-market consequence was already emerging.
Third-order effects
- If funding scarcity and perceived founder risk persist, China’s technology ecosystem could tilt further toward established firms and state-compatible capital rather than broad-based venture creation.
- The pattern would make policy predictability and viable exits central competitive variables for startup hubs seeking to retain—or attract—entrepreneurial talent.
The trend: This is a data point in the shift from a broad, venture-led Chinese startup boom toward a more state-mediated and capital-constrained technology ecosystem.