Benchmark Capital faces backlash over $75M Chinese AI investment

Benchmark Capital faced intense criticism after leading a $75 million funding round in Manus, an AI startup founded in China, with Republican senators and fellow venture capitalists questioning the firm’s decision to invest in Chinese AI technology. The backlash highlights growing tensions in Silicon Valley over China-related investments, as geopolitical concerns increasingly influence venture capital decisions in the AI sector.

The big picture: What was once considered standard international investment activity has become politically charged, with some investors now viewing Chinese AI investments as potentially aiding a strategic competitor.

What they’re saying: Critics framed the investment as fundamentally misguided from a national security perspective.

• “You’re just investing into your enemy,” says Delian Asparouhov, a 31-year-old partner at Founders Fund, a prominent Silicon Valley venture capital firm. “Why would we be funding the Russia space program in 1972? Why would we be funding the Chinese AI race in 2025? To me, those are the same questions. It just seems to be beyond the realm of logic.”
• Bill Gurley, a longtime Benchmark partner, defended the firm’s decision on his podcast BG2, noting: “In not being a China hawk, people accuse you of being a sinophile. And there’s a lot of room in between those things.”

Key details: The investment targeted Butterfly Effect, the creator of the AI agent Manus, with specific operational characteristics that Benchmark viewed as mitigating security concerns.

• The AI product only operates atop large language models developed in the US, such as Anthropic’s Claude.
• The startup maintains offices outside China and doesn’t store customer data there.
• Republican senators suggested Congress should take action against such investments.

Why this matters: The controversy signals a fundamental shift in how Silicon Valley approaches international AI investments, particularly those involving Chinese companies, as national security considerations increasingly override traditional business logic in venture capital decisions.