Chinese venture capitalists are hounding failed founders, pursuing personal assets and adding them to a national debtor blacklist when they fail to pay up, in moves that are throwing the country’s start-up funding ecosystem into crisis.
The hard-nosed tactics by risk capital providers have been facilitated by clauses known as redemption rights, included in nearly all the financing deals struck during China’s boom times.
“My investors verbally promised they wouldn’t enforce them, that they had never enforced them before — and in ’17 and ’18 that was true — no one was enforcing them,” said Neuroo Education founder Wang Ronghui, who now owes investors millions of dollars after her childcare chain stumbled during the pandemic.
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