China's tech startups are lying to you about funding rounds
J Thoendell stashed this in Tech
It doesn’t really matter which Asian market you’ve been watching – over the last few years, funding rounds (and by extension) valuations have soared. Startups are raising more money, and the industry is growing. That growth is real – nobody in the industry could doubt that. But those massive funding rounds you’ve read about? Many of them are fake.
That’s the allegation put forward in a report from Chinese news site Tencent Tech, which says that 80 percent of the country’s startups are lying about their funding rounds. The article quotes famed Chinese investor and Zhenfund founder Xu Xiaoping as saying that phony funding numbers are “a new kind of tacit understanding in the industry.”
“I’m totally not surprised at the 80 percent number being thrown around by that writer,” 500 Startups partner Rui Ma told Tech in Asia, “although I didn’t realize it was getting worse as they contend.” Chinaccelerator director and SOSV partner William Bao Bean agrees, telling Tech in Asia it’s “pretty common practice” right now for startups to exaggerate the size of their funding. “It’s a psychological warfare tactic designed to scare the competition and to scare VCs away from funding the competition.”