Do Chinese Startups Dream of Electric Sheep?

Do startups dream? If they do, it probably looks something like this. A super-smart founder convinces a group of even smarter people to quit their jobs, launch something half-baked, raise some money, and spend a year or so wandering through the desert looking for product-market fit. The lucky ones eventually build something that becomes enough of a pain in a larger competitor’s ass to get acquired.

Successful exits recycle talent, money, and confidence back into the ecosystem. Fairchild helped seed Silicon Valley. Without PayPal’s success, maybe we don’t get Tesla or SpaceX. In LA, MySpace’s success helped create a generation of founders, employees, and investors who made building a tech company there feel much less crazy by the time I launched mine in 2015.

I benefited from that ecosystem without ever really thinking about where it came from.

Which is why the recent Manus-Meta deal getting killed kinda sucks from an ecosystem perspective.

The Chinese-founded AI startup went from relative obscurity to a roughly $2 billion acquisition by Meta in an absurdly short period of time. Then Beijing stepped in over national security concerns and ordered the transaction unwound.

I’ll leave the U.S.-China AI race, national security, and Meta’s long history of acqui-killing for another post.

An acquisition doesn’t just cash out founders and investors. Employees get liquidity. Some eventually start companies of their own, while others jump to the dark side and become investors. Those original investors recycle their returns into the next batch of slightly irrational people willing to quit good jobs and chase crazy, high-risk ideas.

That compounding matters.

China may have perfectly legitimate reasons for wanting strategically important AI talent and technology to stay within its orbit. But there’s also a cost when founders and investors start wondering whether the government will ultimately decide which exits are acceptable.

The growth of U.S. tech has been unparalleled, in part because founders and investors generally haven’t had to worry about that kind of uncertainty.

Roll credits.