To that end, the U.S. Treasury Department has just launched a sweeping review. They’re doubling down on Benchmark’s recent $15 million investment to Manus AI, a fast-growing artificial intelligence startup based in Nashville. This scrutiny comes at a time of heightened concern over state compliance with the 2023 law forbidding investment in certain Chinese companies. Manus AI has inspired audiences around the world with its ingenuity and forward-looking way. Just last week, the privately held company raised another $75 million, equally inflating its valuation to nearly a half billion dollars.
Benchmark Capital was the lead in this latest funding round for Manus AI, which is registered as a company in the Cayman Islands. While the investment is exciting, it has not come without controversy. Supplemental narrative The U.S. Treasury is investigating Benchmark’s ties to Manus AI. They deserve to know the potential ramifications of this enormous investment, particularly given the recently imposed rules on foreign investments in tech companies.
Manus AI is unique in that it operates as a “wrapper” around legacy AI models. Rather than developing its own proprietary technology, it builds on what’s already out there. This structure is widely used by Chinese companies looking to access foreign capital, with perhaps the most famous example being Alibaba. Due to its operational framework, some observers may perceive Manus AI as aligned with China. It is important to note that it does not mean that it is a China-domiciled company.
According to reports, Benchmark’s new legal team had cleared the investment from a compliance standpoint before the funding round even happened. The Treasury Department is still in the process of reviewing that decision. Their findings unearth the interesting trend that regulatory concerns still reign supreme over foreign investment in technology.
Delian Asparouhov, a partner at Founders Fund and one of the sharpest minds in Silicon Valley today, reacted against Benchmark’s investment in Manus AI. He then went to social media home X to post something clearly not thought through, like “wow, actions have consequences?” His remarks reflect a deeper and more widespread anxiety settling over investors right now. They’re right to be concerned about the risks associated with investments in Chinese companies.
The U.S. government is proactively monitoring these sizable investments. Venture capital firms and startups alike are entering a whole new minefield of government regulations and compliance that is essential for building an international business. This recommendation could set a dangerous precedent for making future investments in tech private sector companies. It disproportionately impacts those with potential ties to foreign actors.
