US Warns Tech Startups Of Espionage Threats From China And Others Adversaries Via Foreign Investments: 'Can Directly Lead To The Failure Of These Companies'

In a recent development, the U.S. National Counterintelligence and Security Center (NCSC) has alerted tech startups about the potential risks of espionage from foreign adversaries, including China, through investment channels.

What Happened: The NCSC, on Wednesday, July 24, 2024, issued a bulletin warning U.S. companies about foreign threat actors who might exploit tech startups through private investments such as venture capital and private equity, Financial Times reported on Thursday. The bulletin highlighted that such actions could pose substantial risks to both economic and national security.

Michael Casey, NCSC director, stated, “Our adversaries continue to exploit early-stage investments in U.S. start-ups to take their sensitive data. These actions threaten US economic and national security and can directly lead to the failure of these companies.”

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The bulletin also expressed concerns over foreign groups exploiting the capital needs of struggling start-ups to gain access to intellectual property and proprietary data. It underscored the increasing concerns over attempts by Chinese security services to steal technology, especially in the rapidly advancing field of artificial intelligence.

Why It Matters: This warning comes in the wake of an escalating strategic rivalry between Washington and Beijing, with the US imposing export controls to limit China’s access to advanced technologies. The bulletin also highlighted the strategies used by foreign actors to hide their ownership and intent, such as routing investments through intermediaries in the US or abroad. This follows a trend where American VCs have been urging U.S. start-ups to sever ties with Chinese investors due to anticipated regulatory clampdowns.

Moreover, concerns have been raised over Intel Capital’s investments in Chinese AI and semiconductor start-ups, as it receives significant funding from Washington to compete technologically with Beijing. This comes as industry leaders predict an “explosive growth” in China’s chip industry within the next three to five years.

The NCSC has advised start-ups to take proactive measures to protect themselves from potential threats, including safeguarding critical assets and limiting data shared with investors.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari