SIG is winding down its Beijing team, underscoring the decline of the dollar-fund model in China’s startup market.
By Yang Rui
One of the earliest investors in internet tech company ByteDance is scaling back its venture capital operations in China, marking the symbolic end of a model that once dominated the country’s technology startup boom.
SIG Asia Investments, the regional arm of U.S. quantitative trading firm Susquehanna International Group, has begun dismantling its frontline China venture capital (VC) team, according to recent reports that have stirred debate across the country’s investment industry.
The move has surprised many given SIG’s extraordinary success with ByteDance, the owner of the TikTok social media platform. More than a decade ago, the firm invested $6 million in ByteDance’s angel funding round, acquiring nearly 15% of the company. At its peak, that stake was estimated to be worth more than $90 billion on paper, representing a return of more than 15,000 times its original investment.
The firm is not exiting China entirely. It will retain a core team to manage existing investments, including its ByteDance holding, while its market-making and other routine businesses will continue to operate.
From startup gamble to global giant
SIG’s investment has become one of the defining success stories of China’s VC industry.
When founder Zhang Yiming launched ByteDance, the company struggled to attract funding and many investors doubted its prospects. SIG’s angel investment provided not only capital but also credibility during the company’s formative years, helping it to survive long enough to develop its products and expand.
ByteDance subsequently grew into one of the world’s largest technology companies. Its news aggregator Jinri Toutiao surpassed 100 million users in 2014, while short-video platform Douyin launched in 2016. TikTok followed in 2017 as ByteDance expanded overseas, and by 2018 both Douyin and TikTok had established themselves as major platforms in their respective markets.
Over more than two decades investing in China, SIG backed more than 350 local companies and helped over 70 achieve exits through public listings or acquisitions, making it one of the best-known foreign VC investors in the country.
Its decision to shrink its VC business therefore reflects broader changes in China’s investment environment rather than the failure of a single investment strategy.
Dollar funds lose influence
For much of the past two decades, U.S. dollar-denominated venture funds played a central role in financing China’s internet sector. Their model — invest early in fast-growing consumer internet companies, list them overseas, cash out fast — delivered huge returns during the internet gold rush. But that era is over.
Total investment by U.S. dollar funds in China has fallen by more than 84% over the past five years. Their market share has dropped from roughly one-third of China’s VC market to about one-tenth, significantly reducing their influence.
At the same time, China’s investment priorities have shifted toward sectors such as semiconductors, advanced manufacturing, renewable energy and other “hard technology” industries. These businesses typically require larger research and development budgets, longer investment horizons and more patient capital than consumer internet startups.
That change has weakened the traditional strengths of many foreign venture funds, which historically focused on businesses capable of delivering rapid growth and quicker financial returns.
State-backed capital takes the lead
China’s venture capital market has also seen a significant shift in the composition of investors.
State-backed funds and industrial investors have become increasingly prominent in financing early-stage companies, particularly those aligned with Beijing’s industrial policy objectives and efforts to strengthen domestic technological capabilities.
Against that backdrop, SIG’s retrenchment is widely viewed as part of a structural transformation rather than an isolated corporate decision.
The relationship between SIG and ByteDance remains one of the most successful examples of China’s earlier VC model, in which foreign investors identified promising entrepreneurs, provided early financial backing and shared in the rewards as companies expanded into global businesses.
ByteDance’s subsequent international growth has demonstrated that while venture capital can accelerate a company’s development, long-term competitiveness ultimately depends on technological innovation and product execution.
SIG’s remarkable return on ByteDance stands as a reminder of one of venture capital’s greatest success stories. Its decision to scale back its China venture operations also highlights how profoundly the country’s startup financing ecosystem has changed, with domestic capital increasingly replacing the foreign funds that once helped fuel China’s internet boom.
