China's Next Export: Venture Capital

In April, Empower Micro Systems became one of the first tenants of InnoSpring, a new startup incubator in Santa Clara, Calif., backed largely by Chinese investors. Less than two weeks after Empower’s move-in date, InnoSpring helped the young company—which develops technology that converts electricity between AC and DC—set up meetings with 22 China-based venture capital firms in preparation for a trip to Shanghai in May. “To have that network working on our behalf is priceless,” says Jon Bonanno, Empower’s president.

As more U.S. tech startups see China as an essential place to do business, increasing numbers of Chinese investors are funding them and helping them expand to the mainland. Chinese venture capital firms backed 28 U.S. companies in 2011, nearly double the number two years earlier, according to Dow Jones VentureSource. China’s growing wealth and the government’s desire to attract tech companies have set the stage for more deals, says Gavin Ni, founder of Zero2IPO Group, which advises venture capitalists in China.