U.S. Probes Benchmark Capital Over China-Linked AI Investment

Big VC Meets Big Brother

Benchmark Capital, one of Silicon Valley’s most prominent venture firms, is under investigation by the U.S. Treasury Department for its investment ties to Manus AI, a startup allegedly linked to Chinese interests. The probe, conducted by the Committee on Foreign Investment in the United States (CFIUS), reflects heightened federal scrutiny of American financial relationships that may indirectly empower foreign adversaries. Manus AI, a generative AI company, received early-stage support from Benchmark, but concerns have surfaced around the startup’s deepening entanglements with China through its operational footprint and staffing. The situation underscores how geopolitical fault lines are impacting even seed-stage investments and prompting a broader debate in Washington over venture capital’s exposure to foreign tech ecosystems.

A Legal Gray Zone

Though U.S. law largely restricts CFIUS reviews to foreign investments within the United States, recent policy shifts have expanded the government’s interest in outbound investments as well. The review of Benchmark’s dealings with Manus AI could set a precedent, especially as the Biden administration pushes to regulate American capital flowing into sensitive tech sectors overseas. The case highlights unresolved questions about how much diligence VC firms need to do when funding startups that operate internationally. Benchmark, for its part, claims it exited its stake in Manus prior to any China-related operations, but the Treasury is reportedly digging deeper into timelines and disclosures. More broadly, the probe signals that venture investors are now squarely in the national security conversation.