Foreign investment scrutiny continues to creep into the startup world via a once obscure U.S. government agency that has new tools and a shift in focus that stands to impact young, high-growth companies in huge ways.
The Committee on Foreign Investment in the U.S., or CFIUS, recently made waves when it forced Chinese investors into two American companies to divest because of national security concerns.
There is much to learn from these developments about how government concerns over foreign investment will affect startups and investors going forward.
CFIUS has long had the authority to review investments for national security concerns when the investment delivers “control” of a U.S. entity to a foreign entity — and control is defined broadly to mean the ability to determine important matters of the business.
The Grindr and PatientsLikeMe actions underscore that CFIUS is more focused than ever on how data can pose a security threat.
For example, the U.S. government’s move against Grindr was reportedly motivated by concerns the Chinese government could blackmail individuals with security clearances or its location data could help unmask intelligence agents.