After visiting Chinese investment firms and startups in robotics and biotech, Silicon Valley VC Chemistry partner Bohan Lou wrote up his observations on China's startup scene.
His biggest surprise: many startups are rushing to IPO, not because they're ready, but because their financing agreements include listing deadlines and repurchase clauses. If a company fails to go public on time or meet performance targets, founders and the company may have to buy back investors' shares at principal plus interest. Some agreements also hold founders personally liable.
The Financial Times and Reuters have reported similar cases. When IPO exits stall, some investors demand that startups enforce repurchase clauses and return the capital with interest.
If the company can't pay, the debt can fall on the founder personally. Some founders have had assets seized, been barred from high spending, or even landed on the dishonesty blacklist.
This is what the Chinese venture capital world calls "equity in name, debt in fact" (minggu shizhai): when taking money, it looks like equity financing, but after a startup fails, it can become the founder's personal debt.
https://twitter.com/loubohan/status/2082143914924851449