Payam Javan: The U.S. National Counterintelligence and Security Center (NCSC) has issued a warning to American technology startups about the risks of foreign investment, particularly from China. According to a bulletin released on July 24, foreign adversaries can exploit investments to steal sensitive data and intellectual property, which poses significant threats to U.S. economic and national security. The NCSC highlighted that foreign investors might use complex ownership structures and intermediaries to bypass scrutiny and gain access to valuable proprietary information.

NCSC Director Michael Casey stressed that while U.S. startups are crucial to innovation, they are vulnerable when seeking foreign capital. The bulletin detailed that foreign actors might exploit struggling startups, demanding intellectual property transfers under the guise of due diligence. The NCSC cited incidents where companies, including those in the UK and the U.S., faced significant losses or bankruptcy after transferring their technology to foreign investors who later abandoned deals post-acquisition of valuable data.

In response to these threats, the U.S. government has increased measures to counteract potential risks from Chinese investments. This includes restrictions on U.S. outbound investments in critical technologies and new regulations to limit technology transfers to China. The NCSC’s advisory, developed in collaboration with various federal agencies, underscores the growing concern over how foreign investments might undermine U.S. technological leadership and national security.