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Study finds that most Chinese startups lie about their funding

If you’ve had your eye on the startup scene in Asia anytime in the past couple of years, the first thing you’ll notice is that there’s a LOT of money being invested, especially when it comes to Chinese startups. However, a new report from Tencent Tech suggests that a significant chunk of startups in Asia are actually inflating the numbers they report in order to make it look like they’re receiving more investment than they actually are. According to the report, somewhere around 80% of China’s startups are laying about their funding. 

It doesn’t really matter which Asian market you’ve been watching – over the last few years, funding rounds (and by extension) valuations have soared. Startups are raising more money, and the industry is growing. That growth is real – nobody in the industry could doubt that. But those massive funding rounds you’ve read about? Many of them are fake. That’s the allegation put forward in a report from Chinese news site Tencent Tech, which says that 80 percent of the country’s startups are lying about their funding rounds. The article quotes famed Chinese investor and Zhenfund founder Xu Xiaoping as saying that phony funding numbers are “a new kind of tacit understanding in the industry.” “I’m totally not surprised at the 80 percent number being thrown around by that writer,” 500 Startups partner Rui Ma told Tech in Asia, “although I didn’t realize it was getting worse as they contend.” Chinaccelerator director and SOSV partner William Bao Bean agrees, telling Tech in Asia it’s “pretty common practice” right now for startups to exaggerate the size of their funding. “It’s a psychological warfare tactic designed to scare the competition and to scare VCs away from funding the competition.”

What do you think?

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Written by Sal McCloskey

Sal McCloskey is a tech blogger in Los Angeles who (sadly) falls into the stereotype associated with nerds. Yes, he's a Star Trek fan and writes about it on Uberly. His glasses are thick and his allergies are thicker. Despite all that, he's (somehow) married to a beautiful woman and has 4 kids. Find him on Twitter or Facebook,

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