End of an Era for Foreign Venture Capital in China? SIG Dissolves China Team After Betting on ByteDance

Sequoia Capital China (SIG), the venture capital firm that helped transform ByteDance from an unknown startup into a $600 billion valuation giant, is now reportedly exiting the Chinese market entirely.

According to foreign media outlet The Information, SIG is gradually dissolving its China-based venture capital team, with key executive Gong Ting also set to leave the company to launch his own venture. This marks the end of an era for an institution that has operated in China for nearly two decades and achieved one of the most remarkable return records in venture capital history.

SIG’s connection with Zhang Yiming dates back to 2007. At the time, Wang Qiong, a managing director at SIG, was assigned as an investor representative at KuXun.com. The 24-year-old Zhang Yiming served as the company’s chairman of the technical committee. Over the next five years, Wang Qiong observed the quiet, code-focused young man and gradually became convinced he possessed the traits to achieve great things.

The turning point came during the Lunar New Year in 2012. The 29-year-old Zhang Yiming sketched a product concept on a napkin at a Beijing café and explained to Wang Qiong his vision of disrupting traditional information distribution using recommendation algorithms. This would later become the prototype for Toutiao.

At the time, established portal sites like Sohu (SOHU-US), NetEase (09999-HK), and Tencent (00700-HK) dominated the information market. The industry widely believed the market was already saturated. With no public profile, no product, and no operational data, nearly all investors were skeptical about whether algorithms could challenge entrenched portal giants.

Yet Wang Qiong made the investment decision within just ten minutes, securing both the angel and Series A rounds. In March 2012, ByteDance was officially founded, with SIG investing $80,000 to become the company’s sole institutional investor.

ByteDance’s early days were far from smooth. Wang Qiong took Zhang Yiming to pitch over twenty investment firms—all rejected. By year-end, market funding tightened across the board, and the company faced a potential cash crunch.

At this critical juncture, SIG doubled down, adding a $1 million Series A+ round and providing a $1 million bridge loan. In total, SIG invested approximately $6 million, becoming ByteDance’s only financial backer during its most difficult phase.

From there, the company accelerated rapidly: in 2013, Wang Qiong facilitated a Series B investment from Russia’s DST; in 2014, Sequoia Capital and others joined, and Toutiao’s user base surpassed 100 million that year; in 2016, Douyin launched; in 2017, the international version TikTok was released; and in 2018, Douyin’s domestic daily active users exceeded 150 million.

In just thirteen years, ByteDance’s valuation soared from $9 million to approximately $600 billion.

At its peak, SIG held around 15% of the company. Its $6 million investment yielded a staggering 15,000x return—one of the rarest profit records in global venture capital history. This success propelled Jeff Yass, a key figure behind SIG, to a net worth exceeding $59 billion, making him the wealthiest person in Pennsylvania, USA.

Yet the institution that created this legend has now chosen not to seek the “next ByteDance.” For the past two decades, foreign venture capital firms in China followed a standard playbook: raise funds overseas, target high-growth companies, scale through multiple funding rounds, and eventually exit via overseas IPOs.

But this model is now unsustainable. According to IT Juzi’s statistics, in 2021, there were 871 USD-denominated fund investments in China’s primary market, accounting for 9.6% of total deals. By 2025, that number had shrunk to 225 deals, representing just 2.5% of the market.

In terms of investment volume, USD fund investments dropped from 532.9 billion RMB in 2021 to 82.7 billion RMB in 2025—a decline of over 84% in five years. Their market share plummeted from 35.9% to 10.1%.

Coinciding with this foreign retreat is the massive entry of Chinese state capital. By 2025, state-owned institutions had penetrated 44.55% of the market, managing funds that accounted for 64.5% of the total market. When including indirect funding through limited partners, state capital sources now represent nearly 90% of total market funding.

The market generally views 40% as a threshold. Once state capital exceeds this level, its role shifts from “important participant” to “dominant force,” signaling that China’s venture capital market has officially entered a new phase led by state capital.

Analysts point out that SIG’s withdrawal reflects three irreversible structural trends.

First, China’s internet user penetration has plateaued, leaving little room for growth. The “invest-for-growth” strategy, once the forte of foreign VCs, is now failing.

Second, exit routes via IPOs have drastically narrowed. By 2025, M&A accounted for nearly 80% of exits, while the path to U.S. listings has virtually disappeared.

Third, fundraising has dried up. Overseas limited partners have significantly lowered their risk appetite, and increasing restrictions on investments in sensitive areas like AI and semiconductors have made overseas investors reluctant to fund China-focused funds.

In fact, SIG is not alone. Sequoia Capital completed its global business split in 2023, while firms like General Atlantic, KKR, Carlyle Group, and Tiger Global have also gradually scaled back their China operations.

Foreign VCs are collectively drifting away from the Chinese market. The old order of foreign-led venture capital in China over the past two decades has effectively come to an end.

Looking back at how SIG managed to bet correctly on ByteDance, the industry widely attributes it to an investment philosophy radically different from the mainstream.

While most VC firms focus on sectors and data, Wang Qiong’s core logic was always “first look at the person, then the business.” Sectors evolve, business models become obsolete, but only truly reliable people can endure economic cycles.

Spending five years observing an individual, making a decision in ten minutes, providing two years of financial backing, and maintaining a decade-long commitment—this approach was a form of “dimension-lowering” competitive advantage in the restless VC world.

Moreover, SIG’s ability to achieve extraordinary returns in adversity stemmed from its use of proprietary capital. Free from the performance pressures of external limited partners, it enjoyed extreme decision-making freedom, enabling this mythical 15,000x return.

Yet the reason this model is hard to replicate lies not only in legendary judgment of character but also in the era that allowed foreign capital to hold long-term stakes, nurture companies, and eventually exit via overseas IPOs.

But that era, it seems, is gone forever.