Starting February 1st, the Shanghai government will compensate investment firms for losses incurred while investing in early stage and seed funded tech startups.

Called the “Provisional Measures on Managing Shanghai Angel Investor Risk Compensation” (our translation), the new policy promises up to 3 million RMB (around $456,000 USD) per unsuccessful investment, with a limit of 6 million RMB (around $916,000 USD) in “risk compensation” per investment firm per year. The amount of risk compensation allocated is calculated using the difference between the profit made from the startup’s exit and the amount of money invested in the startup.

It’s a hefty load of money to throw at venture capital firms, aimed vaguely at encouraging local startups, specifically those that bring “global impact” and “innovation” (the Chinese government is obsessed with the word ‘innovation’) to the tech industry. By mitigating the financial risk of investing in startups, the Shanghai government hopes to promote more “public businesses” and the “innovation of the people.”

Start your free trial now.

Get instant access to all our premium content, archives, newsletters, and online community.

Monthly Membership

Yearly Membership

What you get

Full access to all premium content and our full archives

Members'-only newsletters

Preferential access and discounts to all TechNode events

Direct access to the TechNode newsroom

Start your free trial now.

Get instant access to all our premium content, archives, newsletters, and online community.

Monthly Membership

Yearly Membership

Eva Xiao

Eva Xiao is a tech reporter based in Shanghai. Contact her at eva.xiao@technode.com or evawxiao (wechat & twitter).