IPO freeze, economic issues lead to rise in redemption requests
Founders responsible for redemption; startups risk failure
14,000 startups at risk of refund requests, law firm estimates
Startups39; predicament challenges China39;s selfsufficiency drive
Redemption rights offer protection, investor says

Nov 25 Reuters Chinese startups are increasingly struggling with demands from earlystage venture capitalists to return their investment or face lawsuits, after failing to provide an exit via a market listing within an agreed time frame, industry executives said.

Startups worldwide often agree redemption rights allowing private equity and venture capital investors to ask for their money back along with a premium if targets such as an initial public offering are not met.

In China, however, a near freezing of the IPO market this year and declining sources of capital in an economy hobbled by a property crisis and struggling for growth has given rise to reimbursement requests, threatening many startups39; existence, executives said.

The situation conflicts with the government39;s resolve to foster innovation and achieve technological selfreliance in systemically important industries to insulate the country from the impact of geopolitics.

In response, one initiative is to promote patient capital over the rush for quick profit.

Still, exits through redemption nearly tripled to 641 in 2023, showed data from consultancy Zero2IPO. The number jumped 68 in JanuarySeptember…