TikTok's hearing in Congress is a reminder of Chinese startups' identity crisis
TikTok, which now boasts more than 150 million monthly active users in the U.S., is set to testify before Congress on Thursday morning. Over in China, home to TikTok's parent ByteDance, many startup founders and investors are preparing to stay up and watch the app's CEO Shou Zi Chew take thorny questions over China's potential influence on the short-video giant.
To an extent, what happens to TikTok foreshadows the future of any Chinese tech company that will make it big in the U.S. As tensions between the two superpowers rise, Chinese startups expanding in the West find themselves increasingly caught in between. At home, they face heightened restrictions over how their data flows out of China; in the U.S., their Chinese root is a constant source of national security concerns.
No other Chinese internet service is anywhere near TikTok's global influence today, but even early-stage startups are thinking of ways to play down their Chinese identity to avoid being targeted by Western lawmakers down the road.
The most basic steps are to move their parent firm out of China to a more "neutral" country, such as Singapore, and store user data in the jurisdiction where they operate. The more resourceful and determined founders are going out of their way to emigrate abroad, build a substantial team on the ground and raise from American investors to show that their interests align with the citizens of their target market.
ByteDance has tried some of these tactics to localize TikTok's operations, but its efforts didn't seem to do much to placate U.S. regulators so long as the app is still owned by a Chinese firm. Watching TikTok's troubles start in the Trump administration and continue into the Biden era, venture capital firms that bet on China are getting angsty. Some of them are now advising their portfolio founders on how to obscure their Chinese origin and even seek a foreign passport.
Whether TikTok gets banned or not, its ordeal in the U.S. already sounds an alarm to Chinese founders with Western ambitions -- start thinking about the identity of your company from day one and be prepared for an increasingly hostile geopolitical environment.
(I have written about this topic more extensively in the past, including why Chinese founders are seeking overseas growth, what sort of challenges they encounter abroad and why China's web3 entrepreneurs are having a particularly difficult time.)