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Interview

Silicon Valley needs China talent: Ex-Ambassador Roos

Former envoy to Japan fears trade war impact on tech

John Roos says the valuations of unlisted companies are too high due to "a lot of capital trying to invest" in the best deals. (Photo by Takuya Fujisawa)

TOKYO -- John Roos, the former American ambassador to Japan, said the trade war is preventing U.S. companies from accepting Chinese investments and is impeding talented Chinese who might otherwise help Silicon Valley remain on the cutting edge of high technology.

"There have been different types of impact," Roos said in an interview with Nikkei regarding the trade war. "There has been a significant decrease in capital flow from China ... because of the uncertainty of accepting that capital."

Roos is a partner and co-founder of Geodesic Capital, a Silicon Valley-based venture capital company.

"It's fair to say," he added, "that we should be worried." There is "hesitation and concern" about receiving capital from China.

The U.S. and Chinese governments announced on Dec. 13 that they had reached what they are calling the first phase of a trade agreement. Additional tariffs that the U.S. had planned to impose on imported Chinese goods, including smartphones, have been put on hold.

However, U.S. President Donald Trump's administration retains its de facto ban on U.S. exports to Huawei Technologies and related companies, all of which are restricted from doing business with U.S. companies. Washington says these companies represent security risks, highlighting the still strained relations between the two nations vying for high-tech supremacy.

Roos pointed out that with the worsening U.S.-China ties, the number of Chinese students studying at Stanford University, in the U.S. state of California, has been falling, as has the number of Chinese engineers coming to the U.S. to work in Silicon Valley. A decrease in venture investment funds from China can be covered with domestic funds, he said, but "there is no replacement for talent coming into the Valley [from China]."

In reference to the Trump administration's protectionism, he said, "I don't agree with the Trump administration's hammer approach [since] I'm such a believer in the dynamism of our country."

On America's competition with China in high technology, he said, "I believe that if we invest in education, R&D and the relationships with our allies, particularly with Japan, we cannot lose in the long run.

"One of the biggest advantages China has is data, with 800 million internet users that create an incredible amount of data," he said.

He went on to say, however, that "if we look at the area of AI, the U.S., working with other allies, will have an incredible amount of data. We are significantly advanced in computing power, chips that are critical in AI, and how quantum computing plays into that is also important."

Regarding the global environment for investing in startups, Roos admitted that valuations are overheating and said that "there is a lot of capital trying to invest in [the] best deals."

On the other hand, he said, "What we are going through right now with cloud computing, AI and IoT, etc., is something that I have never seen in my professional life. So the trends are in the right direction.

"Will there be adjustments in the public market and the private market? Of course, it's always good to have reminders to look at the fundamentals of these companies, and sometimes it's healthy to have a reminder."

Geodesic Capital's funds have received investments from major Japanese companies, including Mitsubishi Corp. The company also helps promising Silicon Valley startups break into Japan.

Roos mentioned that "Japan moves and adopts technology and is incredibly innovative, and the level of entrepreneurism continues to increase."

Roos was ambassador to Japan under President Barack Obama from August 2009 to August 2013.

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