Study Explores The Impact Of Venture Capital On U.S. Innovation & Threats Posed By China’s Tech Ambitions, Shifting Regulatory Landscapes

WASHINGTON, DC – The American Edge Project (AEP), in collaboration with PitchBook, today released a new study, “American Innovation Under Siege: Venture Capital Data Reveal Risks From Rising Global Regulatory Overreach.” The report examines the critical role of venture capital (VC) in propelling U.S. innovation and economic growth, while highlighting the mounting challenges posed by China’s aggressive technological ambitions and the spread of restrictive regulatory frameworks in the United States and Europe.

This report comes at a pivotal moment, as U.S. policymakers increasingly look to emulate the stringent regulatory models of China and Europe. By analyzing VC data and key trends across the United States, China and Europe, the study underscores the negative impact of overregulation on U.S. innovation and technological development.

“This report serves as a wake-up call for leaders across the United States,” said AEP CEO Doug Kelly. “Venture capital and a supportive ecosystem are the lifeblood of American innovation, fueling the development of cutting-edge technologies and driving economic growth. But as this report makes alarmingly clear, the United States risks falling behind China in the global tech race if we adopt heavy-handed regulations that undermine America’s private sector innovators. The consequences are not limited to local economies, they include our very economic and national security as a country.”

The report in its entirety can be found here. Key findings from the report include:

  • Venture Capital’s Role in Innovation: In 2021, the U.S. demonstrated a dynamic VC landscape, completing 19,000 deals worth $350 billion, a figure that notably surpassed the combined efforts of China and Europe. This vibrant VC activity has been a catalyst for American innovation. Meanwhile, China’s venture ecosystem, fueled by government support, has seen rapid growth, challenging the U.S. pace. Europe, however, struggles with regulatory constraints and market fragmentation, resulting in less VC activity and innovation compared to the U.S.
  • Impact of Government Regulations: Regulatory crackdowns in China significantly slowed its venture dealmaking and economic growth between 2018 and 2019, leading to a strategic reassessment to reinvigorate growth. Europe’s innovation landscape has been similarly constrained by heavy regulations, such as the General Data Protection Regulation (GDPR) and the Digital Markets Act (DMA), stymieing startup investments and pushing businesses towards non-European technologies, notably Chinese. In the United States, an increasing array of federal and state-level regulatory proposals threatens to dampen the domestic tech sector’s growth and innovation.
  • State Innovation and Regulatory Challenges: The expansion of VC-fueled innovation hubs across the United States indicates a diversifying entrepreneurial ecosystem beyond traditional tech centers. Cities such as Miami, Philadelphia and Indianapolis, for example, have shown remarkable growth in VC activity. However, emerging regulations, especially concerning mergers and acquisitions, pose significant threats to this momentum, potentially hindering startup growth, capital formation, and job creation across various states.
  • Recommendations for U.S. Innovation Leadership: To sustain its technological supremacy, the United States needs a proactive policy approach that fosters innovation and addresses national security, economic growth and the promotion of democratic values. Key strategies include maintaining a supportive regulatory environment, incentivizing VC investments and research and development (R&D) through favorable tax policies, enhancing science, technology, engineering, and mathematics (STEM) education, and scrutinizing foreign investments to protect intellectual property. These efforts are crucial for bolstering the U.S. innovation ecosystem and securing America’s position as a global technology leader.

The bottom line: To secure America’s position as the undisputed leader in global technology, U.S. policymakers must cultivate a robust regulatory landscape that empowers VC investment and fuels innovation. By championing policies that support and empower the U.S. tech ecosystem, American leaders can safeguard our economic prosperity, fortify our national security, and stave off the looming threats posed by China’s aggressive technological ambitions.


The American Edge Project is a coalition of domestic organizations representing a cross-section of U.S. innovators who are dedicated to telling the story about technology’s positive influence on America’s economy and the vital role innovation plays in our society. Former New Mexico Governor Susana Martinez, former U.S. Representative Chris Carney, and former Federal Election Commission Chairman Bradley A. Smith are directors of the American Edge Project. AEP’s National Security Advisory Board is comprised of Former White House Counterterrorism and Homeland Security Advisor Frances Townsend; retired four-star General Joseph F. Dunford Jr., United States Marine Corps (USMC), who served as former Chairman of the Joint Chiefs of Staff; and former Acting Director of the Central Intelligence Agency (CIA), Michael J. Morell. Former U.S. Senators Saxby Chambliss (R-GA) and Kent Conrad (D-ND) serve as Co-Chairs of the Project’s Economic Advisory Board. Former U.S. Representative Greg Walden (R-OR) and Former U.S. Representative Loretta Sanchez (D-CA) serve as Co-Chairs of the Project’s Open & Accessible Internet Advisory Board.


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