The U.S. Treasury Department is currently reviewing Silicon Valley venture capital firm Benchmark's recent $75 million investment in the Chinese AI startup Butterfly Effect, the developer behind the Manus AI agent. This scrutiny arises amid escalating concerns over national security and the strategic implications of American capital supporting advanced artificial intelligence technologies in China.
Background on the Investment
In April 2025, Benchmark led a $75 million Series B funding round for Butterfly Effect, elevating the company's valuation to approximately $500 million. This investment marks a significant milestone for the startup, which has garnered attention for its development of Manus—a general-purpose AI agent designed to autonomously execute complex tasks with minimal human input. The funding is intended to support Manus's expansion into international markets, including the United States, Japan, and the Middle East.
Concerns Prompting the Review
The Treasury's review is part of a broader initiative to assess the national security risks associated with U.S. investments in foreign technologies, particularly those related to artificial intelligence. Manus's capabilities, which reportedly include outperforming models like OpenAI's DeepResearch on certain benchmarks, have raised alarms about the potential for such technologies to be leveraged in ways that could conflict with U.S. interests.
Additionally, the involvement of Chinese tech giants such as Tencent and HSG (formerly Sequoia China) in earlier funding rounds for Butterfly Effect adds another layer of complexity to the situation.
Implications of the Review
The outcome of the Treasury's review could have significant ramifications for both Benchmark and Butterfly Effect. Should the investment be deemed a threat to national security, it may lead to restrictions or mandates for divestment. This case also underscores the increasing tension between fostering innovation through global investment and safeguarding national interests in the realm of emerging technologies.
As the U.S. continues to evaluate the implications of foreign investments in critical technology sectors, the Benchmark-Manus case serves as a pivotal example of the challenges at the intersection of venture capital and national security.