May 05, 2026|Borderline: Immigration and Foreign Direct Investment
The review process you thought only applied to acquirers now follows the money — all the way into your fund.
Most emerging managers building their first or second fund treat CFIUS as someone else’s problem — a concern for the acquirer on the other side of an M&A table, not a VC writing a $3M check into a seed-stage company. That assumption is increasingly wrong, and the consequences of getting it wrong have never been more expensive.
Over the past several years, the Committee on Foreign Investment in the United States has expanded its reach well beyond traditional acquisitions. The Foreign Investment Risk Review Modernization Act of 2018 — known as FIRRMA — gave CFIUS explicit authority to review certain non-controlling investments, and subsequent implementing regulations made clear that the identity of your limited partners matters. If your fund has foreign LPs and you invest in companies that touch technology, infrastructure, or sensitive data, CFIUS is already part of your legal landscape whether you have engaged with it yet or not.
This article is aimed at venture capital sponsors — particularly emerging managers — who need to understand how the CFIUS framework intersects with fund formation, LP onboarding, and portfolio company investment strategy. What follows maps the terrain and identifies where the exposure lives. The structuring work required to navigate it demands counsel who operates across both the investment and the immigration dimensions of these transactions.
What CFIUS Actually Does
CFIUS is an interagency committee chaired by the Secretary of the Treasury. Its statutory mandate is to review transactions that could result in foreign control of, or certain foreign investments in, U.S. businesses — and to recommend action to the President where a transaction poses a threat to national security.
The key word in that mandate used to be “control.” For most of CFIUS’s history, the analysis started and ended there: does a foreign person or entity end up in a position to direct the management, policies, or operations of a U.S. business? If yes, CFIUS had jurisdiction. If not, the transaction generally fell outside the committee’s formal review authority.
FIRRMA changed that. The legislation created a new category — sometimes called the TID rule, for Technology, Infrastructure, and Data — that extends CFIUS jurisdiction to non-controlling investments in certain U.S. businesses regardless of whether the foreign investor acquires governance rights. For a VC-backed company operating in any of these three domains, a minority investment by a fund with the wrong LP can now constitute a covered transaction.
Technology
Critical and emerging technologies including AI, advanced semiconductors, quantum computing, biotechnology, and hypersonics — whether controlled under export regulations or identified on the ECCNs.
Infrastructure
Systems and assets that are critical to U.S. national security, including energy, financial systems, telecommunications, transportation, and water supply networks.
Data
Businesses that collect or maintain sensitive personal data of U.S. citizens that could be exploited to the detriment of national security — including health, financial, location, and biometric data at scale.
For most venture-backed companies in 2025, at least one of these categories is likely in play. An AI startup is technology. A payments company touches financial infrastructure. A health tech company almost certainly collects sensitive personal data. The TID framework is broad by design, and the regulatory guidance that implements it has moved in the direction of more coverage, not less.
Where the LP Comes In
Here is where many emerging managers get surprised. The typical mental model is: a foreign LP writes a check into my fund, I write a check into a portfolio company, and CFIUS looks at what the portfolio company is doing — not at who funded my fund. That model is outdated.
Under the current regulatory framework, CFIUS looks through the fund structure to examine the beneficial ownership and control of the investor. If a foreign person or entity that is an LP in your fund holds a significant economic interest — or, critically, has certain information rights, board rights, or decision-making rights in the fund — they may be treated as a foreign invest
The regulations do not require that a foreign LP control the fund. They focus on whether the LP has the ability to access material nonpublic technical information about the U.S. business, participate or observe at the board level, or be involved in substantive decision-making. Standard LP agreements that grant co-investment rights, advisory committee seats, or detailed reporting packages may inadvertently create the conditions for a covered transaction.
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