TikTok’s Endgame: Huawei 2.0 or TikTok U.S.?

Bruin Ventures
2 min readFeb 19, 2023
Image from The College Post

Nicolás León Costianovsky (’25) | Feb 17, 2023

TikTok has been banned for use in the campus WIFI networks of a great number of universities in the U.S., making it so that students cannot access the app when they are connected to their campus network. This news comes after 19 states announced the banning of TikTok on government devices.

But why?

The TikTok app is a product owned by ByteDance, a Chinese-based company. TikTok’s viral growth has spurred political and regulatory debates over ByteDance’s level of insights on users in the United States, with the assumption being that much of the data that the company extracts from the app is available to the Chinese Communist Party (CCP), which constitutes a substantial security threat to the U.S.

Still, TikTok is the most viral, fastest-growing startup in the world, and a significant amount of VC money (~8 billion dollars to be precise) has been poured into ByteDance by investors like Sequoia, Tiger Global Management, and others. These funds are trying to find a way to monetize their investment, and there might be an opportunity to do so.

There is a restructuring proposal apparently underway to try to restructure the oversight of TikTok and ByteDance so that U.S. regulators and companies can oversee the recollection and usage of data from within the U.S. This move towards transparency might prove critical for TikTok’s future, but there is no certainty about how the restructuring process will roll out.

Regulators have been fighting similar battles with U.S.-based companies such as Meta and Google for years, and these companies often pay steep monetary settlements. Nevertheless, it is obviously harder for regulators to go after these American companies because they have American employees, American IP, and American market caps, so picking a fight against a Chinese-owned company with a track record of mishandling private information is a better choice.

This strategy has worked in the past with the Chinese communication company Huawei, for which the U.S. banned the sale and import of new equipment. The Huawei ban might have been effective to protect U.S. national security, but it is important to not overlook what has been going on inside the country for years.

As we saw with the Twitter files in 2022, the social media platform had a curious relationship with the Federal Bureau of Investigation (FBI). The FBI was in constant contact with Twitter’s former Trust and Safety head Yoel Roth, where private information was exchanged at the request of the FBI, and some accounts were even flagged because of the Bureau’s “Warnings” to Twitter.

We now know that both American and foreign companies often misuse private data, but foreign companies such as ByteDance appear to be the scapegoat in the eyes of the regulators, and this philosophy could prove destructive to TikTok.

--

--

Bruin Ventures

We are UCLA’s premier venture capital organization, cultivating leaders in venture capital, technology, and entrepreneurship.