Protectionism could drain top talent from Silicon Valley, VC says

  • Lu Zhang, founder and managing partner of venture capital firm Fusion Fund, told CNBC's Geoff Cutmore the trade war between the U.S. and China is fostering an "anti-immigrant, anti-international" image for Silicon Valley.
  • Immigrants founded more than half of U.S. tech unicorns, she said.
  • A drop tech stock valuations is a "good thing" as investors reset their expectations, she added.

Protectionism is creating a perception that top talent isn't welcome in Silicon Valley, according to one venture capitalist.

Lu Zhang, founder and managing partner of Palo Alto, California-based venture capital firm Fusion Fund, told CNBC Tuesday, the trade war between the U.S. and China is fostering an "anti-immigrant, anti-international" image for Silicon Valley. This perception could threaten the region's attractiveness to tech entrepreneurs, she said.

"For many years, the reason Silicon Valley has been the hub for innovation is because it's such a diverse community," she told CNBC's Geoff Cutmore at the Boao Forum and Ambrosetti Meeting in Rome.

Tech has been caught in the middle of the trade war between the U.S. and China, despite a 90-day cease-fire announced last weekend that prevented additional tariffs on goods between the two countries. Zhang said protectionist measures from the U.S. could discourage immigrants to set up their companies in Silicon Valley.

More than half of U.S. tech unicorns - companies valued at more than $1 billion - were founded by immigrants, she added.

"We do want to still be able to promote the culture of Silicon Valley," she said.

Zhang was named one of the World Economic Forum's Young Global Leaders for 2018. She launched Fusion Fund earlier this year to support early-stage investments in sectors like artificial intelligence, connected industry and health. The fund has more than $100 million in assets under management with 40 percent of its existing investments based outside of the greater San Francisco Bay Area.

Referring to the recent pullback in tech stocks, Zhang said tech valuations are due for a "reset."

"Now we gradually have this reset of the value, or maybe market correction...It's a good sign," she said.

Facebook, Apple, Amazon, Netflix and Google parent company Alphabet, a group of stocks known as the "FAANGs" lost $140 billion in value in Tuesday's market sell-off, while the broader tech-heavy NASDAQ index is down more than 10 percent so far this quarter.