The Asterisk on Benchmark’s Manus Exit

Benchmark’s investment in the startup behind the AI agent Manus drew flack last year from some venture capitalists who viewed the investment in the company, which was founded in Beijing, as a national security risk. But when Meta said in December that it was buying the startup, called Butterfly Effect, for over $2 billion, the early-stage venture capital firm’s bet seemed to pay off. 

Celebrating that deal may have been premature, though—or perhaps not, given possible legal hurdles in dismantling it. This week, Chinese regulators said they were blocking the sale of the startup, now located in Singapore, to Meta and would force the company to unwind it. But there’s a twist: Benchmark, which led the $75 million round of financing at a roughly $500 million valuation last spring, has already distributed the returns from the transaction, which closed last year, to its investors, according to a person familiar with the matter. 

Meta hasn’t said much publicly about its plans. If it goes through with the divestiture, though, it would be difficult for Meta to get its money back from Manus’ investors, Frank Aquila, an M&A lawyer at Sullivan & Cromwell, said. 

Unwinding the closed transaction would set a “dangerous” standard for companies hoping to do cross-border deals and would be “close to unprecedented and almost impossible to put the ‘genie back in the bottle,’” Aquila said in an email.