China's influence on investments in Silicon Valley creates risk for startups.

(Reuters)- Danhua Capital has invested in some of Silicon Valley's most promising startups in areas such as drones, artificial intelligence, and cybersecurity. The venture capital firm is based near Stanford University, the epicenter of tech entrepreneurship in the United States.

However, Danhua Capital also received aid from the Chinese government. And it's not alone.

More than 20 Silicon Valley venture capital firms have close ties to a Chinese government fund or a Beijing state entity, according to interviews with venture capital sources and publicly available information.

While the U.S. government is taking an increasingly hard line against Chinese acquisitions of publicly traded U.S. companies, investments in startups, even by state-backed entities, have been largely untouched.

This may be about to change, as the US Congress finalizes legislation that dramatically expands the power of the US government to block foreign investment in American companies, including venture capital investments.

“The perception is that much of the technology transfer that worries the U.S. security sector is happening in the startup world,” said Stephen Heifetz, a former member of the U.S. Congress’s Foreign Investment Committee and now a lawyer for companies undergoing the committee’s review.

According to Chris Nicholson, co-founder of Skymind, a company that raised money from the Chinese group Tencent Holdings and a family office in Hong Kong, "the window for some startups to raise money from China may be closing."