Jim Breyer, an early investor in Facebook and the cryptocurrency Ethereum, said he thinks investors should reset their expectations when it comes to returns on venture capital in China.

"There are segments that are extremely healthy. There are many more which are undergoing very significant valuation downdrafts as well as consolidation," he told CNBC's Geoff Cutmore at the East West Tech conference in the Nansha district of Guangzhou, China.

"We are no longer, I believe, in a market where people by expectation will consider 8, 10, 12 percent or more per year, many times after tax, to be a ballpark estimate of what they're trying to do for their funds," said Breyer, founder and CEO of global venture capital firm Breyer Capital.

He now foresees a "more profound change in what expectations should be" in the near future.

China's industry has witnessed an influx of money from state funds over the past eight years, but that boom may not last long, he warned. "There has been an abundance of capital with an abundance of opportunity, and these kinds of trends generally don't last and in many cases, they end badly."