context: China’s AI industry faces challenges, not least due to geopolitical tensions that limit access to foreign investment, advanced chips and technical know-how, along with domestic regulations that impose security and censorship demands. Chinese investors and founders are finding ways to navigate these challenges.
Club deals, where VCs (venture capitals) pool resources to minimise risks, are becoming increasingly important in China's LLM (large language model) industry, Tencent News reveals. Tech investors, once competitors, are now investing in the same AI startups. For instance
- Alibaba and Tencent in Baichuan AI, Minimax and Zhipu AI
- Hillhouse and HongShan (formerly Sequoia China) in Minimax and Zhipu AI
While still betting on potential AI winners, they form a consortium behind the scenes, each investing small amounts like US$10 million across different startups to diversify risks and avoid being the sole investor in any single venture.
This cautious approach also stems from uncertainties about AGI's future, anonymous industry insiders say. When Wang Huiwen 王慧文 Meituan co-founder launched Lightyears Beyond, an LLM startup, in February 2023, it attracted the majority of the initial VC attention, reaching a valuation of over US$1 bn in four months despite having no product.
Wang's burnout led to the company's failure, which opened funding opportunities for six AI startups, including
- Zhipu AI (Zhang Peng 张鹏 CEO, Tang Jie 唐杰 chief scientist)
- Minimax (Yan Junjie 闫俊杰 founder)
- Moonshot AI (Yang Zhilin 杨植麟 founder)
- Baichuan AI (Wang Xiaochuan 王小川 founder)
- Stepfun (Jiang Daxin 姜大昕 CEO)
- 01.AI (Lee Kai-fu 李开复 founder)
The LLM sector has encountered hurdles, analyses the article author 张小珺 Zhang Xiaojun, such as
- tense international relations
- weak funding due to economic downturn
- limited exit paths
- cautious investors
- scarcity of AI entrepreneurs