BEIJING – The breakthrough of the artificial intelligence of Deepseek arouses the Chinese venture capital world after three consecutive years of decline.
While Deepseek released its OpenAI rival at the end of January, AI Drug Discovery Company Insilico Medicine was a completion of a series of e-financing round of $ 110 million led by Hong Kong Value partnersTold the CEO and founder of the Startup Alex Zhasonkov to CNBC in an exclusive interview. The deal was closed last month.
But so many Chinese funds wanted to participate at the last minute – “Like an avalanche” – that insilico is planting a series “E2” increase, Zhavoronkov said. “We have never seen this level of interest before.”
Qiming Ventures-backed Insilico uses AI Van Deepseek and other companies to make models for developing drugs. According to Insilico, ten of the startup medicines have already received approval for clinical tests, which mentions research laboratories in China, the US and the Midden -Oost.
Zhasonkov added that during his American travels in recent weeks many US and other global investors asked him about ways to invest in Chinese AI companies.
“It looks like the Deepseek moment, it created a lot of interest from global investors to invest in China,” he said on Monday. “I think the financing will come back.”
Regulatory uncertainty in both China and the US, especially around IPOs, and slow economic growth have contributed in recent years to a sharp fall in Chinese risk capital activity. VC investments in companies established in China have fallen over the past three years and reached only $ 48.86 billion in 2024, the lowest record that goes back to at least 2016, according to PitchBook data.
Now that the clarity of the regulations is emerging, sentiment and encouraging investors to follow a different approach to the past when startups based on the internet such as Alibaba emerged.
“People just hurry to find the next Deepseek,” said Annabelle Yu Long, founder and managing partner of Bai Capital in Beijing. She is also in the sign of coach Parent carpet.
“Everyone makes investments, but I ask my team to hold new deals because we see our core portfolio [of around 6 companies] Very, very meaningful AI traction, “she said and noted that her company chooses to increase his investments in existing companies in the coming months.
Part of her call stems from her opinion that Chinese funds have much less capital than WEs to invest in AI, which requires a targeted approach. Instead of looking at new startups, Long said she expects entrepreneurs who already use AI to succeed in the near future.
For example, Bai Capital-Backed Black Lake, which sells production management systems, has become profitable this quarter because AI has lowered the service costs, Long said. Another of her investments, a care company called Lejian, has become more profitable with the help of AI, and Goldman Sachs is preparing his IPO, she added.
Long said she is planning to list nine portfolio companies this year, mainly in Hong Kong, and has received many phone calls from international investors about the Chinese economy and Chinese entrepreneurship beyond AI. “I certainly see a return of trust.”
Other recent investment rounds also reflect how capital accumulates in existing players. Insilico’s Zhasonkov said that some Chinese investors had previously lost almost all their money at AI drug startups, and now acknowledge that only a few, probably more established players will make it.
This month, AI model company Zchipu AI collected the equivalent of around $ 137.68 million from Alibaba Cloud and a fund supported by Hangzhou, according to PitchBook’s records of 12 AI-Deals for the first 10 days of March. The data also showed that Robotics company Limx Dynamics increased an unprecedented amount from Alibaba Group and other investors.
A holiday -turning point
China’s Moon -New Year At the end of January was a turning point for AI investment. The R1 model of Deepseek came out just before the holidays, while the widely broadcast Spring Festival Gala from State Media Dancing Robots showed Unitree.
“I think Unitree and Deepseek encourage many foreign investors to look for opportunities here,” said Hongye Wang, executive director of Forebright Capital, which has money established in Shenzhen, who has money in the US Dollar and the Chinese Yuan. He noticed that some funds in the East have recently been looking for opportunities in Chinese AI companies.
“I believe trust [is] Returning, “he said about domestic VCs and noticed that many were traveling again for meetings.
Wang said that his company has invested in a company that makes mobile chargers and AI glasses and is looking for opportunities in humanoid robots, together with companies that offer solutions for calculating reasoning. Forebright, of which Wang says he has several billion US dollars in assets under management, is planning to make at least five to six investments this year, he said.
Policy support
It is important for a market that is affected by legal action, Beijing signals clear support.
“The fact that President Xi [Jinping in February] Shook the hand of the founder of Deepseek and gave almost the green light for generative AI to be used on a scale, now you would expect a huge number of deep -like clones … that will come true and just reveal what they have done in the last three years, “said Zhasonkov.
Prime Minister Li Qiang’s work report said last week that China would work to “accelerate the development of investments in venture capital and the growth of patient capital”, referring to long -term investments.
A day after Li had presented that plan, Zheng Shanjie, head of the National Development and Reform Commission, reporters that the central government is planning a fund that is expected to mobilize 1 trillion Yuan ($ 137.7 billion) for technical investments. Governor Pan Gongsheng from the Central Bank announced during the same press conference that a loan program for technical innovation would almost double to no less than 1 trillion Yuan.
“From investments at an early stage to exit, policy is more complete and clearer,” said Liu Rui, vice -president of China Renaissance Capital, in Mandarin, translated by CNBC.
He expects more resources to go to AI applications this year, given the faster decrease in operating costs and the large consumer base of China.
However, tensions with the US – ranging from rates to technical limitations – remain an obstacle for international investors considering China AI opportunities.
In contrast to the US established companies that have access to the global market, it will probably also find it more difficult to expand abroad in view of the sensitivities surrounding AI and data, said Xuhui Shao, Palo Alto-based managing partner at Foothill Ventures. His company focuses on the US and does not invest in China.
Even with the potential of the Grote Markt in China, foreign investors must understand the risks of investing in China, such as limitations on the capital flow, Shao said. But he pointed out that “innovative breakthroughs” such as Deepseek should not be a surprise, since China has many university-educated engineers and data scientists, who can represent half of the AI researchers at an industrial conference.
“I think,” he said, “competition always pushes the entire sector [to move] Vooruit and technology would not be included by the borders. “