DeepSeek’s AI developments are revitalizing China’s venture capital landscape after three years of decline, marked by significant interest from investors, as exemplified by Insilico Medicine’s recent funding. The evolving regulatory landscape supports renewed funding optimism, although challenges persist for international investment due to U.S.-China tensions.
DeepSeek’s recent advancements in artificial intelligence are revitalizing China’s venture capital market, which has experienced a steady decline over the past three years. As DeepSeek launched its OpenAI competitor in January, AI drug discovery company Insilico Medicine successfully closed a $110 million Series E funding round, attracting significant interest from Chinese investors. This surge in interest has prompted Insilico to plan an additional fundraise, as stated by CEO Alex Zhavoronkov, who commented, “We have never seen this level of interest before.”
Insilico utilizes AI from DeepSeek and other companies in drug development, having successfully received clinical testing approvals for ten of its drugs. During his recent travels in the United States, Zhavoronkov noted that numerous global investors expressed interest in investment opportunities within Chinese AI ventures, suggesting a pivotal moment, which he described as the “DeepSeek moment,” and expressed optimism for future funding.
Despite a three-year decline in Chinese venture capital investment, which plummeted to $48.86 billion in 2024, sentiment is changing due to emerging regulatory clarifications. Annabelle Yu Long, founding partner of BAI Capital, remarked on the urgency to secure future investments, stating, “People are rushing just to find the next DeepSeek.” Her strategy entails focusing on existing portfolio companies that are already gaining momentum with significant AI advancements, rather than branching into new startups.
For instance, BAI Capital-backed Black Lake has reported profitability attributed to AI lowering service costs. Long is planning to list nine portfolio companies this year, primarily in Hong Kong, reflecting a resurgence in investor confidence, while others also observe increased interest in established players over new entrants in the market.
DeepSeek’s recent product release during Lunar New Year is viewed as a turning point for AI investments, as Hongye Wang of Forebright Capital indicated that foreign investors are exploring opportunities in the AI sector. His firm aims to perform multiple investments this year due to renewed investor confidence and growing market activity in China.
Policy support from the Chinese government is also notable, with President Xi Jinping’s endorsement of DeepSeek signaling encouragement for the generative AI sector. Premier Li Qiang emphasized the need for enhanced venture capital investments and the establishment of a fund to mobilize 1 trillion yuan for technology. Liu Rui from China Renaissance Capital highlighted improvements in policies from early-stage investment to exit strategies, indicating an expected influx of resources towards AI applications this year.
Nonetheless, challenges remain for international investors, particularly U.S.-China tensions affecting market dynamics and investment strategies. Restrictions on capital flow pose risks in China, but with a strong base of talented engineers and data scientists, innovative breakthroughs in AI will continue to emerge.
The resurgence of interest in Chinese venture capital, spurred by DeepSeek’s AI advancements, marks a crucial pivot in investment motivations and strategies. Despite the past years of decline and current regulatory uncertainties, increased enthusiasm from investors, particularly in established companies, signifies confidence in the sector’s potential. Policies geared toward fostering tech investment and the acknowledgment of the profound talent pool further enhance prospects for the AI landscape in China.
Original Source: www.cnbc.com
