Top Chinese investment fund dismisses talk of exiting ‘dead’ market, says focus now on AI

A leading Chinese venture capital (VC) firm that has backed some of the country’s most successful tech startups has denied rumours it has decided to exit the primary market, at a time when a heated debate rages over whether the country’s once vibrant venture capital funding sector is “dead”.

Capital Today, which has profited handsomely from its early investments in Chinese e-commerce platform JD.com, food delivery giant Meituan and the country’s second-largest gaming company NetEase, issued a statement to Chinese media on Wednesday refuting market rumors that it has decided to cut back on its venture capital investments.

The company said it is actively seeking deals in the areas of artificial intelligence (AI), among others. Capital Today said it invested in an early-stage startup called Stand AI in May and increased its existing investment in Moonshot AI in July.

The denial comes as China’s venture capital market, once known for actively channeling capital to promising startups, has dried up, replaced by government funds chasing “hard tech” deals. Wang Ran, founding partner and managing director of CEC Capital, said in a speech last month that China’s main market for venture capitalists was “dead” as deals dried up.

Kathy Xu Xin, founder of Capital Today, has been dubbed “the queen of Chinese venture capital” for her successful deals in the domestic internet sector.

As the company continues to seek deals in the AI ​​sector, it is acting in tandem with many other venture capital firms to significantly reduce its investments, according to two separate sources.

According to a source familiar with the matter, Capital Today “rarely takes an interest” in primary market transactions, with the exception of AI-related projects.

“While there have been no layoffs recently, some staff members left earlier this year, leaving only a few colleagues on the VC team,” the person said.

Capital Today did not respond to a request for additional information.

According to Chinese business database Tianyancha, Capital Today continues to bet on China’s AI sector, backing major language model startups Moonshot AI and Zhipu AI in 2023. It was also an investor in Meituan co-founder Wang Huiwei’s AI startup Guangnian Zhiwai, which was acquired by Meituan shortly after Wang stepped down for health reasons.

According to research firm Zero2ipo, initial public offerings (IPOs) by Chinese companies declined in the first half of 2024, with only 82 companies listed on domestic and overseas exchanges, down 62.4% from the previous year. Total funds raised through IPOs amounted to 47 billion yuan ($6.5 billion), down 79% from the previous year.