China’s VC investors on what 2023 has in store

摘要: By LI Biao, LI Jingya“Between half and two-thirds of funds have slowed, and 10 to 20 perce...

By LI Biao, LI Jingya

“Between half and two-thirds of funds have slowed, and 10 to 20 percent have given up,” WANG Ran, founder of venture capital fund CEC Capital, wrote last May. That was in the depths of Shanghai’s Covid outbreak. With consumer confidence at a twelve-year low, and the housing market still reeling from the Evergrande crisis, venture capital was feeling the pinch.

VC fundraising fell 10.3 percent in the first six months of 2022. Investment dropped sharply. Funds that normally closed over a hundred deals a year did tens at best in 2022. Fundraising rose by 11 percent in the third quarter, partly driven by state-backed funds preparing for infrastructure projects.

Jiemian News asked 20 VC investors what the new year has in store.


The pandemic will linger in the first half of 2023. Outbreaks, vaccination and the availability of effective treatment will have a direct impact on market sentiment. Consumption will recover but not without intermittent setbacks. Export weakening is unlikely to reverse. “The fundamentals are conducive to the restoration of market confidence. But industries respond differently,” said MI Lei, founder of CAS Star Capital.

Cash flow has never been as crucial. “2022 was a year of change. Survival is a priority. Cash flow is king,” said CHEN Yu, partner of Yunqi Capital. Last year, Yunqi only invested in companies with at least 12 months of cash reserve.

The first step to recovery, said XIA Jinzhi from Vertex Holdings, is the restart of travel. Ma Rui, who specializes in new materials and biotech, said he was “forever on his way to conferences, seminars and road shows” until the pandemic hit. “Whether it’s to stay up-to-date with the newest technology, or to assess individual projects, nothing beats seeing it with your own eyes,” he said.

Dollar funds

Dollar funding (money raised in dollars, in many cases from limited partners overseas) shrunk by 65 percent in the first half of 2022, only a seventh of the investment made by RMB funds.

Many private equity and venture capital funds investing in high-tech are registered with the government as Renminbi (“RMB”) funds. There are two types: domestic and foreign-invested. Domestic RMB funds are fully owned by Chinese investors, while foreign-invested RMB funds may be partially or fully owned by non-Chinese investors.

Dollar funds rose together with China’s mobile internet economy. They are known for betting on high-growth, high-risk enterprises and having no qualms about pumping money into money sinks – ByteDance, Pinduoduo – for extended periods. In contrast, RMB funds prefer less risky companies with shorter payback periods. Since many are backed by the government, they also chip in on factories and roads.

RMB funds surpassed dollar funds in total investment amount around 2015. Since then, “hard technologies” such as biomedicine, green energy and semiconductor have become the darling of the investment world while the mobile internet is saturated.

“For mobile internet companies, the marginal cost of scaling up is almost zero. Therefore VC funds can afford to make many mistakes. This is not the case for hard tech,” said DAI Yusen, partner at ZhenFund. An investor must know the founding team and become an expert in the technology. More often than not, some creative financial engineering is needed to fund the long journey from lab to shelf.

Although R&D and mass adoption take longer, said Xia Zhijin of Vertex Holdings, IPOs happen at earlier stages if the market is comfortable. VC funds will also seek non-IPO exits such as acquisitions, mergers and secondary funds.

Large funds will be eyeing early rounds, so angel investors need to get in even earlier, said LI Zhu, founder of Inno Angel. They will also become more specialized. Funding rounds will be much larger, and valuations higher. Investors should prepare to put down tens or even hundreds of millions in seed and angel rounds instead of two or three, as in the case of mobile internet.


Chen Zhongjue, Bain Capital:ESG is our focus for 2023. As a dollar fund, we are closely watching Chinese startups going overseas. After three years of Covid, they must participate more in the global economy.

Liu Dawei, Capital O:We don’t talk about the next big thing. Infrastructure that paves the way for innovation and mass adoption is more exciting than mere disruption. At Capital O, we call it NTIC, which stands for New Tech Infrastructure Commoditizing. In 2023, we will be looking at AI, especially its application in pharmaceuticals, autonomous driving, new material, and hydrogen as energy.

Yang Yunxia, Sequoia:I am in healthcare, and I believe there are many underexplored areas of healthcare. In fact, there are many markets that don’t even exist yet. Some examples are cellular therapies, gene editing, gene therapy and RNA therapeutics. As a VC investor, I care about how to turn these technologies into effective treatment, how to make treatment accessible, and how to bring innovations closer to mass production by improving cost efficiency and quality consistency.

Zhu Jia, Lightspeed China Partners: Semiconductors and green energy, especially green energy supply chains. Which new materials are used in the latest photovoltaic products, and what innovations are made in EV batteries?

Huang Yungang, Source Code Capital:I focus on fundamental breakthroughs that drive innovation. In terms of specific applications, next year will be about big data, biotech, digitization, green energy, smart manufacturing and robotics.

Gao Zhangnan, Meridian Capital: We like underexplored, undersupplied, and hard-to-get-in markets. In 2023 we will be looking at satellite communication, 6G communication, bio-based materials and industrial software.

Dai Yongbo, Country Garden Venture Capital:I like companies that closely follow overseas demand, especially those who stand out in R&D, manufacturing and supply chain. For 2023, they may be concentrated in green energy, materials, or automobile supply chains.

Wei Jian, PLD Capital:Investment is a long-term endeavor so the next big thing is quite secondary. That being said, for 2023, I think hydrogen as energy is great, because of supportive policies. Semiconductor is tricky. On one hand, there are sanctions. On the other hand, semiconductor materials and supply chains, as the foundation of the sector, will be in great demand.

Tang Yinan, Marathon Venture Partners:My team specializes in early-stage healthcare enterprises. Particularly, we like those with the potential to improve healthcare efficiency. There are four promising areas. One is healthcare digitalization. The entire industry is building its data infrastructure from anew. The second is the intersection of biotech and IT, such as AI pharmaceuticals and synthetic biology. The third is smart tools, an example being healthcare robots. The fourth is medical insurance fintech.

Ma Rui, FreesFund:I have been and will still be paying attention to synthetic biology, which will have wide applications in energy, healthcare and materials. Computational biologies, such as technologies that use data and algorithms to better understand protein and DNA, are also worth following. There are many unresolved issues in brain-computer interfaces, but there will be a lot of breakthroughs here.

Bai Zongyi, Glory Ventures:High-end consumer electronics, data centers, smart cars and new energy will be my focus next year. In terms of new energy, I will pay attention to materials and equipment that come with the latest photovoltaics and battery innovations. There’s also software, particularly software in cybersecurity, industrial digitization and AI.

Mi Lei, CAS Star: We have been closely following photonics, and have recently made our first investment in nuclear fusion. We are also looking at quantum computing and synthetic biology. These are all very cutting-edge technologies with great potential. There is no Chinese company that has reached the level of global leaders in these areas, but that’s why there are many opportunities.


Gao Zhangnan, Meridian Capital:Everyone agrees that green energy is big and super competitive. There are many technological challenges. But in the meantime, huge opportunities lie in its supply chain. Because of the enormous upfront investment – the competition is more about who has the most resources – it’s crucial to pick your specialty and know it inside out.

Autonomous driving is a very special subsector under the new energy umbrella. Here, the competition is more about technology than mere money. The sector is experiencing the late phase of a bubble. Despite and because of this, Meridian has been aggressive in this area.

Chen Weiguang, Blue Run Venture: The most interesting and promising aspect of green energy is its application, especially in transportation, industry and logistics.

We are looking at three different layers of this sector. There is the foundation, which includes chips, materials, and manufacturing. In the middle, there is energy infrastructure, which means the production, storage, shipping and reuse of energy. At the top are applications.


Xiong Weiming, China Growth Capital:There’s a gap between imagination and reality. In the investment world, everyone is following and talking about them but few have opened their wallets.

The crash of Meta stocks marks the end of a Metaverse bubble. The definition of the Metaverse is still debated. So is the path to mass adoption. Without hardware or foundational computational power, the Metaverse is nothing but an idea.

NReal, one of our companies, recently suspended its AR (augmented reality) goggle. The market is small, even globally. Maybe Apple’s VR goggle is something to look forward to? You can’t talk about the commercial value of the Metaverse without mature hardware.

In terms of Web3, NFT caused a sensation, which didn’t last. There is no startup with implementable technologies, not to mention viable applications or actual products. Many so-called Web 3 companies only issue coins, which are not even legal in China. The market is still at a trial-and-error stage.

GPT-3 is a great breakthrough. However, when it comes to making money from generative AI, tech giants have a better shot. Computational hardware is hugely expensive. Before there is a cloud service for generative AI, startups are will not be viable.