VC firm Lanchi bets on China AI, Hong Kong potential after parting ways with BlueRun
A year after parting ways with US venture capital (VC) firm BlueRun, its former China arm, VC firm Lanchi Ventures is looking to build on its new identity.
The early-stage VC firm is now expanding to Hong Kong, aspiring to leverage the city's financial center status and talent pool to connect the newest generation of Chinese artificial intelligence (AI) entrepreneurs with global markets, Jui Tan and Terry Zhu, managing partners at Lanchi Ventures, said in an interview with the Post.
"One of our key goals is to position ourselves as a truly global VC fund," said Tan in their newly-rented office in Admiralty. "Despite the geopolitical tensions, or perhaps because of them, both investors and entrepreneurs are more driven than ever to adopt a global perspective."
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"Many more Chinese companies are thinking globally from day one, asking themselves, 'How can we create a world-class product?' and we want to support that spirit," Tan added.
Jui Tan and Terry Zhu, co-founders of BlueRun Ventures, during their interview. Photo: Sun Yeung alt=Jui Tan and Terry Zhu, co-founders of BlueRun Ventures, during their interview. Photo: Sun Yeung>
Tan joined BlueRun in Silicon Valley in 2001 and set up its China operations in 2005 with headquarters in Beijing. Over the years, it grew into a powerhouse that now manages over 15 billion yuan (US$2.1 billion), and has placed bets on more than 200 start-ups across technology, consumer, and healthcare sectors.
Some of its most notable portfolio companies include electric vehicle maker Li Auto, in which Lanchi invested for five rounds before its listing in 2021 and now boasts of a US$21 billion market capitalisation.
As rising geopolitical tensions between the world's two largest economies heat up, Washington and Beijing have locked horns over tech and capital flows. US giants like GGV and Sequoia Capital have spun off their Chinese arms as scrutiny intensified at home. BlueRun China, already run by the local team, also rebranded as Lanchi Ventures last September.
"Our focus on tech-driven early-stage investing remains the same," Zhu said. If anything, what has changed is that Lanchi is expanding its horizons - the evolving tech landscape has led them to focus more on sectors like AI, 3D interactive technologies and robotics, which Lanchi believes will be the main drivers shaping the world over the coming decades.
"Think about what these terms mean - you can see AI as the human brain, 3D interaction as cognition, and robotics as physical execution," Zhu explained. "The things combined could unleash infinite possibilities, a tidal wave that will bring tremendous value."
Some recent investments reflect Lanchi's view on the sector. Genspark AI, founded by former Baidu executives focusing on AI applications in manufacturing, secured US$60 million in seed round funding led by Lanchi last month. OPTIX, an augmented and virtual reality start-up, raised US$15 million in a Pre-A round financing with Lanchi at the helm in May.
Yet, for all its optimism, Lanchi admits there are challenges. Chinese VCs are navigating the most treacherous waters in years: IPO exits were virtually shut off following tightened listing rules at home, while fundraising has become increasingly difficult as global players retreat. China's position in the global AI race is also under pressure as Washington stepped up export curbs on semiconductors and advanced chips.
Tan said they shared these anxieties, but are not paralysed by them. "It's more important that we look forward, adapt to how the world, the market, and technologies are changing, and chart a new path ahead."
China's tech sector has had a track record of rapid catch-up and innovation, Zhu noted. China has evolved from a copycat nation to now having fostered tech giants whose operational excellence, innovative business models, and financial performance rival or even surpass their US counterparts, he said.
"The current AI game is not even at halftime," Zhu said. "The next crucial phase involves advanced sensors in 3D interaction and robotic execution, and that is where China could leapfrog ahead."
The country's manufacturing prowess and deep talent pool could enable it to accelerate development at a fraction of the cost and time to innovate, he added.
"It's too early to call a winner in the coming AI battles," Zhu concluded. "It's like we're at the start of a whole new cycle, and we're looking at a massive opportunity here. There's a pretty good chance we'll hit on something even bigger than Li Auto, companies that could be more valuable, make a bigger splash, and reach more people."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.