A VC from the Crypto world said AI is too crazy, and they are very conservative

Core Viewpoint

AI seems to be playing the Crypto game

elsewhere: Before deciding to create an AI investment fund, you had been investing in Crypto for a long time. Can you share the story from that time?

Jingwen: In 2017, I graduated from the Schwarzman Scholars program. Coincidentally, my graduation thesis was related to Crypto, so I talked to many people. Some thought I was looking for a job and introduced me to Zhou Shuoji, the boss of FBG Capital.

At that time, it was actually very difficult to recruit people with a serious background in the crypto space. I graduated from NUS with a computer science degree and was from the Schwarzman Scholars program, so I went for the interview.

The process was particularly absurd: the boss was over an hour late, and when he sat down, he asked me what salary I had already received in an offer. I said 7,000 Singapore dollars, and he directly said, "Then I'll give you double." At that moment, I felt this place was just full of naive people with lots of money.

elsewhere: But that salary still tempted you.

Jingwen: The original offer was to start in September, and I thought since I graduated in June and had nothing to do, I would just go there for three months to see what these people were really like.

It turned out to be the peak of wild growth. At that time, FBG was the top blockchain fund in Asia, with LPs like Sequoia and Ribbit Capital, and the boss himself was very wealthy, so investments were made quite casually. My job was to fly around the world, attending various events in Berlin, San Francisco, Tokyo, and Singapore. Sometimes in the office, I would bump into the boss in the hallway, and I would say I was interested in a project—hundreds of thousands, millions of dollars—and in just a few sentences, the money would be invested.

elsewhere: How long did this peak last?

Jingwen: It lasted about half a year. By the end of 2018, the bull market was coming to an end, and in 2019 it completely turned into a bear market. My job content also underwent a 180-degree turn: from giving out money to asking for money. Originally investing 1 million, I had to ask back for 500,000. Just like that. Later, there was hardly any investment at all.

elsewhere: Looking back now, what kind of world is Crypto?

Jingwen: Crypto is a world that has been pressed on the fast-forward button. It is essentially a development process of a new technology from emergence to implementation. There are many similarities with what is happening in AI now.

Another point that is somewhat similar to now: building teams, crafting narratives, inflating data, and then exiting. In the current AI game, the ones taking over are institutions and LPs, but the game logic hasn’t changed.

Back to Crypto—I don’t think that world is over. It is moving towards a more solid direction: real applications, fundamentals on the chain, especially the combination with AI, which I believe has many truly promising directions.

We just don’t want to replicate that game in AI. Impa starts with its own money—we have no difference in attitude towards our own money and external funds. This way, we can more purely seek that true Alpha.

We are a conservative AI fund

elsewhere: Please introduce your fund.

Jingwen: Starting in 2024, I, Shiran, and James (Liang Jie) have created this early-stage fund focused on AI. Shiran and James are colleagues from Huachuang, and Shiran and I are colleagues from FBG. We have already invested in 9 projects.

"Chinese founders + global market" is the great opportunity given to us by the times, and it is still in the early stages. Day one global is our fund's biggest characteristic: Shiran and I are usually based in Singapore, while James is generally based in Shanghai; among the 9 projects we have invested in, 3 are in Shenzhen, 2 in Singapore, 1 in the United States, 1 in Sydney, and 1 in Shanghai.

elsewhere: Why is it called Impa Ventures?

Jingwen: Impa is an NPC in The Legend of Zelda. When the protagonist starts the main quest, Impa provides the map and guidance. She is a key part of the protagonist's mission, but she is definitely not the protagonist. What we can do is to become a part of helping them get things done in their earliest stages.

This understanding is actually the starting point of our entire investment methodology—since the founders are the protagonists, what we need to do is not to bet on the narrative, but to find the person who is truly solving the problem.

elsewhere: As a new fund, many people must have asked you what your differentiation is?

Jingwen: Our starting point for looking at projects is quite different from most funds—we don’t start with defining the track, but rather start with defining the problem. Therefore, the things we ultimately invest in are naturally different.

We are true AI Believers, believing that AI is reshaping the underlying infrastructure of many industries. This is not just a narrative; it is something that is truly happening. But we have also experienced that round in Crypto—we have seen how bubbles grow and how they burst. So we know the difference between waves and the ocean.

We believe in AI, but we do not believe in many narratives that claim to be AI.

elsewhere: How do you specifically distinguish between waves and the ocean?

Jingwen: AI Believer, but Skeptical. Optimistic about the long-term industry, but skeptical about specific projects.

Judgment is reflected in several aspects:

Problem First, not Narrative First.

Starting from the problem, not from the track. We won’t first define an "AI + X" theme and then look for projects; instead, we first see a real, underestimated pain point, and then ask: Who is solving this problem? Does the solution hold up? Founders who can answer these two questions well are more useful than any glamorous background.

Global by default, not Global by design.

When I was in university, I interned in VC in Israel for half a year, which was the first time I truly understood how venture capital operates, and I met a group of founders who naturally pushed their small local market towards global ambitions. Israelis do business with a day one global mindset. That experience had a profound impact on me, and it was from that time that I decided to pursue VC.

Later, in Crypto investments, many of the projects I invested in were not Chinese teams, but truly global developer ecosystems—during those years, I flew to Berlin, San Francisco, Sweden, and met many excellent developers, many of whom have transitioned to AI.

Young but experienced.

In our team, James is the only one born in the 80s; the others are from the 90s/95s/00s. We have no historical baggage, but all three partners have experienced complete cycles and have successful exit experiences. Those who have seen bear markets will have a different judgment on "real demand" and "bubble narratives."

elsewhere: In AI, what kind of game do you want to play?

Jingwen: Our methodology can be summed up in four words—"respect common sense," especially business common sense. Some may think we are too conservative.

Now many people look at founders through a "colored bubble," thinking that as long as they come from big companies or prestigious labs, they can succeed. But what have you really created for customers? Does your productivity improvement really cover the costs?

Impa focuses more on value creation.

elsewhere: What are some unsexy but sensible projects?

Jingwen: We invested in a project called "Lightyear Reach." The founder met with over 100 investors, and everyone thought B2B was unsexy. But after talking to him, I found out he was addressing the real needs of Chinese supply chains going overseas: many small factories lack overseas marketing capabilities, and he uses AI to help them automate finding customers and doing advertising. This is a typical "distribution intelligence" process.

The model company creates intelligence, but how to sell that intelligence into specific scenarios is the opportunity for startups. These types of projects may not be fancy, but their business is solid.

Additionally, in Australia, we also invested in a medical Admin AI project. It does not touch diagnosis and treatment but solves the most tedious administrative processes like appointments, triage, and summaries. Overseas, these processes were originally all done by humans answering phones, but now AI can achieve full online processes.

We prefer projects that first solve existing, confirmed "pain points," rather than speculating on vague demands.

elsewhere: VC is a business of chasing excess returns. Can this kind of investment achieve that?

Jingwen: For example, we invested in a digital human company focusing on a 3D route to create real-time digital humans. The topic of digital humans is not unfamiliar in the capital market, but our logic for being optimistic about this company is very simple: they let users' own devices handle rendering, and the cloud only transmits driving data, reducing costs by 99% compared to mainstream cloud solutions.

We estimate that serving just a few hundred thousand daily active overseas users could generate tens of millions of dollars in ARR. The team has top scientists in the field of 3D digital humans, aiming to achieve the effect of Cai Haoyu's Anuttacon LPM video model, but running on mobile and PC browsers. The prospects for multimodal AI and social entertainment scenarios are huge.

Our core is to find the extremes in the Power Law. We won’t invest in businesses that can only grow to a few hundred million dollars.

elsewhere: Your dreams are quite big…

Jingwen: I had a funny dream when I was in college; I wanted to be on the Midas List.

elsewhere: That is the dream of many VC investors.

Jingwen: I learned about the Midas List when I was in college. It’s not that I thought it would be so impressive to be on it. My thinking was this: investing in the primary market is something I enjoy doing, and I hope to achieve a milestone in what I love to do.

Looking back, that so-called "dream" seems quite silly, but many times people actually have no goals, so having such a "funny" goal is still better than having none.

Three months ago, a conversation with James

@Liu Jing

When I first started updating the "Chinese Investment Stories" series, I wrote about a person, and the title was: The Forgotten Person in the Pinduoduo Capital Myth.

The story goes: a Sequoia investment manager met Huang Zheng early on and repeatedly pushed Pinduoduo (then called Pinhui) onto the IC. But due to various circumstances, it never went through. It wasn’t until six months after he left that Sequoia invested. This was a key round in Pinduoduo's history, which later became a legendary investment for Sequoia.

Whether or not it is related to a $10 billion return is all about that six-month difference.

This person is Liang Jie. Between 2012 and 2016, he worked at Sequoia, and it was during this time that he saw Huang Zheng and Pinduoduo.

To be fair, such stories are not uncommon in the investment industry. As long as one hasn’t become a partner—even a managing partner (GP)—9 out of 10 investors probably have a basket full of stories of regret.

Liang Jie, however, is one of the most memorable people to me. This has even become a long-term narrative about him.

A few years ago, he came to Beijing on a business trip from Shanghai, and we met in the lobby of the Westin at Liangmaqiao. It was already late at night when we met, and I originally wanted to discuss industry topics with him, but somehow we quickly started talking about this story, and he casually pulled up the pitch deck from the Pinhui era on his phone. His memory was so precise that he could recall the layout and wording of every page.

After leaving Sequoia, he went to two other funds and later even worked on a fund focused on going overseas. But those years can only be described as unremarkable.

Perhaps because when I met Liang Jie, I was also new to the investment industry, and among a bunch of legends, this reverse story inevitably left a deeper impression.

Around 2020, the entire Chinese VC industry shifted fully to B2B. At that time, Liang Jie was still insisting on looking at B2C and platforms. I remember he said: if the only investment opportunities left in China were B2B, then he wouldn’t do it. This was not his conviction.

elsewhere: I didn’t inform you in advance that I would write about you, and this isn’t exactly a "good story." How do you feel when you see it?

Liang Jie: A bit surprised. But I don’t want to be labeled as "unlucky."

First of all, I don’t think luck can explain everything. It must be that my own accumulation is still insufficient—like my ability to handle things and relationships, or my conviction isn’t strong enough; secondly, luck is important, but it also needs to be accumulated. For those at the card table, as long as you don’t leave, there’s always a chance.

elsewhere: If you could go back to ten years ago, would you be more confident in pushing Pinduoduo (Pinhui) through IC?

Liang Jie: Definitely. Compared to ten years ago, whether in business understanding or how to push things forward, I have made some progress.

elsewhere: Someone in the comments asked: since you believe so much, why didn’t you buy Pinduoduo stock in the secondary market later?

Liang Jie: In 2015, investing in an early-stage company and buying stocks in the secondary market after the IPO in 2018 are two completely different things in two different time periods.

Perhaps the better question is: if I was so optimistic, why didn’t I join Pinduoduo or invest a little myself at that time?

To be honest, I really didn’t think about it back then. One reason was that when comparing the $600 million valuation with the cash I had at the time, it didn’t seem significant. But this also reflects that I really didn’t understand enough—I didn’t think it could become a $100 billion company. After leaving Sequoia, I also discussed other possibilities with Colin (Huang Zheng), who introduced me to LPs and invited me to join his fund, etc.

elsewhere: Do you regret leaving Sequoia? For example, if you had stayed for another six months to a year, maybe it would have been a story related to you.

Liang Jie: In mid-2015, a significant turning point occurred, which was also one of the reasons I left.

In August of that year, during a Sequoia offsite, the consensus was that the focus of venture capital was shifting from B2C to B2B, as well as vertical industries like education and healthcare. I was not very willing internally.

To be fair, during the stage I was pushing, Neil (Shen Nanpeng) was still positive in his response. But honestly speaking, did I have conviction that Pinduoduo could succeed? Probably not. I just felt the story was big, the growth was fast, and the people were particularly strong.

elsewhere: How long did it take you to calm down?

Liang Jie: After moving to the later fund, it was actually okay. Every stage has more important propositions.

Luo Xiang once said: after he became famous, he received a lot of criticism, which made him very uncomfortable. A friend asked him: since you received so many mismatched accolades, do you feel ashamed or uncomfortable? He said no. So why accept accolades that shouldn’t be yours with pleasure, but not accept criticism that shouldn’t be yours?

I think the leaders in this industry, or any industry, are the few who are both smart and hardworking, and also lucky; if we feel we are not stupid, can still get things done, and compare ourselves to those few typical examples of extreme luck, that would be too greedy.

elsewhere: In fact, stories of not being able to push through IC are very common in the VC industry. Why is your story so memorable (besides the fact that I wrote about it!)?

Liang Jie: Perhaps because of the scale that it (Pinduoduo) reached later, you cannot avoid it. It’s like you dated a girlfriend who didn’t work out, and later she became a big star…

elsewhere: I remember you studied engineering. How did you enter the VC industry back then?

Liang Jie: I studied materials in undergraduate and microelectronics in my master's. While reading my master's, I came across "The Great Game," which opened a window for me as an engineering student: the capital market is so exciting and so important. A seed for becoming a VC began to sprout.

After graduating with my master's in 2006, I tried every means to get into VC. But there were no opportunities. In the financial crisis of 2008, there was a Swiss fund called Adveq that interviewed me five times and almost gave me an offer. I still vividly remember the conversation we had at the Jin Mao Hyatt when their founder came to Shanghai.

Later, I spent $499 to take a financial modeling training course because many people doubted my lack of financial background and my ability to build models. I also sent over 100 resumes to Chinese VCs that I could find. Finally, in 2011, I received the only offer—at Huaden International.

elsewhere: Then it was Sequoia.

Liang Jie: Yes. Of course, after leaving, I realized that Sequoia was already the center of the universe at that time.

elsewhere: How have the past few years been?

Liang Jie: I started my own fund, "Skylines Venture Capital," but the scale didn’t grow (didn’t raise institutional money)—I’m not satisfied, but I can only accept it—AI has come, but I feel it’s hard to participate—I found like-minded partners and returned to the table—I discovered there are great opportunities and not many participants—grateful and expectant.

elsewhere: Do you sometimes feel like you were just a bit unlucky?

Liang Jie: Many people who are smarter and more capable than me have left this industry. I’m still participating in this wave of technology; I feel very lucky.

Doing early-stage investments has a long feedback cycle, and one outstanding performance can cover up many flaws. Everyone is looking forward to that kind of small probability good luck, which is neither rational nor healthy.

Last year, I went to the Big Lotus in Hangzhou to watch the national football team vs. Australia, and we lost 0:2. When I came out, I encountered a TV station interview, and the reporter asked why I was still smiling after China lost. I said, none of the players performed particularly poorly today; they all played at their level, especially Wang Yudong played very well. Australia was clearly stronger than us, so I had no problem accepting a 0-2 loss.

Just like a child taking an exam, if their usual level is 70 points and they scored 75, what’s there to be unhappy about?

elsewhere: Once he scores 75, you would still want him to try for 90.

Liang Jie: Of course, I would be happier if he scored 90. But it’s unreasonable to expect that.

elsewhere: As an investor, can you try to evaluate yourself?

Liang Jie: I can use playing football as an analogy. Playing football is one of the few things where I can achieve a flow state as soon as I invest myself. Even when I play poorly, I have never stopped. I started playing street football in a small county since middle school and have continued until now.

After graduation, I was a main player in my team (as long as I consistently showed up, I was basically a main player), but I was never the one who could decide the game. However, over time, I have gradually become someone who can influence the outcome of the game.

Why is that? First, I have a competitive spirit; second, in a situation where others are declining significantly, my physical condition has basically maintained or even improved; and then my understanding of football has deepened.

In analogy to investing, I think I can keep going. I missed the opportunity to become famous overnight, but I can persist until the end and can influence the game.

elsewhere: Finally, I want to ask you: do you want 75 points this time, or 90 points?

Liang Jie: Most things in our lives are beyond our control: our birth, our IQ, our opportunities. If we really achieve something, we should be grateful for things outside of ourselves. So-called talent is given by heaven, and opportunities are given by the times; we really cannot force it, only be grateful and be ourselves.

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