A Conversation with Hangzhou Capital's Sun Gangfeng: The Key to Patient Capital Is Attitude, Not Time

"Straight talk from the hottest state-owned capital of the year."

By Zhuxi Huang

Edited by Zhiyan Chen

Since 2025, the "Hangzhou Six Little Dragons" have repeatedly broken into the national spotlight, making Hangzhou one of the most closely watched cities in China's venture capital market. Against a backdrop of multiple challenges facing the broader market, a wave of tech companies — DeepSeek, Unitree, Game Science, Manycore Tech, BrainCo, and others — have emerged in succession, representing some of the most cutting-edge technology directions globally: artificial intelligence, embodied intelligence, and brain-computer interfaces.

Many have begun to ask: Why Hangzhou? Why always Hangzhou?

Of course, Hangzhou was not the first protagonist when it comes to state-owned capital in equity investment. That distinction belongs to Shenzhen. In 1999, Shenzhen Capital Group was established, investing 4.38 million yuan in Han's Laser — a milestone for local state-owned capital's participation in tech investment. Then came Hefei. First, its bold 10-billion-yuan bet to bring in BOE in 2007; later, its 7-billion-yuan strategic investment that pulled NIO "out of the ICU" in 2020, earning the city its reputation as "China's top city for venture capital."

But Hangzhou's rise after 2023 is inseparable from this historically rich land, the private economy that has grown upon it for decades, and the seasoned urban administrators that came with it.

When you step into the offices of this city's capital operators, you'll find that Hangzhou's success is neither purely policy-driven nor a high-stakes government gamble. It is the natural product of urban endowment, talent reserves, business environment, and innovation ecology co-creating together.

Recently, Waves sat down with Sun Gangfeng, Party Secretary and Chairman of Hangzhou Capital. In a refreshingly candid conversation, it became clear that today's mature state-owned capital has evolved from a mere capital provider to a builder of innovation and entrepreneurship ecosystems.

In our discussion, Sun started with the "Six Little Dragons," extending to the formation mechanism of the "Hangzhou Model," the proper role of state-owned capital in the venture capital system, and even his understanding of "patient capital."

Hangzhou's path is not easily replicable, but it offers a thinking model for how state-owned capital can approach investment. In the end, what can and should state-owned capital do for land where innovation thrives? And what should it not do?

The following conversation has been edited by Waves —

Part 01

The Most Correct Thing Done in Ten Years

Waves: This year, because of the "Six Little Dragons," the Hangzhou Model has become a hot topic in state-owned equity investment. Have a lot of people come here to "learn from the source"?

Sun Gangfeng: Hangzhou Capital began laying out its science and technology industry investments over a decade ago. The timing was somewhat fortuitous — any later and there might not have been so many highlight moments; any earlier and people probably wouldn't have paid much attention.

Actually, these companies have been developing for nearly ten years. The "Six Little Dragons" weren't built overnight; they were built over the past decade.

Waves: What allowed Hangzhou Capital to reach them in the past?

Sun Gangfeng: Among the "Six Little Dragons," three have connections to Hangzhou High-Tech Venture Capital (now Hangzhou Sci-Tech Innovation Group): Unitree, BrainCo, and DEEP Robotics. They were basically all invested in by sub-funds participating in our guidance fund's fund-of-funds. Truthfully, we don't have "discerning eyes" — we've just maintained an open mindset, with a large group of GPs fighting alongside us. In reality, they were the ones who discovered the "Six Little Dragons."

Waves: So what we're seeing today — Hangzhou's frequent emergence of innovative enterprises — their starting point is still private soil?

Sun Gangfeng: Hangzhou's private capital is indeed quite abundant. For Hangzhou, whether the government should do venture capital has always been controversial. When the market is active enough, is there a need for government intervention?

Our approach is to align with the general logic of innovation, focusing on strategies for the innovation and entrepreneurship ecosystem.

Hangzhou High-Tech Venture Capital was Hangzhou's earliest guidance fund, positioned at that time as policy guidance. Hangzhou Capital was established in 2018. By 2022–2023, when the broader environment demanded more from state-owned capital, we seized that round of SOE reform as an opportunity to begin focusing on "innovation and entrepreneurship."

Hangzhou Capital's core mission is to build a nursery, a pasture — to increase investment opportunities within it. I believe that as long as investment opportunities increase, the institutions partnering with Hangzhou Capital will have more chances to make money, and Hangzhou Capital will benefit in turn.

Waves: What specific impacts did the SOE reform you mentioned have on Hangzhou Capital?

Sun Gangfeng: From 2018 to 2022, Hangzhou Capital was in an intermediate transition phase, completing the design of its platform architecture, consolidating high-quality underlying physical assets, strengthening its capital structure, and vigorously expanding financing channels through instruments like science and innovation bonds. With funding in place, plus its existing industrial foundation, by 2023 Hangzhou Capital's core mission revolved around "how to empower the industrial ecosystem of a major city."

People are always sensitive about the word "capital," saying we're a capital platform. In reality, Hangzhou Capital is first and foremost an industrial platform.

Waves: What does "capital" mean to you?

Sun Gangfeng: Capital is inherently neutral; what matters is how you use it. Used well, it can empower the real economy and accelerate development. Used poorly, it easily leads to disorderly expansion.

Currently, Hangzhou Capital mainly moves toward both ends of the spectrum — investing earlier or later. On the earlier side, we founded Hangzhou Innovation Camp to create a strong entrepreneurship ecosystem. On the later side, we're adding a capital perspective on top of our existing industrial viewpoint.

Previously, for our controlled subsidiaries Hangyang and Hangzhou Turbine, we were quite lacking in capital operation awareness — mostly building new projects, thinking in industrial terms. With the Hangzhou Capital platform, for the areas that Hangyang and Hangzhou Turbine want to expand into going forward, we have more capital tools available.

From a model perspective, early-stage and M&A are two particularly difficult things to do, and they are areas where state-owned capital participation is more needed.

Waves: If you had to summarize the single most correct thing Hangzhou has done in innovation and entrepreneurship over the past decade, what would it be?

Sun Gangfeng: If I can only name one thing, I would say it's the accumulation of innovation resources. Westlake University, Beihang University's Hangzhou Research Institute, the China-France Aviation University, numerous provincial laboratories, the West Science and Technology Innovation Corridor — the province and city have done a lot around gathering innovation resources. Talent accumulation and entrepreneurial resource accumulation reinforce each other.

Part 02

Having No Key Person Is Precisely the Key for State-Owned Capital

Waves: In recent years, investing early, investing small, and investing in technology has become the main theme of the primary market. State-owned capital doing early-stage investment actually faces risk issues. How does Hangzhou Capital address this?

Sun Gangfeng: When we do innovation investment, we mainly focus on cultivating the field — getting the irrigation system right for a plot of land, bringing in seeds and scattering them. As for which seed will sprout, that's truly uncertain, and that's precisely the charm of innovation.

But you must have this "field." Because early-stage project success is probabilistic. Assuming a 10% success rate — invest in 10, maybe 1 makes it; invest in 100, maybe 10 succeed. Innovation is a "field" job. If you try to turn it into a "point" job, you won't do well investing in early-stage projects.

Actually, looking at the operation of Hangzhou's guidance funds and sci-tech innovation funds, the success rate of early-stage projects is quite high. Over 50% of our early-stage investment projects have received follow-on funding.

Waves: The core of early-stage projects is people. What methods does Hangzhou Capital use to judge people?

Sun Gangfeng: Team composition, educational background — these are relatively easy to assess. The management ability of the key figure is also important. There's a phenomenon now: being a top-tier expert doesn't necessarily mean entrepreneurial success. This shows that a company's success is determined by multiple factors combined. As state-owned capital, we should also do our best to achieve collaborative innovation among entrepreneurs, capitalists, and scientists.

Waves: Specifically in terms of sectors, what are Hangzhou Capital's key investment industries?

Sun Gangfeng: Hangzhou has always had five major industries: intelligent IoT, biomedicine, high-end equipment, new materials, and green energy — five industrial ecosystems. The core is one thing: hard tech. Essentially, it's about intellectual property for key technologies, core patents.

Waves: So a company like Game Science, which produced Black Myth: Wukong, wouldn't be within Hangzhou Capital's investment scope, would it?

Sun Gangfeng: That is indeed a question.

Theoretically speaking, if this project were very early-stage, we definitely couldn't invest it. Cultural enterprises theoretically fall outside the scope of hard tech, and thus outside Hangzhou Capital's main business scope.

But now people ask: if it breaks out, can we invest? Does it belong in the tech category? We have never used whether a project breaks out as an investment criterion. Within the scope of our main responsibilities and core business, we will continue to pay attention to projects where technology and culture converge.

Waves: In terms of investment decision-making mechanisms, what is special about how state-owned capital operates?

Sun Gangfeng: State-owned institutions have their organizational advantages, institutional advantages. Using soccer as an analogy: is it Brazil or Argentina-style star-dominated play, or Germany's total football with balanced teamwork? By comparison, state-owned capital is more suited to a balanced team organization method, not relying on a few star players.

State-owned capital having no key person — this is precisely the most key thing about state-owned capital. We should do our best to ensure that no single person can decide everything.

Part 03

Investment Is Primary; Investment Attraction Is Not

Waves: This year, the State Council General Office's "Document No. 1" requires separating government guidance funds from investment attraction. Although Hangzhou Capital is not a government guidance fund, as a state-owned capital investor, how do you view the practicality of this policy?

Sun Gangfeng: The core of "Document No. 1" is that investment attraction cannot be the purpose. When state-owned capital invests in projects, it cannot invest because it wants to attract companies to set up locally — rather, it invests because enterprises are willing to come to this city. Investment is primary; investment attraction is not.

Waves: We've observed that state-owned capital is also gradually becoming more professional, respecting market rules. As local state-owned capital, when you are bullish on an industry, can you go all in like a market-oriented institution?

Sun Gangfeng: For local governments, that's quite impossible. Take AI, for example — we can't invest in every model company. When we invest in a project, there must be a local presence.

Conversely, precisely because there is some investment attraction factor involved, state-owned capital's tolerance for investment returns compared to social institutions is somewhat higher. For example, a market-oriented institution might require a 10% return to invest. For state-owned capital, for projects with investment attraction attributes, after ensuring risk assessment, an 8% or even 6% return might be acceptable.

Under policy guidance, the various other contributions that enterprises can bring to a locality are sometimes difficult to fully quantify. The employment, GDP, tax revenue, and urban benefits generated don't all accrue to state-owned capital — they may manifest across various social dimensions.

Waves: When the market discusses local state-owned capital, what it's essentially exploring is each different city's business environment. What do you think Hangzhou's characteristics are?

Sun Gangfeng: Zhejiang as a whole handles the balance of regulation extremely well in its comprehensive environment. This is related to the long-term development of the private economy on this land, and the cognition, experience, and judgment that regulatory personnel have accumulated.

Discretionary space is an expression of a place's administrative capability and business environment. It's hard to explain clearly in a sentence or two.

From Hangzhou Capital's perspective, we support the better development of private sci-tech enterprises through investment. When we partner with market-oriented institutions, we don't demand control.

Waves: In recent years, the notions of "the state advances, the private sector retreats" and "state-owned capital's strong presence" have been unavoidable.

Sun Gangfeng: State-owned capital is of course entering some sectors, and some sectors need state-owned capital's entry. State-owned enterprises themselves should be strengthened and expanded — this is only natural.

Only one thing: don't enter through administrative monopoly. We should enter through our own competitiveness, with full confidence.

Waves: In your view, what sectors is state-owned capital better suited for?

Sun Gangfeng: To use an analogy: state-owned capital is suited to driving trains, high-speed rail — the direction is relatively determined, the investment is relatively large, the route is relatively long. Private capital is suited to driving race cars, frequently changing lanes, with flexible mechanisms — getting off when it should, getting on when it should. Each has its strengths.

Now everyone is talking about being patient capital, but from capital's nature, it must exit within a certain timeframe. Patient for ten thousand years — no one can do that.

Different capital has different positioning. Angel stage, PE stage — the operating methods are completely different.

State-owned capital should of course be patient capital, but when it's time to exit, it must exit. Exiting well is for the sake of entering better. If you don't exit and burn through all your money, what does state-owned capital use to invest? State-owned capital isn't a money-printing machine.

Patient capital cannot be measured by rigid timeframes. Patience is, at its core, an attitude.

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The "Artificial Intelligence" Hangzhou Innovation Camp, initiated by Hangzhou Capital and the Talent Group, is currently recruiting for its second cohort. If you are a highly innovative AI startup team, click "Read More" for details.

Image source | IC Photo

This summer, WAVES 2025, focused on the new generation of venture capital professionals, will land in Hangzhou's Liangzhu. June 11–12, Hangzhou Liangzhu Culture and Art Center — come join us in discussing the "New Era."

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