Exclusive | Kathy Xu says she hasn't exited primary markets, and just invested in an AI company

By Lili Yu

Edited by Jing Liu

Rumors have been swirling that Kathy Xu, the "venture capital queen," is pulling out of the primary market. The circulating claim is that Capital Today has disbanded its early-stage investment team and will no longer make primary market investments, instead becoming a purely public-market fund. But Xu herself denied this to An Yong Waves, stating, "Not true. We just invested in the early-stage company Sand AI."

This means Capital Today has not, contrary to the rumors, completely abandoned primary market investing. We understand that Sand AI was founded by Cao Yue, who was Wang Huiwen's co-founder during the Light Year Beyond era. Cao previously served as a lead researcher at Microsoft Research Asia and won the 2021 ICCV Best Paper Award, the Marr Prize. Investors told us that Cao's new venture focuses primarily on video generation along the lines of Sora.

As a major Meituan shareholder with close ties to Wang Xing, Wang Huiwen, and others, Xu had already backed Light Year Beyond in 2023. At the time, Light Year Beyond had attracted figures including Liu Jiang, vice president of the Beijing Academy of Artificial Intelligence, Ma Zhankai, known as the "father of Sogou Input Method," and Cao Yue, a researcher at the same academy. So her investment in Cao's new company hardly comes as a surprise.

For this turbulent new AI era, the venture capital queen who successfully bet on NetEase, JD.com, Meituan-Dianping, Ctrip, Boss Zhipin, and Manner, among other star projects, clearly has no intention of sitting on the sidelines.

Beyond Sand AI, Capital Today was also an early investor in Moonshot AI, the large model startup. Investors told us, "Capital Today came in after Hongshan, investing roughly $20 million." Moonshot AI's latest valuation now stands at approximately $3 billion. IT Juzi data shows that Capital Today's AI investments also include Jinri RenCai, as well as earlier bets on Zhipu AI and XYZ Robotics.

At a 2022 Nanjing University alumni gathering, Xu had stated that artificial intelligence would be "what changes the world over the next 20 years." Their core logic when investing in cross-border e-commerce, robotics, electric vehicles, and autonomous driving all centered on AI.

In her view, when the AI era arrives, China has a chance to leapfrog ahead. Breaking it down across data, compute, and algorithms: China has "a large population and many scenarios, so the data is in our hands." On compute, it's continuously strengthening — which is why they backed Kai Yu's Horizon Robotics. And on algorithms, "20% is true scientific invention, while 80% is continuous machine learning, continuously training with data" — areas where China will have unique advantages.

Returning to the layoff rumors, one point worth noting: for over a decade, Capital Today has always operated with a lean structure. If you look at headcount, it's never matched the influence of Xu or the firm itself, and its primary market team has always been notably small. However, An Yong Waves understands that Capital Today has indeed made fewer primary market investments over the past year or two. This may partly reflect the general downturn in the consumer sector — Xu's home turf — in primary markets, and perhaps also a shift in her interests. Earlier this year, many noticed from Pinduoduo's shareholder data that Capital Today bought 2.4539 million Pinduoduo shares in Q3 last year, representing 76.3% of its portfolio. Xu also has a track record of investing in public-market names like Tencent and Vipshop.

To some extent, this story gained traction because it fits the current pessimistic sentiment toward primary markets and the reality of many funds downsizing or pivoting.

But if even the venture capital queen is shifting strategy, an old era may truly be ending.

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Layout: Yao Nan