It’s not just Taihe Capital that needs a "second founding."

By Zhiyan Chen

Edited by Jing Liu

Expected yet unexpected, Taihe Capital sent out an all-staff letter on the afternoon of August 8, signed by "Liangjing Song." As Taihe's managing partner and CEO, Song announced that the firm would embark on a "second startup."

The letter ran 4,600 characters. Its core message: Taihe would execute a new "upgrade strategy," which can be summarized in four parts:

First, upgrading its positioning to "China's leading industrial capital management group";

Second, evolving its methodology from "large-scale, full-formation plays for broad beta" to "a more agile organization with higher efficiency to capture market alpha opportunities";

Third, upgrading its execution strategy, leveraging government, corporate, and fund partnerships to deliver deep empowerment;

Fourth, building a team that is "more hungry, more formidable, more grounded, more pressure-resistant, more long-term oriented, better at playing from behind, more results-driven, and more fundamentally powerful."

As a hub for deals, information, and even industry confidence, an FA firm observes and experiences changes that are, in some sense, a microcosm of the entire primary market. Over the past six months, various rumors about this firm have circulated nonstop. It's not hard to see that Taihe Capital has raised the flag more prominently, identifying the pain points of the era and how it plans to address them.

In "Three Barometers for the Primary Market, for Reference," we noted that the bilateral order of China's primary market is being reconstructed: the asset side is growing heavier, while the capital side is becoming increasingly RMB-denominated, industrial, and policy-driven. In broad alignment with this, Taihe has made clear that it needs to strengthen communication and cooperation with industrial capital, local governments, and leading enterprises; that its clients will no longer blindly pursue "bigness" but will instead show multi-industry, scattered characteristics; and that its team structure will be adjusted with more grounded talent.

Indeed, for this 11-year-old institution, as Song put it in the open letter, this amounts to "a revolution."

Founded in 2012, Taihe Capital saw an explosion in both deal volume and reputation around 2016: as the architect behind companies like Pinduoduo, SHEIN, Zuoyebang, and Li Auto, Taihe made a name for itself in the primary market. What made it even more striking was that while first-generation FA firms focused mainly on matching assets with capital, Taihe championed "heavy research, heavy deal-making, heavy empowerment" — its most significant iteration beyond "elder statesmen" like China Renaissance.

Nearly everyone in the primary market would agree: Taihe redefined the boutique investment bank. Around the same time or shortly after, a wave of "boutique banks" emphasizing deep research and heavy service began to emerge.

But as we've said many times: the FA model is hardly a great business. Over the past year or two, as the primary market has shifted toward RMB and industrial capital, the star deals Taihe has orchestrated have seemed less prominent — though in the era of industrial investment, the number of star deals, how people define "star deals," and whether this remains a return-maximizing strategy for FA firms are all fundamentally different from before.

In short: as a top-tier boutique investment bank, the virtuous cycle of its business model has been broken by the times.

Taihe's previous success lay in making FA heavier across research, companionship, advisory, and service, then reaping massive returns by helping super-headline companies raise large Series C and D rounds. This was also the inevitable choice driven by costs after Taihe expanded its team post-2018. But with the absence of super-headlines in tech and industrial sectors, many scattered deals are judged "not cost-effective" from the outset and fall outside Taihe's range.

As Song described the changes in the primary market in the all-staff letter: "The probability of a super deal is virtually gone."

On another front, Taihe — dubbed "China's disciple of 3G Capital" — was co-founded and co-managed by three partners, branding itself as a "research-learning organization with elite governance," widely seen as a sign of the FA industry's move toward standardization and maturity. But whether the partnership model can work long-term in China, and whether elite governance can adapt to environmental changes — these are urgent questions for China's venture capital industry as well.

Right now, multiple primary-market FA firms are explicitly waving the "industrial" banner: Lightsource Capital now positions itself as "China's new-generation leading industrial investment bank"; Yunxiu Capital calls itself "China's leading technology industry boutique bank"; and Potential Energy Capital is "a domestic leading technology investment bank focused on hard tech, with a mission to discover and elevate China's top technology entrepreneurs." Taihe's new self-definition: China's leading industrial capital management group.

Behind these varying yet similar goals, the "middlemen" of the primary market are continuing to find their optimal position amid transformation.

Eleven years ago, Taihe won the industry's respect by offering startups "triple empowerment" in capital, business, and management. Today, the path to success for any company faces a more complex environment, and the value services required are inevitably more diverse. This is not just Taihe's challenge — it's the shared proposition facing all institutions that grew up in the internet era.

In 2017, Song once wrote in a WeChat Moment: "Winners focus on winning, losers focus on winners. What ultimately defeats you won't be competitors, but yourself. This is our firm strategic belief."

That still applies today.

Image source | Visual China

Layout | Meng Du