Exclusive | The Full Untold Story Beneath the Surface of "Kimi Yang Zhilin Arbitration Case"

By Lili Yu

Edited by Jing Liu

On November 11, Waves exclusively reported that Kimi founder Zhilin Yang had been taken to arbitration by former investors. This was merely the latest climax. In fact, for at least the past six months, Kimi, Recurrent AI, and numerous stakeholders have been locked in a protracted tug-of-war.

Contrary to what some might assume, the pivotal figure in all this may not be Zhilin Yang at all, but Yutong Zhang. She is the one who truly threaded the needle — the protagonist who connected the story from Recurrent AI to Kimi, and onward to the nearly $1 billion Alibaba financing. As a former managing partner at GSR Ventures, Zhang backed standout companies including Xiaohongshu, DeePhi Tech, and Recurrent AI, distinguishing herself as a rare female investor with genuine tech investment chops.

Rumors about her relationship with Kimi began circulating in the primary market last year. It was an open secret in investment circles — widely known, yet never publicly acknowledged.

The arbitration case against Yang remains under seal. Waves spoke with nearly a dozen sources close to Recurrent AI, Kimi, and various investors, attempting to piece together the full picture from the periphery.

Over the past two decades, China's venture capital industry has seen nothing quite like Kimi: a company valued at over $3 billion, born in a field of technological innovation requiring massive investment with highly uncertain commercial prospects, and achieving this in such a compressed timeframe. Such breakneck speed inevitably leaves cracks.

Before the dust settles, absolute truth will be difficult to fully reconstruct. But what can be confirmed is this: It is a story of human nature being instantly magnified in a rare arena of reckless acceleration.

Yutong Zhang: The Real Key Woman

At Kimi, a young company of just over 200 people, Zhang is a mysterious presence.

She goes by the alias "Aether" — the name of a protagonist in miHoYo's Genshin Impact. In the game, this character is a traveler, "forced onto a journey of wandering and searching after having their sibling taken by the sustainer of heavenly principles and their powers sealed."

Many believe the focus of the Kimi dispute is Zhilin Yang, but Zhang may be the more critical figure.

Until around April of this year, Zhang's public identity remained managing partner at GSR Ventures. Yet the investment world had long known she was deeply involved in Kimi's operations, "like the company's chief steward." To date, Kimi's official external position remains that she has "not yet joined."

The timeline stretches back to late 2023. Multiple investors who attempted to participate in Kimi's fundraising told Waves that their first meeting was often not with founder Zhilin Yang, but with Yutong Zhang.

One FA active in AI financing told us that rumors once circulated: "Yutong is going to Kimi as CFO," and even speculation that she would become CEO.

Such speculation peaked after the 2024 Lunar New Year. In late February, Kimi secured nearly $1 billion in funding from Alibaba. In this unprecedented mega-round for a Chinese large language model company, Zhang was seen as the key figure.

A source close to the deal once told us: "Negotiations continued through the New Year holiday, forcing Alibaba's strategic investment team to work overtime." Other media reported that the Kimi-Alibaba alliance was orchestrated by Zhang from Singapore.

But two narratives exist about this financing.

The positive view holds that Zhang was undoubtedly among those who turned Kimi's fortunes around: At a time when the scaling law consensus still held and massive compute was essential, without Alibaba's backing, Kimi — which launched late, had shallow credentials, and was valued at only around $1.2 billion — might have fallen off the table entirely. Meanwhile, Zhipu AI and MiniMax, which "launched earlier and had relatively mature products," had already surged past $1.6 billion and were approaching $2 billion in valuation.

Yet some AI entrepreneurs viewed this as "a deal more favorable to investors than founders" — after the round, Alibaba held roughly 40% of Kimi.

Kimi had clearly anticipated such concerns. According to Waves, Kimi not only persuaded Alibaba to shift strategy from small bets to major support, but also designed a relatively favorable deal structure — making Alibaba the single largest shareholder while negotiating away harsh terms, "implementing a dual-class share structure that preserved absolute decision-making and control rights for the team." One FA principal told us that Tencent's subsequent investment in Kimi, following Alibaba, itself demonstrates Kimi's independence.

Overall, this financing resembled a brilliant surprise attack. It transformed Kimi, previously at a disadvantage in the competitive landscape, into the highest-valued unicorn in the large model race. And Yutong Zhang was instrumental in this.

Zhang's deep involvement extended beyond financing to encompass human resources and other operational aspects.

One headhunter told us that until late last year, Kimi's hiring appeared to be Zhilin Yang's call. But Zhang functioned like a "revival card." "If an interview got stuck, going to Zhang would quickly move things forward," he said. "Win her over, and an offer would come quickly."

Even so, during March and April after the Alibaba deal closed, when Waves asked multiple Kimi investors about Zhang's status change, they remained tight-lipped: "Still go with the official line."

In late March 2024, we separately sought confirmation from GSR Ventures and Zhang herself. GSR's response: "She has always been our boss, just spending more time helping portfolio companies." Zhang herself stated: "Zhilin is my junior schoolmate; I'm just helping out for now."

However, a source close to the matter recently told us that Zhang's relationship with Kimi may become more clearly defined in the coming period.

One theory about Zhang's ambiguous status concerns the distribution of carry from Xiaohongshu, now valued at $17 billion — a matter not yet settled between her and GSR. In 2013, GSR Ventures hosted a Chinese student entrepreneurship competition at Stanford University. Among more than twenty competing teams, Zhang and GSR founder Richard Lim invested in only one: later Xiaohongshu founder and CEO Charlwin Mao. Xiaohongshu became one of Zhang's most representative deals.

In late February this year, Waves heard rumors circulating in investment circles about Kimi cash-out arrangements. When we cross-checked this with one Kimi investor, they denied it: "Of course not." This investor's framing was that Zhang, following Allen Zhu, was the second GSR investor promoted to managing partner under a performance-based mechanism — someone who had "seen big deals, experienced the big stage."

But Zhu soon shattered all of this.

Allen Zhu: "Shame!"

The confrontation erupted late one Friday night.

On the afternoon of April 19, 2024, Waves published "Allen Zhu Turns Left, Yutong Zhang Turns Right," mentioning Zhang's departure from GSR Ventures.

Hours later, at 11:19 PM, Zhu posted unusually stern words on his WeChat Moments: "As an investor, a GP's fiduciary duty to LPs; as a company director, fiduciary duty to shareholders — these are untouchable red lines! Shame!"

Minutes later, Zhu swiftly deleted the post.

A source close to GSR Ventures immediately told us: "That was directed at Yutong Zhang."

According to this source, Zhang and GSR had recently gone through a conflict. The source's reconstruction: after the Alibaba deal closed, some of GSR's LPs gradually heard about Zhang's deep involvement in Kimi and inquired. "Only then did GSR learn the depth of Zhang's involvement, and had someone investigate her relationship with Moonshot AI." The source specifically requested anonymity.

One person then surfaced: "Kimi co-founder" Zhen Wang, whose other identity was: Yutong Zhang's husband.

Wang is the most distinctive among Moonshot AI's several co-founders. The others — Yutao Zhang, Xinyu Zhou, and Yuxin Wu — were basically Zhilin Yang's classmates in Tsinghua University's computer science department. Wang, however, graduated from Fudan University's computer science program, then studied at Nanyang Technological University in Singapore, and had worked as a senior software engineer at Google. His background suggests little overlap with Yang.

Before joining Kimi, he served as VP/CTO at Singaporean unicorn ADVANCE.AI, and had even worked as a VP at investment firm Shangshi Capital.

One AI industry headhunter told us that as early as 2023, Wang was helping at Moonshot AI and would communicate with him, but "Wang wasn't a business decision-maker."

According to Tianyancha's equity structure, Yang holds 78.968%, while Zhou, Wu, Zhang, and Wang hold 10%, 5.957%, 5%, and 0.075% respectively.

However, a legal industry source analyzed for Waves that with successive rounds of dilution, "the true equity proportions are actually reflected at the Cayman company level." Because Kimi uses a VIE structure for its USD fund, this means it has not only an offshore USD fund entity and a domestic pure Chinese entity, but also a Hong Kong entity in between, with "the ultimate Cayman and BVI companies at the top where the true equity structure can be seen."

According to the GSR source, while Zhang's equity stake cannot be determined from public records, the actual equity architecture appears to include a portion for her, possibly held through others or other arrangements.

As for why Zhu erupted late at night, one investor analysis suggests he may have learned of Zhang's actual relationship with Kimi relatively late. "Recurrent AI was Zhang's project; news about it may not have been promptly shared with Zhu."

Some context is needed here: though Zhu has long been the public face of GSR Ventures, he is not its founder.

One of GSR's founders is actually Singapore-born Richard Lim (the other two later departed). Before founding GSR Ventures in 2004, Lim had founded three internet software companies in the US and served as an executive at Lotus Software. He invested in Qunar, FunPlus, and Xiaohongshu, with Zhang also participating in the latter two.

Additionally, GSR's other two managing partners are Jian Ding, who joined in 2005 and co-founded US-listed AsiaInfo before investing in Horizon Robotics, Boxpay, and others; and Allen Zhu, who joined GSR in 2007. Zhang, who joined in 2011, became GSR's fourth managing partner in February 2020.

Multiple investment industry sources told Waves that among the senior partners, the semi-retired Richard Lim was Zhang's mentor, and that she and Zhu were "not necessarily in sync" on information.

Another source close to GSR told us that after learning of Zhang's situation, GSR inquired with her. Some context: funds typically have strict agreements with their LPs prohibiting partners from having interests in portfolio companies or related enterprises. According to this source, Zhang subsequently denied this.

The external result was Zhang's departure. In her April response to Waves, she also denied joining Kimi: "I will indeed have more time to explore new opportunities in AI, but I'm still in a transition period, serving as an advisor and providing post-investment support at the fund."

One investment industry figure told us that in a sense, the "advisor" arrangement accounted for her having backed star projects like Xiaohongshu and made enormous contributions to the firm. Even upon departure, she could share in the benefits through such a role.

Another telling detail: while Zhang was still at GSR, Zhu rarely mentioned Xiaohongshu; but recently, Zhu has brought up Xiaohongshu on multiple occasions, and just yesterday took GSR's USD fund LPs to visit Xiaohongshu headquarters.

Waves attempted to reach Zhu and Moonshot AI for this story; both declined interviews at this stage.

Between Qicong Chen and Zhilin Yang

Compared to Zhu, other former shareholders of Recurrent AI may have clashed with Kimi even earlier.

Founded in 2016, Recurrent AI is an AI software provider for enterprise marketing and customer service — the company where Yang and Yutao Zhang worked before this venture. Besides Yang and Zhang, Recurrent AI had another co-founder, Qicong Chen. All three co-founders came from technical backgrounds and met at Tsinghua University's Knowledge Engineering Laboratory. Chen was CEO, Yang was chief scientist responsible for AI and product, and Zhang was CTO. In 2019, Recurrent AI brought on another co-founder focused on marketing.

In 2018, after Zhang invested in Recurrent AI on behalf of GSR Ventures, Huashan Capital, Jingya Capital, and GSR Ventures participated in the Pre-A round, followed by ZhenFund, Hongshan, Wanwu Capital, and Boyu Capital.

One AI investor speculated that the "friendship boat" between former shareholders and Kimi may have capsized when people learned of Zhang's strong presence in Kimi's equity design.

At that time, Zhang's public identity remained as GSR's board representative at Recurrent AI. If she had related interests in Kimi, this would create psychological imbalance among Recurrent AI's other shareholders.

Among these, GSR Ventures — which led three consecutive rounds in Recurrent AI and held the largest stake — would likely be most aggrieved. But one investor added that GSR's failure to invest in Kimi alongside other former shareholders like Hongshan and ZhenFund may not necessarily mean they weren't given the opportunity; it could equally reflect a difference in investment judgment. "After all, Zhu's public statements have consistently expressed skepticism about large language models, so there's also the possibility they actively passed."

Another point of conflict stems from the博弈 between Recurrent AI and Kimi as companies.

One investor familiar with Recurrent AI's early days told us that as Recurrent AI's angel investor, Zhang was similarly a benefactor to Qicong Chen. This meant that when Yang and Chen came into conflict over interests, Zhang knew the cards both sides held. As Recurrent AI's board representative, if she had interests on one side, she could hardly remain fair and impartial in related voting matters.

Beyond Zhang, Yang's conflicts with former investors also stem from procedural issues. Based on Waves' multiple interviews, two narratives currently exist.

The first is that when founding Kimi, Yang obtained support from Recurrent AI CEO Qicong Chen and major shareholders, with Chen sending an explanatory email to company shareholders notifying them of the plan and obtaining confirmation and approval — but some later regretted this upon seeing Moonshot AI's valuation surge, and with several people not having signed, things got delayed together.

The alternative narrative is that Chen may have agreed early on, perhaps even sent an email, but didn't organize a meeting. Moreover, early former shareholders went back and forth during the waiver consent signing process, with some withdrawing after discovering issues, including GSR Ventures — the largest stakeholder among the five institutions.

How much equity Recurrent AI should hold in Kimi is also a point of divergence, largely depending on how the relationship is defined.

Some former Recurrent AI shareholders view this as a spinoff: both are AI companies, with core personnel and assets including the chief scientist and CTO participating and providing support.

But from the perspective of some Moonshot AI investors, what Moonshot AI does is completely different from before — one is a consumer-facing super app, the other an enterprise business — fundamentally a case of "leaving to start anew."

Additionally, in the view of one investor close to both companies, the delay in the waiver consent was also partly because Kimi wasn't constrained by these agreements in subsequent fundraising.

Typically, serial entrepreneurs who haven't obtained waiver consents from their previous company won't receive funding from certain investment institutions. But in practice, some institutions agree to handle it later with corresponding penalties or compensation measures. Kimi clearly fell into the latter category.

One informed source indicated that around May of last year, Kimi received its first funding installment. The arrival of money made the waiver consent less urgent.

One AI investor told us that for the first half of 2023, all investors were more concerned with securing tickets to invest in large models than with having everything hang on an unsigned waiver consent.

The Moon and Sixpence

How did all this come about, and could it have been otherwise?

From an external perspective, this is the product of a new wave of AI in which everyone is frantic, swept up in massive FOMO.

For foundation model entrepreneurs, this is a game requiring $50 million just to start and unlimited follow-on investment, making fundraising almost the most critical, cannot-lose battle in the early stages of entrepreneurship. Yet the time window is fleeting: just over twenty days after GPT-4's release, the market widely believed that the window for foundation model entrepreneurship had essentially closed, and the first round of capital arms race was largely over.

To some extent, this is also the historical opportunity that allowed investor Yutong Zhang to enter the large model entrepreneurship arena.

For most investors, they faced not only an unprecedented capital-intensive target but also the macro backdrop of US-China conflict and the decline of USD funds, making them not only urgent but also causing early阵营分化 between those who believed in technology versus those who believed in market dynamics. This is reflected in the different choices of Zhu and Zhang.

Excessive time compression is only one aspect.

One investor with approximate knowledge of the matter told Waves: Recurrent AI and Kimi span not only two generations of AI waves, but the former also has a thorny three-way equal equity split. These factors create模糊地带 in distinguishing core personnel and core assets between the two companies.

For former Recurrent AI shareholders, they also face the psychological gap created by two generations of AI fervor. Moonshot AI secured a single round of $1 billion in just 11 months — unimaginable in the previous AI wave. At that time, even the most prominent SenseTime took 4 years to raise $1 billion, and Megvii took 7 years.

The more fundamental crux may lie here. Had Kimi not developed to its present state, none of these disputes might have arisen. This is a story of human nature being instantly magnified before enormous利益.

In the view of one AI investor, if relationships had been promptly communicated, much trouble could have been avoided. As for equity代持, he believes "as long as it's disclosed in the disclosure schedule or LDD report and accepted by investors, it's compliant," and "even special circumstances can be noted in side agreements with shareholder signatures," otherwise "it may violate duty of care."

Regarding her responsibilities as a Recurrent AI director to its shareholders, many investors believe she bears important duty of care obligations. But some argue it depends on specific agreements, "after all, being a director isn't a full-time job. By comparison, her responsibilities to GSR Ventures are greater."

During interviews, one investment circle figure described an ideal state: leaving GSR Ventures earlier. But he also considered this "a difficult choice." "At that point in time, asking an investor holding carry from star projects to abandon everything for a late-launching, poorly positioned startup would be an enormous gamble."

For Kimi, the capital and attention it has received far exceed what a startup could normally expect. But as one of the Chinese large model companies bearing the most expectations in this fierce battle, no one wants Kimi's story to be damaged.

According to Waves, all parties remain in negotiations. More than one source close to the matter told us, "At the end of the day, it's still a matter of interests, completely negotiable."

Years ago, Zhang once explained to Waves the meaning of her work as an investor: "Let others be the stars; I will be the night." But in reality, resisting the temptation of stars is indeed too difficult.

Or perhaps, in a world full of sixpence, what counts as seeing the moon?

(For convenience, "Kimi" in this article generally refers to Moonshot AI)

Image source | IC Photo