Exclusive | Kimi Founder Yang Zhilin Faces Arbitration Filed by Former Investors

By Lili Yu

Edited by Jing Liu

Anyong Waves has learned exclusively that Yang Zhilin, founder of Moonshot AI, and Zhang Yutao, co-founder and CTO, were recently served with an arbitration filing in Hong Kong by investors from their previous startup, Recurrent AI. The electronic arbitration application has been submitted to HKIAC (Hong Kong International Arbitration Centre). As of press time, Moonshot AI has not yet responded to the matter.

Recurrent AI was the company where Yang and Zhang worked before founding Moonshot AI. According to sources familiar with the matter, the applicants in this arbitration include Recurrent AI itself and five of its seven investment entities: GSR Ventures, Jingya Capital, Boyu Capital, Huashan Capital, and Wanwu Capital. The above-mentioned sources told us that the arbitration likely stems from the fact that Yang Zhilin, Zhang Yutao, and others launched fundraising and founded Moonshot AI before obtaining consent and waiver letters from several Recurrent AI investors (GSR Ventures, Wanwu Capital, Jingya Capital, Huashan Capital, and Boyu Capital).

Recurrent AI is an AI software provider founded in 2016, focused on enterprise marketing and customer service. An industry insider familiar with Recurrent AI's early history told Anyong Waves that besides Yang Zhilin and Zhang Yutao, Recurrent AI had another co-founder, Chen Qicong. "All three co-founders came from technical backgrounds and met at Tsinghua University's Knowledge Engineering Laboratory."

Yang Zhilin previously studied under Ruslan Salakhutdinov, Apple's head of AI, and William W. Cohen, former principal scientist at Google AI, earning his PhD at CMU. Chen Qicong studied under Alex Smola, head of AWS AI at Amazon and a leading figure in machine learning, earning his master's in computer science at CMU. Zhang Yutao earned his PhD in computer science at Tsinghua University under Tang Jie, a top expert in data mining. It wasn't until 2019 that Recurrent AI brought on another co-founder focused on marketing.

Notably, despite the three founders initially splitting equity equally during this entrepreneurial stint, Yang Zhilin was not the CEO. He was primarily responsible for AI and product, effectively playing the role of chief scientist. Chen Qicong was CEO, while Zhang Yutao served as CTO. Later, Yang Zhilin and Zhang Yutao, along with others, went on to co-found Moonshot AI.

Meanwhile, Zhang Yutong, the former GSR Ventures managing partner who played an instrumental role in Moonshot AI's Alibaba financing round, was also Recurrent AI's very first angel investor. Before leaving GSR Ventures, Zhang Yutong had consistently represented the firm on Recurrent AI's board.

According to one AI investor's recollection, following GSR Ventures, Huashan Capital, Jingya Capital, ZhenFund, Hongshan, Wanwu Capital, and Boyu Capital also came in, and Recurrent AI's valuation once reached around $200 million-plus.

According to the above sources, the conflict between Yang Zhilin and Recurrent AI's shareholders mainly developed after 2023.

In the investment industry, similar conflicts are hardly secret. One industry view holds that such tensions may partly stem from the lightning-fast fundraising windows.

Yang Zhilin described it this way in one interview: We started concentrated fundraising for our first round in February 2023. If we had delayed until April, there would basically have been no chance. But doing it in December 2022 or January 2023 wouldn't have worked either — there was COVID then, people hadn't caught on — so the real window was just one month.

Another person close to both companies told us that the delayed signing of consent and waiver letters likely reflects dissatisfaction among several Recurrent AI investors with the equity stake Recurrent AI eventually received in Moonshot AI. He told us that among China's several foundation model companies, "Moonshot AI's valuation rise has been whirlwind, the steepest," which inevitably "delivers a massive shock to old investors from the Recurrent AI era who watched valuations climb slowly."

As one of the most closely watched large model companies, Moonshot AI's fundraising history has always been turbulent and opaque.

One AI investor once told Anyong Waves that when the company first emerged, "despite Yang Zhilin's exceptional technical talent, he had no business or management experience," so the feeling was that "a $50 million valuation would be pretty good" — following Wang Huiwen's famous rallying post, many people took $50 million as the starting benchmark for founding a large model company.

Moonshot AI's earliest investors came from Hongshan and Capital Today. One AI investor noted that investing in Moonshot AI was a case of "the moon being nearer to the water tower" — those closest got there first.

The dramatic climax of its fundraising was of course Alibaba's nearly $1 billion round. Following this, Moonshot AI, barely a year old, became the highest-valued unicorn in the field at that stage, and subsequently entered the $3 billion club ahead of schedule.

What's particularly telling is that not all of Recurrent AI's old shareholders filed this complaint — "showing that opinions were not unified."

Multiple investors told us that when a serial founder starts another company, many investors won't wire money if waiver consent from previous investors hasn't been obtained. But in practice, many firms also agree to "handle it afterwards," with corresponding compensation measures.

In the view of the above sources, institutions that invested in Moonshot AI likely all took corresponding risk mitigation measures, but even so, when it involves a star startup, "this kind of thing is still troublesome."

According to another industry insider familiar with major corporate strategic investment ecosystems, Alibaba has also become aware of this matter. Because Hu Xiao, the Alibaba strategic investment lead who spearheaded the Kimi investment, left Alibaba in September, the person currently following up on this is "Shen Chen, Alibaba strategic investment's new successor."

According to Anyong Waves' understanding, as early as the first half of this year, several of Recurrent AI's old shareholders had sent lawyer's letters to Yang Zhilin, and a number of well-known investors participated in mediation efforts, but as things stand, "no settlement was reached."

In the view of one FA who has participated in fundraising processes for multiple AI companies, because of the urgency of time windows, many of this generation's AI startups face "historical baggage" issues between old and new companies. Moonshot AI naturally cannot avoid this. It's just that for such a young company, barely a year and a half old, the thorny problems it needs to solve clearly extend well beyond this.

Image source | IC Photo