A New Decade for Venture Capital: Hongshan's First Answer

By Muxin Xu

Edited by Jing Liu

"Buy one, get eleven free."

That was the slogan coined by the 12 CEOs of YUE Cohort 03, and it became their motto for showcasing mutual solidarity. At a time when the venture capital world is growing ever more fragmented, there still exists a place where founders can cluster together like felted wool. This is one reason Hongshan launched the YUE startup accelerator.

In August 2022, Hongshan established YUE. Compared to traditional accelerators like Y Combinator, YUE is a curriculum system tailor-made for Chinese entrepreneurs. It skips the demo day, opting instead for a leaner cohort paired with heavier services — including courses on customer acquisition, marketing, and pricing, plus a fundraising class calibrated to China's financing environment.

To date, YUE has run three cohorts, focusing on pre-angel and angel-stage projects. Fewer than 50 founders have passed the interviews and screening to become YUE fellows, each receiving RMB 7 million (roughly $1 million) from Hongshan. Founders are deliberately drawn from different industries or different directions within the same industry, eliminating the possibility of internal competition.

On March 14, Hongshan opened recruitment for YUE Cohort 04. As usual, the curriculum comprises eight modules: Idea, Hiring, Product, Commercialization, Fundraising, Culture, Growth, and the X module. YUE will spend one month on screening and interviews, then determine the mysterious X module's content based on the cohort's specific needs.

For Hongshan, YUE serves purposes beyond simply gathering entrepreneurs — there's a pragmatic side too: The primary value is deal flow. Colin Guo told Anyong Waves: "A seed fund is always chasing that one 100x return project. That's determined by the nature of early-stage investing."

YUE's heavyweight support services are designed to ensure that home-run hit. And while the services are intensive, YUE's ultra-early-stage nature means the cost of failure is comparatively low.

But is now really a good time to bet on early-stage? According to IT Juzi data, 2023 saw the lowest number of funding events in a decade, yet total funding volume didn't hit a corresponding low — meaning capital concentrated in the top tier and unicorns, while legions of small startups went unfunded. The funding crunch hit hardest at Series A and earlier, where deal volume dropped roughly 30% in 2023.

Beyond fundraising, founders face the shock of shifting sectors. Liu Chao, founder of Speed Leopard Power, has clearly tracked the migration of entrepreneurial focus across YUE's three cohorts — from SaaS to new energy to today's AI dominance. Another shock is the imperative of going global. For small companies, overseas expansion means grappling with concrete, granular challenges: choosing your first office location, hiring foreign employees, selecting where to incorporate, even finding a reliable lawyer. One AI application founder discovered that when using overseas cloud services, his company's usage volume was too small and API transactions too few — so the cloud provider's service was consistently delayed.

Why is YUE doubling down on early-stage right now?

The Blossoming World of Entrepreneurship

In interviews about YUE, both mentors and fellows invariably convey a powerful sensation: "the lure of entrepreneurship." Whether they're accomplished serial entrepreneurs, multinational executives, or young engineering PhDs, everyone wants to enter this flourishing world.

But is now really a good time to start a company? This is our entry point for understanding what YUE means to Hongshan and to its participants.

In Colin Guo's view, objective difficulties don't conflict with VCs discovering excellent early-stage founders.

First, the emergence of outstanding founders isn't directly tied to macro conditions: "Based on our experience investing in early-stage companies, founders typically decide to start up based on just two factors — their personal circumstances and opportunities around them. The broader environment only affects resource availability, funding levels, sector trends, and so on. It doesn't affect the fundamental reasons someone chooses to become a founder."

Kuai Jiaqi, who lived through the O2O funding frenzy as founder of Dada and is now a YUE accelerator partner, sees it this way: "When the environment is good, fundraising is indeed easier — but once you gain momentum, you'll attract 100 competing projects. Nowadays there's no more burning cash to grab market share, which means capital efficiency has generally improved."

From Hongshan's perspective, the decision to increase early-stage investment during a "downturn" stems from a crucial observation accumulated over decades: "At the bottom of every economic and technology cycle, when a new round is about to begin, it's always full of early-stage investment opportunities."

Due to capital availability, deal volume, sector dynamics, and other factors, the primary market has generally been shifting earlier in recent years — all the way to the "-1" stage.

But for founders at the "-1" stage, why lean toward YUE rather than alternatives?

Domestic and international incubators/accelerators range from established YC to its spiritual successor MiraclePlus, while business-focused programs include Matrix Partners China's Hundreds of Millions Entrepreneurship Camp and Taihe Capital's Chongling Program.

Perhaps only an "outsider" can explain this clearly. Kuai Jiaqi told Anyong Waves, "First, few funds can offer full-chain investment. This doesn't just mean funding across all stages, but also a full-chain perspective. Second, there's access to Hongshan's portfolio community. Finally, YUE's rigorous screening ensures small cohorts, so clearing YUE's threshold itself constitutes stronger validation."

Kuai Jiaqi's answer comes not from speculation but personal experience. In 2014, before Dada's business registration was even complete, he secured his first check from Hongshan. Dada's early direction, business model, and team were, to some extent, co-incubated by Kuai and Hongshan. Over the six years from founding to IPO, Hongshan repeatedly increased its stake, becoming Dada's largest financial investor before listing.

As a resident mentor, this serial entrepreneur now collaborates with the Hongshan partners who once backed him, planning YUE as if it were his own next venture — its positioning, goals, product, promotion, and more.

During the Lunar New Year, Kuai binge-watched the TV drama Blossoms Shanghai. Seeing the protagonist Ah Bao's story, he recalled his own entrepreneurial journey and the benefactors he'd encountered along the way — like the character Uncle. "Every Ah Bao needs an Uncle," Kuai said. "And he can be any mentor in YUE."

Beyond several Hongshan partners personally taking the stage, YUE's instructors are almost exclusively founders — called "entrepreneurship coaches," nearly all drawn from Hongshan's portfolio. The implication of this title, in Colin Guo's words: The factors that help entrepreneurs succeed, or that improve startup success rates, can be acquired through "teaching by personal example and verbal instruction." This is what YUE has always emphasized: founders help founders.

Of course, for a VC winter that has persisted for quite some time, YUE — an organization with relatively weak commercial motives — has become a way for both investors and entrepreneurs to combat isolation. As a three-time startup veteran, Kuai believes YUE offers a unique emotional value beyond entrepreneurial methodology. "Anyone who's founded a company knows that founders are often lonely figures. Especially in the early stages, many things can't be discussed with employees or even co-founders — you can only process them silently or find your own outlet."

In 2022, Li Shaojian decided to resign from his executive position and become a founder, encountering many difficulties in the transition. So at a late-night sharing session after a YUE class, Li chose to reveal his darkest moment. He's since forgotten the specific details of that moment, but remembers that day "everyone was a real person, not some mechanically constructed creature."

Aggregation also enables "resource sharing." The first YUE cohort's dozen-plus founders from different industries committed to quarterly meetups, where each founder would bring their own investors. In a funding winter, the importance of such matchmaking speaks for itself.

During Cohort 04's application period, YUE's operations team organized a larger reunion, inviting applicants who didn't make it into the program but reached the final interview stage. Three partners and four investors from Hongshan Seed, plus six YUE fellows, gave these "YUE aspirants" a condensed精华分享.

"From an investment perspective, this is a look back, because investors often misjudge. We believe and expect that among those previously passed over, there will be some hidden gems," Colin Guo said. "We also want to send a message externally: although YUE can only admit a dozen or so people each cohort, this isn't a closed organization. We want it to keep opening up, so entrepreneurs realize that at whatever stage, we've always got opportunities to collaborate."

The Courses Early-Stage Founders Need Most

YUE fellows come from diverse backgrounds. Liu Chao is on his second startup; his previous experience left him feeling the "shareholder structure was rather complicated." Li Shaojian, founder of HKCIC, was previously an Autodesk executive — he could scale from 1 to 100, but this was his first time facing the 0 to 1 stage. Guo Haibing, founder of Hanchen Star, had previously bootstrapped with his own funds; this was his first time needing to raise external capital.

YUE mentors brainstormed extensively on curriculum design, wanting to emphasize practical courses. But over time, both Hongshan and the entrepreneurs themselves quickly realized that fundraising was the most important thing.

As multiple Hongshan instructors emphasized: "Fundraising is the CEO's number one project." Liu Chao told Anyong Waves that in his observation, from YUE 01 to 03, founders grew noticeably more anxious and urgent about acquiring all information related to fundraising. Of course, this also reflects the tightening venture capital industry over the past two years.

So who's better suited to teach this course — entrepreneurs or investors? Colin Guo has considered this; their perspectives differ, and so does the experience they can impart.

In Liu Chao's view, YUE resident mentor and Dada Group founder Kuai Jiaqi is a tactical-level expert: "He's raised billions of RMB — what investor hasn't he seen?" Based on this, Kuai's fundraising advice is: 1. Explain your target market and unique advantages with maximum concision. 2. Reasonably create scarcity and urgency around your project. Explain why investors should invest now, and thread this logic through every step of your fundraising process.

As an investor-mentor, Colin Guo told Anyong Waves: Compared to overseas accelerators and incubators, YUE's fundraising course has more "Chinese characteristics," because China's fundraising patterns are less predictable — early-stage pricing is in fact determined by supply and demand. In hot sectors, the first three rounds' valuations often aren't set by business development structure, but by the number of term sheets in the founder's hands. That's what supply and demand means. But the nature of supply and demand is that valuations rise fast, and they can crash just as suddenly.

To Guo Haibing, such sharing can be internalized as concrete operations: even between two funding rounds, keep rolling meetings with investors. As a first-time fundraiser, Guo sees investor-taught courses as knowledge unattainable through books or articles — equivalent to your game opponent directly telling you the solution.

Entrepreneurs' experiences are vivid but their cases limited; investors have seen more fundraising but can't truly empathize. So beyond these two roles, YUE's curriculum also brought in Hongshan human capital lead Miao Haiyuan for a hiring course. With over half of Cohort 03 in AI, an AIGC module was added with relevant domain experts. After each class, fellows rate their instructors.

But ultimately, Colin Guo believes the most suitable mentor may be enthusiasm itself. One YUE mentor once connected a fellow with 40 customers to help land their first order. Whether investors or entrepreneurs, the instructors who devote enormous time and passion here are consistently the highest-rated by fellows.

Is YUE Hongshan's Answer?

In recent years, the venture capital industry has faced its most severe moment since the 2008 financial crisis. Only those most skilled at responding to change will survive.

Hongshan began responding six years ago. In 2018, Hongshan Seed was established. Colin Guo later noted that it would have been better to layout ultra-early-stage even earlier. In the initial years, some external skepticism surrounded Hongshan Seed, but today that doubt has evaporated.

Over six years, Hongshan has moved aggressively in ultra-early-stage investment: co-hosting the Ostrich Club with ZhenFund, internal Scout programs (individual angel investors), establishing Sparkle focused on early-stage consumer entrepreneurs, and partnering with universities and science innovation funds. For instance, Hongshan Seed invested in Hu Yuanming's Taichi Graphics while he was still a PhD student — a case of "targeted incubation."

YUE's emergence represents Hongshan's attempt to systematically replicate this targeted incubation.

Of course, the extremely high failure rate inherent to ultra-early-stage investing gives YUE something of a public-interest character. As Neil Shen characterized Hongshan Seed: "Achieving a satisfying result in the balance between public benefit and commerce."

For an institution like Hongshan, establishing YUE was inevitable — or rather, it's the final piece of this full-chain VC's puzzle. "In my years at Hongshan, I've always felt it's an organization with a strong sense of crisis. The results we achieve today actually come from seven or eight years ago. Similarly, mistakes we make today won't show consequences tomorrow, but years later. By then it may be too late to turn things around," Colin Guo told Anyong Waves.

So regardless of how the world changes, Hongshan remains insatiably hungry.

Image source ｜IC PHOTO