FreeS Fund's 2022 Year in Review: Stay True to Your Convictions, Do What's Right Rather Than What's Easy

"Do what's right, not what's easy." This slogan, which has accompanied FreeS Fund for more than seven years, felt especially relevant in the turbulent year of 2022. Market ups and downs didn't disrupt our investment rhythm. We continued applying our interdisciplinary investment methodology, thinking and researching with rigor, striving to discover new rivers. In practice, compared to 2021, our deal pace didn't slow — it ticked up slightly. We also kept passing on this conviction to more people, whether communicating with portfolio companies or sharing insights internally and externally. Cautiously optimistic, always forward-looking — that's been our attitude toward change and difficulty. In accompanying companies through their growth, we've encountered a more complex and expansive business world. This year, some companies crossed the RMB 20 billion valuation threshold; others, after years of persistence, finally hit an inflection point. FreeS colleagues have kept elevating their understanding and expanding their capabilities, growing together with the fund and our portfolio companies. Thank you to every friend who has journeyed with FreeS. Here's to a better 2023. Happy New Year! P.S. Scroll to the end for a surprise~

01 2022: Bold Moves, Witnessing Growth

In 2022, we and our portfolio companies:

• Invested: Completed 50+ investments, with nearly 30 follow-on rounds in existing portfolio companies and 20+ new deals, totaling nearly RMB 600 million in capital deployed.
• Exited: Achieved nearly 10 exits.
• Follow-on financing: Preliminary statistics show 40+ FreeS portfolio companies raised new funding in 2022, with total financing of nearly RMB 4 billion.
• Raised: Closed multiple funds, completed the first close of RMB Fund III's main vehicle, and began preparations for USD Fund II.

New high-valuation companies this year:

• 5 portfolio companies newly reached "thousand-li horse" status (valuation exceeding RMB 1 billion);
• 2 companies newly surpassed RMB 5 billion valuation in 2022;
• 1 company newly crossed RMB 20 billion valuation this year.

When markets cool, we actually get more opportunities to engage deeply with projects and learn industry know-how. Through abstraction and synthesis, we build new knowledge structures, testing and iterating our understanding and judgment in investment practice. That's why we dare to move. In 2022, we completed 50+ investments, with 20+ going to new deals. We still insist on investing early and small — 30+ investments were in seed, angel, and Pre-A rounds. When the market desperately needs confidence, companies pursuing innovation and long-term value get more chances to be seen. Among 2022's newly minted high-valuation companies, 5 are hard-tech/soft-tech enterprises and 3 are biopharma companies. Of exited projects, more than half also came from hard-tech/soft-tech and biopharma, specifically covering lidar, synthetic biology, surgical robotics, and other directions.

02 Embracing Interdisciplinary Approaches, Discovering New "Rivers"

We've maintained our distinctive interdisciplinary investment approach. Similar to 2021, over half of our 2022 investments spanned multiple disciplines and fields, including but not limited to quantum sensing + neuroscience, gene editing + breeding, pet care + smart hardware, AI + fitness, food sensory science + medical nutrition, and more.

Why, since the fund's founding, have we kept seeking non-consensus yet imaginative projects, discovering new "rivers"? Uncle Feng's internal sharing offers part of the answer: "We're not afraid to stand firm in our logic. Even if we're the first to stand on the other side of the river, gradually others will join us." Our investment team's research focuses on underlying principles. Weekly deal meetings feel like shuttling between classrooms in biology, physics, chemistry, computer science, economics, materials science, engineering, demography, psychology, and more.

In the new year, we look forward to meeting more innovative and imaginative projects.

03 More Visible, Thanks for the Recognition

In 2022, FreeS earned 92 honors total — 58 for the firm, 34 for individual colleagues. This recognition affirms our steady investment pace amid volatility.

Swipe left or right to see more~ Among the firm's awards:

• 24 recognized FreeS's early-stage focus, with keywords including "best returns," "most LP-recognized," "most founder-friendly," "most admired," "investment pioneer," and "impact."
• 14 affirmed our investment practice in consumer and TMT, especially in creative economy, lifestyle services, retail, industrial internet, and cross-border expansion.
• Hard-tech and biopharma investment results gained more visibility, with 7 recognitions each, covering semiconductors, new materials, synthetic technology, advanced manufacturing, and healthcare.
• 4 praised FreeS and portfolio companies' social value, with keywords including "best ESG," "ESG pioneer," "dual-carbon investment pioneer," and "most growth-potential carbon-neutral investment firm."

Swipe left or right to see more~ Thank you to all these institutions and organizations for the recognition ❤️

04 Comprehensive Portfolio Support, Guarding Founders' Confidence

In 2022, we continued using our "4R+BP" organizational framework, with investment and portfolio teams collaborating to empower portfolio companies and accompany founding teams through growth. When COVID hit Shanghai, Shenzhen, Beijing, and other cities, we launched online surveys to promptly understand companies' latest developments, hoping to mobilize resources to help portfolio companies. In the FreeS portfolio CEO group, Uncle Feng has always been the most active "CEO cheerleader" — discussing industry opportunities rationally with founders while also giving them emotional encouragement. Our parallel portfolio support groups also provide professional help to founders within their capabilities.

GR

In 2022, we assisted 40+ portfolio companies with landing, applying for supportive policies and resources. Beyond on-site visits, we organized multiple online communication sessions to help companies connect early with interested industrial parks and understand the latest policy support. Local governments pitched their industry big-data resources, introduced upstream and downstream partners, or provided support in factory construction and other areas. FreeS portfolio companies thus gained more development possibilities through this healthy government relations dynamic.

IR

In 2022, the most precious thing for the VC industry was confidence. And ample capital "ammunition" was one important source of that confidence. In 2022, we helped 50+ portfolio companies with 200+ investor introductions. Beyond investment institutions, we connected companies with more listed companies, strategic investors, and state-owned capital platforms, helping them access broader financing channels and industry resources. IR colleagues built dozens of point-to-point portfolio service groups to track companies' latest situations and provide financing strategy advice. Beyond equity financing, we also hosted investment-loan linkage sessions to help companies more smoothly connect with banking institutions.

HR

"Cost reduction and efficiency improvement" became a buzzword in 2022. We kept thinking about how to help startups optimize human resources to improve overall operational efficiency. We focused on helping 10+ companies recruit key teams and build organizational structures. We also designed flexible employment schemes, pandemic-era attendance policies, and downsizing plans for multiple companies.

BD

In 2022, we helped portfolio companies connect with resources at Alibaba, Tencent, TikTok, Meituan, and others. Beyond big-tech partnerships, FreeS portfolio companies kept having "dream collaborations": more upstream and downstream cooperation among biopharma companies; hardcore smart manufacturing companies collaborating with biopharma firms in interdisciplinary projects; and new service models FreeS invested in — whether fitness, psychological counseling, or HR — beginning to serve as infrastructure supporting other FreeS portfolio companies' development.

PR

In 2022, on the FreeS Fund WeChat official account, we published 60+ articles, nearly 50 related to portfolio companies, generating hundreds of thousands of reads. We also developed an SOP for portfolio companies' funding news announcements, helping early-stage companies smoothly achieve their first exposure and public debut.

We worked closely with portfolio companies to help startups expand their influence. We launched a semiconductor chip livestream series, sharing frontier trends and entrepreneurship stories in photonic chips, lidar, chip+biopharma, and other directions; we focused on the "E" in ESG, hosting 3 environmental dual-carbon livestreams with portfolio companies on driving innovation and creating social value; we participated in planning and attended multiple summit events at top North American universities with portfolio companies, actively reaching North American research and VC communities.

05 Generosity Toward the Future Means Investing in the Present

In FreeS internal personal reviews, we talked about changes experienced in 2022 and expectations for the future.

06 Welcoming the New Year

"Heroes return," welcoming the new year with fresh energy.

07 2023: Confronting Uncertainty, Moving Forward with Conviction

At the start of 2023, we also want to share some of Uncle Feng's thinking about the new year.

Over the past year, almost every month brought various challenges from internal or external sources, with each event having phased ripple effects. If 2022 was a year hard to grasp, 2023 still holds considerable uncertainty. We don't need to fall into helplessness because of this. On the contrary, we can prepare as much as possible, buying ourselves more room to respond.

Looking at China and the US from the current economic cycle: In recent years, the US has been active in trying to bring back important industries that moved out decades ago. Looking at China, we've evolved from initially taking on low-value-added roles in the global division of labor to seeing our chip semiconductors, biotech, and related manufacturing successively reach high-value-added, high-tech positions. Going forward, regardless of whether deglobalization occurs and to what extent, and regardless of how US-China relations evolve, it appears that in the current and future long economic cycle, the key contest between China and the US is over who can master the core of high-end manufacturing. Behind this lie both opportunities and challenges, with considerable venture capital opportunities.

Returning to the economic recovery topic everyone cares about. We can imagine the entire economic pie as a building. First look at the foundation. For China's current economy, real estate undoubtedly belongs in the foundation category. The foundation needs structural stability and certain thickness. With the foundation solid, to ensure the floors above can be built higher and larger, we need to consider the pillars. There are three main pillars: finance, infrastructure, and industry value-add.

Finance is essential for supporting economic structure, while also serving to connect, regulate, and transform. Infrastructure makes the economic structure sufficiently stable and efficient. Infrastructure includes both traditional infrastructure like highways and high-speed rail, and digital infrastructure like 5G internet, data centers, AI, and industrial internet. Traditional and digital infrastructure are the basis for ensuring high-speed industrial chain operation, and determine how stable, high, and large the building can ultimately become. The third pillar is industry value-add. When the economy returns to normal growth trajectory, we need to increase industry value-add, enabling better value creation at each industry link.

As for the specific "bricks and tiles," for industries to develop, one opportunity lies in "new demand forging new supply and new structure." We forge new supply by elevating technology content and value-add; new demand further pulls new supply's upgrade and competition, creating some new structural opportunities. Once new demand, new supply, and new structure connect, it becomes very powerful.

Therefore, for entrepreneurs, a particularly worthwhile set of questions to consider is: In your industry, what is new demand? What kind of supply aligns with industry and technology upgrade directions, while also enhancing industry and individual value-add, and improving employment efficiency for your company and upstream/downstream industries? How do you transform your company into this and embed it into the new structure, catching the beta of overall economic and industrial development?

Interactive Giveaway

We welcome you to leave a comment at the end sharing your thoughts and hopes for 2023. By January 27, the 6 most thoughtful commenters will receive Uncle Feng's recommended book blind boxes (each containing 2 books, randomly shipped).

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