FreeS Fund 2023 Year in Review: Take the Long View

In 2023, whether looking at the capital market we operate in or the sectors where most innovative companies compete, everyone faced their share of changes and adjustments. Over the past year, our team grew alongside the sectors we track, standing by our portfolio companies through the industry's ups and downs. As Feng Shu put it in our internal review: "The depth of the pits you've stumbled into is roughly proportional to the height of the mountains you can ultimately scale."

Standing at the threshold between old and new, we believe that while capital markets will continue to fluctuate, they will ultimately trend upward. At the very least, from a policy perspective, the capital market is becoming the main arena supporting China's economic structural transformation. It's still the same principle: "Do what's right, not what's easy."

The future we face won't necessarily get easier. But we trust in the laws of how the world develops, and we believe that optimism, at any moment, gives us more staying power and resilience than pessimism. Take the long view.

P.S. Scroll to the end for a surprise~

FreeS Fund and Our Portfolio in 2023:

• Investments: 27 deals completed — 16 in new projects, 11 in follow-on rounds for existing portfolio companies.
• Exits: 6 partial or full exits realized.
• Follow-on financing: By conservative estimates, over 40 FreeS portfolio companies completed roughly 50 new funding rounds in 2023, raising nearly RMB 7 billion in total.
• Fundraising: First close of our RMB Fund III.
• New high-valuation companies: 2 portfolio companies surpassed RMB 2 billion valuation; another 2 exceeded RMB 5 billion in 2023.

In 2023, we remained active in investing, completing 27 deals — 16 in new projects and 11 in follow-on investments. On the fundraising front, we secured fresh capital, and we'll likely maintain our active investment pace in 2024.

What's particularly notable is that despite the volatile funding environment, over 40 FreeS portfolio companies raised approximately 50 new rounds totaling nearly RMB 7 billion, well above the RMB 4 billion raised in 2022. As one colleague wrote in their year-end reflection: "Counter-cyclical periods are precisely when the market filters for truly good companies."

2023 brought considerable exit pressure, especially on the IPO front. This year, FreeS achieved partial or full exits from 6 projects. Among the exited companies, 4 were in hard/soft tech and biomedicine — specifically in computer vision, IoT chips, AI drug discovery, and related fields.

Since its founding, FreeS Fund has consistently focused on early-stage, small-scale, technology, and interdisciplinary investments. We've watched many early-stage companies grow into significant forces advancing technological development. By conservative estimates, as of end-2023, among FreeS portfolio companies:

When confidence runs scarce in capital markets, external validation becomes especially precious. In 2023, we received over 100 honors from dozens of institutions — 77 for the firm, 34 for individual team members.

Among the firm's awards: nearly 30 recognized FreeS's comprehensive capabilities, with keywords including "most entrepreneur-friendly," "most LP-recognized," "most influential," "best returns," "best early-stage," "top-tier VC," "investment pioneer," "exit pioneer," and "ESG pioneer."

In specific investment domains, our hard/soft tech investments earned 16 recognitions spanning AI, advanced manufacturing, semiconductors, new materials, and industrial internet; our healthcare investments garnered 15 honors from industry and specialized medical media; and our consumer and TMT practice continued to receive affirmation.

Among individual recognitions: Feng Shu's honors included keywords like "most popular," "best early-stage," "regional empowerment," "best early-stage tech hunter," "top-tier venture capitalist," and "best returnee"; Partner Lei Wang received awards from Zero2IPO & PEDaily and China FOF Research Center; Partner Rui Ma was recognized by Global PE Forum & Caixin Data, China FOF Research Center, Artery Network, Cyzone, Jazzyear, and 21st Century Business Herald; and Venture Partner Chen Shi received honors from EqualOcean and Jazzyear.

In 2023, for portfolio services, we continued our integrated investment-and-post-investment team approach to empower portfolio companies and support founding teams through their growth. We also tailored our services to each company's specific circumstances, advancing our post-investment support into a "full-chain, multi-dimensional, personalized" service framework.

▎Government Relations (GR)

In 2023, we assisted over 40 portfolio companies with local government landing, policy incentive applications, and resource expansion. We systematically mapped each company's granular needs, providing support at every growth stage — including government relations, policy applications, talent recruitment programs, and production site selection.

▎Investor Relations (IR)

In 2023, we helped over 80 portfolio companies connect with investors more than 300 times. In this volatile funding environment, we worked with portfolio companies to analyze and refine their financing strategies, pushing to secure funding at optimal timing. We also continuously expanded our investor network, encompassing financial investors, strategic corporate investors, and an increasing number of government direct investment funds. We maintained regular communication with investment institutions, systematically matching portfolio companies with interested parties. Additionally, we helped companies identify suitable financial advisors to broaden their capital access.

▎Human Resources (HR)

In 2023, we focused on C-level recruiting for over 20 portfolio companies, recommending dozens of candidates. Beyond one-on-one support, we built a comprehensive talent empowerment system for portfolio companies across four pillars: HR diagnostics and planning, talent sourcing and recruitment, talent development framework building, and compensation and incentive system design. We helped companies identify HR challenges, define ideal candidate profiles, and provided strategic guidance for their hiring. We also actively engaged with universities at home and abroad through online and offline events to help portfolio companies access top talent.

▎Business Development (BD)

• Consumer & TMT

We built an ecosystem for cross-border companies to generate synergies: connecting outbound companies with TikTok, Temu, Shein and other online channels; helping consumer brands expand offline footprints; linking companies with overseas marketing and branding agencies; and sharing market intelligence while having in-depth discussions with portfolio companies on AI, international expansion, strategy, and user growth.

• Biomedicine

We connected companies with pipeline pharmaceutical firms and clinical CROs to advance production; recommended B2B and B2C sales channels; linked companies with industry sales channel experts and think tank resources; and facilitated upstream-downstream collaboration among portfolio companies.

• Hard/Soft Tech

We connected companies with upstream and downstream resources, helping hard tech companies find suitable suppliers and customers to advance commercialization. These industry resources spanned automotive manufacturers, steel plants, and solar companies, as well as internet giants like Baidu and Xiaomi.

▎Public Relations (PR)

In 2023, we published nearly 50 articles on the FreeS Fund WeChat account, including 20 industry research pieces. We believe more sharing and exchange deepens collective understanding of venture capital. We also collaborated closely with portfolio companies to amplify their reach. We launched a livestream series with FreeS portfolio founders exploring frontier trends and entrepreneurial stories in AIGC, biomedicine, chip manufacturing, and other fields. We also revived FreeS Open Day, where we discussed interdisciplinary entrepreneurship with portfolio founders.

In 2023, we continued our podcast collaboration "High Energy" (Gao Nengliang) with Li Xiang, author of the Detailed Conversations book series and host of The Turbulent Times. FreeS-co-produced podcast content garnered nearly 1.8 million plays across Xiaoyuzhou, Ximalaya, and Apple Podcasts. Content featuring FreeS portfolio companies exceeded 250,000 plays. Our episodes covered macroeconomics and niche industries alike, while also addressing autism, youth employment, and entrepreneurs' experiences. In 2023, "High Energy" received two major honors: 2023 Xiaoyuzhou Podcast Awards "Trending Podcast of the Year" and 2023 CPA Chinese Podcast Awards "Business & Finance."

In December 2023, we took our first post-pandemic international team retreat to the tropical island of Langkawi. We went sea kayaking — on open waters, we focused on steering our course; in the narrow, tangled channels of mangrove forests, we had to find our leverage. We watched eagles from the sea — they circle at altitude with vision spanning 36 kilometers; early-stage investing similarly demands sharp eyesight, the ability to see far into the future, and sensitivity to pivotal shifts. We also fished for grouper; interestingly, the fish bit when we weren't trying so hard to win.

It was a journey back to nature and fundamentals. Under the blazing sun, cattle grazed leisurely by the roadside, butterflies fluttered freely among flowers, and we rode ATVs across grasslands, riverbeds, and fields. At dusk, we watched the sunset's fleeting transformations from a boat, feeling the rise and fall of the tides.

At the team dinner, colleagues shared "what color was your 2023." A new joiner said, "I hope coming to FreeS is like being a blank canvas, painting the future together with everyone." We also heard: "Among visible light, violet has the shortest wavelength. I hope 2023 passes quickly." "Though 2023 wasn't easy, I hope we face it positively, like the energetic dopamine color palette." "For many, 2023 may be black, but there are always flickering stars that bring light to our lives."

In FreeS's internal year-end reflections, we discussed growth and challenges in 2023, plus outlooks and expectations for the future. Facing a complex and shifting market environment, colleagues frequently mentioned keywords like optimism and courage, embracing challenges, following one's convictions, and staying in the game...

The future may not get easier, but at least we have more courage to meet challenges head-on. In 2024, we hope to move forward with you — carrying hope, persisting upward, and doing what's right, not what's easy.

Engagement Giveaway

Share your thoughts and hopes for the new year in the comments, or tell us what you'd like to say to us. By 5:00 PM on February 13, the 5 most heartfelt commenters will receive a FreeS New Year gift (includes 2 books).

▲ How We View the 2023 and 2024 Consumer Market | Feng's Column

▲ A Tumultuous 2023: Courage and Aspiration | FreeS Year-End Special

▲ Heading into 2024: How We Think About AI Entrepreneurship and Investment | FreeS Year-End Special

▲ Li Xiang x Li Feng: Stripping Away Emotion, Discussing H2 2023 Economic Variables | Feng's Column

▲ FreeS 8th Anniversary: You're Invited to Join Us on a Longer Journey

▲ FreeS 2022 Year in Review: Staying True to Our Logic, Doing What's Right Not What's Easy

▲ Our Year: Working Together, Persisting Upward | FreeS Fund 2021 Year in Review

Star the FreeS Fund WeChat Official Account for timely business insights