Jui Chan, BlueRun Ventures: If Foreign Capital Stops Investing in China, It Gives Up a Major Opportunity | BlueRun Perspectives

Recently, when Jui Chan, managing partner of BlueRun Ventures, sat down with Tencent's Deep Web for an exclusive interview, he addressed two questions: Where is the next trillion-dollar track in venture capital? And how can early-stage funds survive and stay active in the current environment? These are likely the most pressing concerns on the market right now. We're sharing the full interview in the hopes of sparking reflection and discussion.

"Over all these years, every single new energy vehicle startup that lied about or inflated its fundraising amounts has died without exception. Some tried to come back from the dead, and they still ended up dead." This was Xiang Li, founder of Li Auto, commenting publicly on Weibo.

This year, Li Auto has seen explosive sales growth — one of the few new energy vehicle companies bucking the trend. First-half deliveries already exceeded its full-year 2022 volume. Li Auto's Q2 earnings report showed that first-half net profits had already erased the net losses of the previous three years, with 2023 full-year revenue on track to break 100 billion RMB.

Looking back at the skepticism just a few years ago about Li Auto's decision to prioritize extended-range technology, then seeing its ferocious competitiveness this year, Li's comment carries unmistakable undertones of "the light boat has already passed ten thousand mountains."

Turning the tables against the wind was never just a battle for startups. For the investors behind them, identifying the ultimate winner amid chaos has always been the eternal question.

As an early investor in Li Auto, Jui Chan shared his investment methodology with Deep Web. BlueRun Ventures invested in Li Auto across five consecutive rounds, and has also backed notable projects including Waterdrop, Guazi Used Cars, Qudian, Ganji.com, Monster Charging, and Gaussian Robotics. During the capital winter of the past two years, BlueRun Ventures raised 5.5 billion RMB in dual-currency funds to continue supporting early-stage technology innovation.

After new energy vehicles, where is the next trillion-dollar track in venture capital? How can early-stage funds survive and stay active through this winter? How should they tackle the fundraising challenge? Below is an edited transcript of Jui Chan's conversation with Deep Web:

The Next Trillion-Dollar Track

Deep Web: Among the new energy vehicle startups, BlueRun invested in Li Auto very early. Why?

Jui Chan: Success in new energy vehicles comes down to positioning and cost control.

From a positioning standpoint, if you're competing in the same segment as BYD and other traditional automakers, your rivals have supply chain advantages — some are even battery producers themselves — so their costs are lower than yours. You might have stronger new technology, but in the current environment that advantage can't yet manifest. And if you're competing against premium brands now, they have deep brand heritage; to differentiate you'd need to provide lots of services, which burns through cash.

Li Auto's positioning is clear and its cost control is strong. It targets families, and it's not purely battery-electric — the battery is relatively small, so costs are relatively low, and it can differentiate on interior space.

In first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, many families only have one car, so interior space is extremely important.

Deep Web: Tesla keeps cutting prices. What does this mean for the new vehicle startups?

Jui Chan: Why can Tesla keep cutting prices? Because its market is the entire global market. Vehicle manufacturing, like other manufacturing industries, is about economies of scale. If you can sell more cars, you spread fixed costs across more units, and gross profit contribution becomes very substantial.

Long-term, will Tesla use volume to kill off the "new vehicle startups"? I don't think so.

First secure the domestic market. Once volume comes up, Tesla's advantage won't necessarily be so pronounced. As the "new vehicle startups" further expand their domestic market share, they'll go international too. In the future, all the "new vehicle startups" have a chance.

Deep Web: Beyond new energy vehicles, are there still many trillion-dollar track opportunities?

Jui Chan: Robotics is one. Several robotics projects we've invested in are growing very fast — including ones in property services, cleaning, and semiconductor factory logistics.

Deep Web: Might new trillion-dollar tracks require longer cycles?

Jui Chan: Not necessarily. If certain elements are in place, growth can be very rapid. The growth in robotics, for instance, is connected to population aging. The key is to pay attention to the macro trend.

It's like surfing — some people have great technique but never catch the wave; others always manage to be on the wave at the right moment.

You rise and fall with the wave, so timing is crucial.

Deep Web: How do you catch the wave?

Jui Chan: Certain fundamental conditions need to be met. When we started looking at autos in 2015, first, China already had electronics and lithium battery production capabilities, and range had exceeded 300 kilometers; second, government policies were encouraging EV purchases — there were driving factors. If someone had called this a trend in 2010, but these elements weren't in place, it would have been very hard to form a major trend. Early investors need to learn to identify which are real trends.

Deep Web: Once you've identified the macro trend, which project in the track do you invest in?

Jui Chan: Companies with transformative technology. Only this can generate excess returns. The VC business, fundamentally, exploits information asymmetry.

The Joys and Pains of Hard Tech Investing

Deep Web: BlueRun has been investing in early-stage hard tech for many years. Why?

Jui Chan: Why did Silicon Valley create the VC asset class in the 1970s? Because semiconductor innovation tore open the world of computing and communications. The original purpose of VC was technology innovation. I'm an engineering guy who loves underlying technology; investing in hard tech is BlueRun's choice out of original purpose and genuine interest.

Deep Web: How has this space changed over the past decade-plus?

Jui Chan: The most important factor is talent. When I returned in 2008 and invested in some semiconductor companies, none became big successes — mainly because of insufficient talent reserves.

Now China's engineering workforce has gradually expanded and become more diversified. There are engineers specializing in AI algorithms, AI chips, and other directions; researchers across biological sciences and various disciplines; and many interdisciplinary talents. More and more young people are receiving good education and valuing research. Although domestic birth rates have declined in recent years, China is after all a large country.

I believe that at least through 2035, the engineer dividend can be sustained.

Deep Web: What's the logic and risk of investing in hard tech?

Jui Chan: Technology projects require substantial upfront capital investment, have long R&D cycles, and their productization and sales processes are considerably slower than internet applications — the growth curve is relatively delayed. That's the risk and challenge. But once its technology is accepted by the market, the barrier to entry is very high, and subsequent growth curves become relatively stable.

So investors need to understand the nature of projects, understand their risks — including the differentiation threshold of the technology, completeness of intellectual property, application scenarios, and input-output ratio. Additionally, it's very important whether your capital has sufficient patience, because hard tech can't be like internet companies where winners are determined in three years; it may take 5-10 years to truly see profitability.

Moreover, hard tech must be combined with application scenarios and commercial scenarios. The cleaning robots we invested in replaced cleaning workers and reduced costs. But this also took a very long time to figure out the right path.

Deep Web: How do you view the current capital market?

Jui Chan: I'm a relatively cautious person, but I hold a relatively optimistic attitude. The hard tech companies we've invested in — their revenue, business expansion are all normal, some are even growing. The only challenge during the pandemic was that fundraising was relatively difficult.

But after the pandemic restrictions lifted, they've announced new funding rounds one after another. If everything had dropped 50%, I'd be panicking too, selling stocks as fast as possible. But right now I feel the fundamentals are all quite good.

Deep Web: Last year BlueRun raised 5.5 billion for its dual-currency fund. Was the fundraising process difficult?

Jui Chan: Dollar and RMB fundraising are different.

For dollar funds, we need to convince dollar LPs: although China's internet dividend has disappeared, there's a new theme called hard tech, and China still has good assets; there are only two largest economies in the world, China and the United States, and if you don't invest in China, you're giving up a relatively large value creation opportunity.

For RMB funds, we have more market-oriented funds. Local government guidance funds hope that invested projects will land locally, helping create local tax revenue and employment. The fundraising difficulty lies in whether you can bring good projects to the locality, how to cooperate with them, and making them see the fund's value.

Deep Web: What do LPs expect from funds?

Jui Chan: To generate excess returns for LPs — at least 20% annual return. To create excess returns, you need to take greater risks, and you must be riding a major trend, because startups are all small companies. If you don't catch a major trend, it's very hard for them to become valuable companies in a short time, and thus impossible to help investors create greater value. And this major trend, I believe, is not the same as a "fad" — fads are too broad.

Deep Web: What's the gap between China's VC circle and Silicon Valley's?

Jui Chan: First, entrepreneurs need to approach building companies with a long-term perspective, not pursuing short-term targets. Second, more effort is still needed on innovation — but not innovation for innovation's sake, rather innovation driven by real demand.

One Step Earlier Than Early Stage

Deep Web: What has BlueRun mainly focused on this year?

Jui Chan: Simply put, three keywords: AI, globalization, and deeper empowerment of entrepreneurs.

Deep Web: The first one goes without saying. But more and more VCs are emphasizing globalization this year — what's the logic behind that?

Jui Chan: Technology has no borders. At the same time, Chinese companies and brands face the opportunity to stand on a higher stage and build more world-class products. So if investors want to capture major opportunities, they need to evaluate projects with a globalized perspective.

For entrepreneurs, when competing for opportunities worldwide, they also face stronger competition and get stronger training. Because if you can't achieve world-class status, it may not be that big an opportunity. Of course, when entrepreneurs have world-class R&D strength and confidence, "domestic substitution" naturally won't be a problem.

Deep Web: What about deeper empowerment of entrepreneurs? Traditional early-stage investing often didn't emphasize post-investment support.

Jui Chan: Fundamentally, it's because of the gear shift in the era of technology innovation. Technology innovation projects are different from internet projects — the 0-to-1 R&D phase is the hardest, the most "silent." Once they break through, they enter a "booming" phase of explosive prosperity.

Like when you ask me why Li Auto exploded so quickly — but people may still remember that before it found and truly captured its PMF (Product Market Fit), it also went through very difficult, lonely times. We hope to be a trusted friend to entrepreneurs at this stage, establishing different frameworks for thinking to help entrepreneurs better see opportunities and risks.

Deep Web: Is this the underlying logic of why BlueRun has always insisted on early stage?

Jui Chan: Let's first define: how early is early? Entrepreneurs may still be in the trial-and-error and exploration phase of their business; the business prototype may not be fully formed yet; they're still seeking their entry point. How do we select people and opportunities at this stage, how do we manage risk — we're relatively focused in this direction, and it's also where we ourselves find great sense of accomplishment. Discipline in investing is very important; our choice to focus on early stage is also a requirement we place on ourselves for discipline.

Deep Web: What are BlueRun's future challenges?

Jui Chan: I feel there are new challenges every day, every year. First, how to identify major trends earlier and faster; second, whether we can have an optimal investment team that matches those trends at every moment; third, as portfolio companies grow, whether we can exit in a timely manner before market conditions deteriorate.

Deep Web: Can this be attributed to luck?

Jui Chan: 30% luck, 70% professional judgment.

Deep Web: For entrepreneurs, money is money — there's no difference. How does BlueRun define its own personality?

Jui Chan: We don't chase fads, we only pursue truth, and truth requires curiosity and continuously improving your cognition to achieve. This is the requirement for entrepreneurs, and also the requirement for our team. Second, be sincere to entrepreneurs and the team — be open, speak your mind honestly. Don't hold back because you're afraid of offending someone or worried about losing out. These two are probably values I care about most. As long as investment decisions are based on truth, and you treat entrepreneurs and the team sincerely, whether the return is 10 billion or 1 billion, there may be an element of luck, but I believe there will definitely be good outcomes.

Deep Web: Who do you admire?

Jui Chan: Lee Kuan Yew. He was very forward-looking. Some people say Singapore can make money lying flat now. Lee Kuan Yew built a very good framework in the early years.

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Originating in Silicon Valley, BlueRun Ventures was established in 2005 and is a venture capital firm focused on early-stage startups. Currently, BlueRun Ventures manages multiple USD and RMB dual-currency funds in China, with assets under management exceeding 15 billion RMB, making it one of the largest early-stage funds domestically. Its investment stage focuses on Pre-A and Series A, covering technology, consumer, and healthcare sectors, with nearly 200 portfolio companies including Li Auto, Waterdrop, QingCloud, Guazi Used Cars, Qudian, Ganji.com, Monster Charging, Gaussian Robotics, Songguo Mobility, Yuntion Semiconductor, Machenike, Yunsheng Intelligence, Anxin Wangdun, BioMap, and others.

BlueRun Ventures has been ranked #1 on Zero2IPO's "China Top 30 Early-Stage Investment Institutions," #1 on ChinaVenture's "China Best Early-Stage Venture Capital Institutions TOP30," and was named to Preqin's Top 10 VC Fund Managers Globally for Sustained High Returns.

Additionally, BlueRun Ventures has received consecutive annual honors from Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, Jiemian, and other media organizations, including "China's Best Early-Stage Institution of the Year," "China's Top Venture Capital Institution," "Most Entrepreneur-Friendly Early-Stage Institution of the Year," and "Most Influential Early-Stage Institution of the Year."