Dalton Venture's Sun Qi: Mid-Game Mastery Goes to Those Who Adapt

"It is the winter of despair, and also the spring of hope. Our tomorrow depends on the convictions we hold today, and on the attitude with which we face reality."

As winter's chill sweeps through capital markets, some choose to hibernate, while others press forward with lanterns in hand.

Recently, Dalton Venture founding managing partner Sun Qi shared his insights on the current investment climate and future trends in his keynote address at Dalton's 2024 Annual Partners Meeting. He argued that amid tight capital resources and complex international relations, investors need to adopt bottom-line thinking and quickly adjust their mindset and strategies to adapt to the new normal. He also emphasized that investors should stay grounded, focus on specific industries or companies, tune out market noise, and make their own judgments. On internationalization, he stressed that companies should orient themselves toward globalization, using global resources to hedge risk — but must never abandon China's home-market advantages. The more difficult the times, Sun advised, the more investors and entrepreneurs need to adapt nimbly, iterate continuously, and strengthen execution — to become the "last ones standing."

ChinaVenture, Rongzi China, SINA Corporation, Phoenix Network Finance, and other media outlets reported on the speech. Below is Dalton Venture founding managing partner Sun Qi's sharing and reflections from the 2024 Partners Meeting. The article is edited and condensed from the speaker's remarks:

PART 1

Mid-Game Chess: Those Who Adapt Prevail

It has been six years since Donald Trump launched the trade war against China in 2018. Across the Trump and Biden administrations, China and the United States will likely face another 10–15 years of strategic stalemate — like two evenly matched chess players, neither able to gain decisive advantage quickly. This means for the foreseeable future, we will all face issues of international environment and resource allocation. It means we need bottom-line thinking and must view problems from the nation's perspective. This is the fundamental judgment.

With resources tightening, many companies and investment institutions won't survive. Some will choose to lie flat — it's too intense, too hard. Some will go for broke, because they can't see the road ahead. I'd suggest something more moderate: neither passive nor aggressive, just endure. Don't complain — it doesn't help. The weak complain; the strong adapt. Rather than complaining about the darkness, carry a lantern and walk forward. The weak seek retreat; the strong find a way out. Adapt quickly to the new normal, because those who don't will fall.

Mid-game chess: those who adapt prevail. Outlast your opponent's mistakes. Endure until victory comes. This applies to nations, and to us. We suffer, but others aren't having it easy either. When it comes to endurance, what nation is more resilient than ours?

PART 2

"Crossing the River by Feeling the Stones" in a New Era

Carl Jung said: If the path before you is perfectly clear, you're probably walking someone else's road. The rise of a nation of 1.4 billion people is likely a path no one in human history has taken, so it's normal that our way forward isn't clear. What to do when it's unclear? We can't stand still. So we use the old method from the early reform and opening period — crossing the river by feeling the stones.

Some say: If you don't go global, you're out. Others say: Not going global is waiting to die; going global is rushing to die. So go or not? And how? In my view, don't overthink it. Take small steps abroad — stabilize each step before taking the next. It's fine if one or two steps go wrong; step back and start again.

Based on your own capabilities and strength, first stand firm domestically. For internationalization, observe before acting, watch more and move less. When the river runs swift, find easier crossings — Southeast Asia, for instance, China's backyard. Or find a walking stick for support; going global can mean finding partners. This applies to companies and to funds alike.

PART 3

Focus on Your Feet

On August 19, 2010, I summited Kilimanjaro.

Many know that before founding Dalton, I spent several years enjoying outdoor sports. The most important thing in mountaineering is: don't look at the distant peak or the nearby cliff — they'll make your legs weak, drain your confidence and courage. Just look at your feet. Don't step on loose stones and twist your ankle. Follow your breathing rhythm, one-two-one. The Tanzanian guide called it "polypoly" — move step by step, don't stop, and don't fall.

We started our summit push at midnight. Woke up, drank some coffee to sharpen up, set out from the 4,000-meter camp under a sky full of stars — so bright, twinkling. Our headlamps only illuminated two meters ahead. I knew two meters beyond that was a cliff, but what you can't see doesn't scare you. We rested once midway, drank some glucose for energy. At seven in the morning, facing the sunrise, we stood on Kilimanjaro's highest peak, now nearly bare of snow.

Investing is the same. Don't worry about the entire country, or the A-share or Hong Kong market indices. Just focus on specific industries and specific companies. We don't buy indices; we invest in individual sectors, individual projects. Walk each step well beneath your feet, and dawn may bring the summit. Kilimanjaro has several routes to choose from; we have only one path before us now. Just move your legs and walk.

PART 4

Internationalization

To hedge against China's economic slowdown, don't shrink the numerator — expand the denominator. The most successful Chinese companies of the future will not be import substitutes, but internationally oriented.

Over the past year, we've all felt the chill in industries around us. To hedge against China's economic slowdown, only globalization — or more precisely, internationalization — will do. In 2021, Singapore's richest person, Goh Cheng Liang of Nippon Paint, saw his company continue growing, with China business still expanding (albeit in single digits), yet its market value fell to one-quarter of its 2021 level. The reason: China business accounted for 35%, and overseas investors didn't like it. Beyond geopolitical preferences, there was also the factor of China's slowing growth. He said he had no choice but to expand the denominator to reduce China's share.

This point is crucial: not shrinking the numerator means that while internationalizing, we absolutely must not neglect or abandon our home country and home-country advantages. Start from your advantages in China, create incremental growth in target countries, and don't touch existing interests first. For example, saturated vaccines in China can go to Indonesia, radiating across Southeast Asia.

PART 5

China's Advantages

In today's environment, we need optimism. We need to find advantages and give ourselves confidence. On China's advantages, I have three observations:

01

Talent Advantage: The Engineer Dividend

The national education philosophy is shifting, driven by technological development and national strategic needs. Education will transition from generalist cultivation to selecting and elevating the exceptional, solving the talent problem for innovative technology — in plain terms, cultivating specialized engineering talent.

National competition ultimately comes down to talent competition. The adjustment in national education direction is timely, correct, and resolute. The source of technology is education, and education's soil is changing.

02

An Unprecedentedly Favorable Research Environment

Scientists are receiving unprecedented respect and attention. Government R&D investment keeps hitting new highs. The research system is making a difficult transition toward commercialization and application. Scientists' entrepreneurial enthusiasm has been encouraged as never before.

We all know that what determines a nation's long-term competitiveness is technological progress. The United States maintains its lead because its technology remains ahead. One view holds that China's economic achievements over the past 40 years, seen through economic theory, were not a miracle but mainly the result of sustained high-intensity factor input — not substantial productivity gains from technological innovation and progress. But now such high-intensity factor input has finally hit a bottleneck. So we turn to technology for productivity. Technology investment gradually producing results takes time, patience, and persistence. With limited resources and capital, we concentrate forces to accomplish great things. Biomedicine is among those great things.

03

A Fiercely Competitive Business Environment

Talent forged among 1.4 billion people, products with costs driven to the extreme in perhaps the world's harshest business environment — take these abroad, and they dominate globally.

PART 6

Investment

Domestic investment must prioritize alignment with national strategy and the alpha of specific sectors.

Objectively speaking, many industries no longer offer alpha, but certain sectors still have their beta. Humanoid robotics, embodied intelligence — such tracks remain very hot, sought after by capital, with valuations rising rapidly. Domestically, what we must do is align with national strategy and find sectors that still offer alpha. It may get harder and harder to unearth, so we must dig deep enough.

International investment, meanwhile, needs to be market-driven, oriented toward the business itself making money.

PART 7

The Last One Standing Wins

In an environment of great change, maintain iterative capability and strengthen execution.

Returning to my speech title today — the last one standing wins. This year, there has been no shortage of voices singing the decline of the primary market, of finance, of venture capital. I'd say: everyone faces the same difficulties. Strive to outrun your peers, be slightly stronger across all dimensions, and you may become the one who remains.

Respect common sense: sell when it's high, don't be greedy; buy when it's low, don't worry. Tune out market noise and make your own judgments.

Beyond market economics, study some political economics. Befriend public policy and international politics experts. Talk more with officials. Understanding policy, understanding trends, getting the timing right — this matters more than ever.

Finally, I'd like to close with words from a founder we invested in, spoken at this meeting: "It is the winter of despair, and also the spring of hope. Our tomorrow depends on the convictions we hold today, and on the attitude with which we face reality."

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