Starting with Five Investments in Manus Founder Red Xiao: A Conversation with ZhenFund Partner Yuan Liu on How Reading People Evolves

Since Manus launched in March, the entrepreneurial journey of its founder Red Xiao and the story of Yuan Liu, a partner at ZhenFund and its earliest investor, backing him through multiple rounds have drawn considerable attention. Late last year, we recorded a podcast episode with Red Xiao on the tenth anniversary of his founding (held back from release for certain considerations), and we also invited Yuan Liu to speak at a "Crossroads" event about investing in Manus.

This week, we sat down with Yuan Liu for a recorded conversation in which he detailed the story of his five investments in Red Xiao, while also sharing his career arc as a ZhenFund partner — from starting out at a VC fund-of-funds, to joining ZhenFund in 2014, living through the mobile internet cycle, evolving from "looking at everything" to gradually refining his understanding of investing and evaluating founders at several pivotal moments, what happened at each, and his own takeaways.

In this episode, you'll hear from an investor's perspective the twists and turns in Manus's development, its strategic choices and strategic abandonments, and you'll see how an early-stage investor, having lived through cycles of highs and lows and met countless founders, reflects on investing and reading people. We hope you find it valuable.

🟢 Part One: The Story of Five Investments in Red Xiao

03:10 — Recently met Bob Xu and told him the Manus story

06:20 — Yuan Liu looks back on five investments in Red Xiao: first meeting at a hackathon

07:24 — First investment in Red Xiao: put in a small angel, got back a big angel

08:27 — Red Xiao's second startup, continuing in tools: building a China-version Benchling, angel round investment (the first check from Butterfly Effect)

09:25 — Third (Butterfly Effect's second check): pivoted to ChatGPT for Google — the precursor to Monica

13:51 — Fourth (Butterfly Effect's third check): Monica.im, with HSG, Tencent, and Huiwen Wang coming in

14:55 — Fifth: experimented with building a browser on Monica's commercialization path, never launched it, then released Manus

18:23 — The story of how Koji met and invested in Red Xiao

21:49 — Facing a founder who kept pivoting, did you ever have doubts?

23:57 — Each pivot wasn't because things weren't working, but because he saw something bigger

25:24 — What signals along the way gave investors more confidence?

🟢 Part Two: Yuan Liu's Career as an Angel Investor

26:37 — Before joining ZhenFund, worked at a US-based VC fund-of-funds researching the landscape and stories of domestic VC firms

28:23 — Returned to China in 2014 to join ZhenFund, as the value of star mobile internet companies became clear

29:40 — "At the time, I hadn't yet developed such a deep awareness of so-called trends and waves"

31:01 — Invested in 26 projects in 2016; looking back, much of the thinking was wrong

33:00 — "I've always believed in logic, but I don't believe in the deduction of business logic"

35:05 — People are harder to change in business; early on, crudely assumed that someone who succeeded before would succeed again

36:28 — How understanding of "reading people" evolved, mapped against time

38:10 — In the beginning everyone was feeling their way; early assumption was that the most impressive people were top-school graduates

41:25 — Also followed personal interests in looking at investment opportunities, checking out everything

44:45 — Starting in 2018, sought out founders who had left ByteDance: but if a ByteDance exec is impressive, is it them or is it ByteDance?

46:29 — Starting in 2022, focused time on young founders and serial entrepreneurs

46:38 — Skilled at identifying dark-horse founders

49:23 — Junjie Zhang of CHAGEE, Ning Wang of Pop Mart, Xingxing Wang of Unitree — what do they have in common?

50:43 — Should understand founders more "bottom-up"

53:54 — "All my efforts have merely completed an ordinary life"

54:31 — Invested in some people who were "watertight in business negotiation" rather than founders with a rough, unpolished texture

55:16 — Now more able to embrace "rough-edged" founders

🟢 Part Three: Investing in the AI Era — How to Back the Next Star Founder?

56:47 — How the industry's view of the investor profession has changed; the need to stay clear-headed

01:00:22 — The best VCs must have directly participated in building great companies to have a good playbook

01:02:50 — "I think the market is at its best right now"

01:03:46 — Chinese founders can already at least hold their own against American founders, but investors haven't caught up

01:04:28 — The biggest mistake in positioning yourself for AI-era opportunities is missing out, not making a wrong bet

01:05:59 — Using workflow mechanisms to ensure you don't miss out

01:08:51 — Much of the time, positive feedback is false or temporary

01:12:37 — What do AI-era founders need, and how can investors keep up?

01:14:11 — Hope for a holy-grail-like standard that works in any domain; hard to say if it's been found today, but some things don't change: courage, the spirit of adventure, sensitivity and insight toward opportunity, ability to execute

01:17:02 — Don't worry about problems that haven't emerged yet

01:17:35 — Not something that keeps me up at night, but something I often think about: projects I saw but didn't invest in

01:19:14 — What mistake might be being made right now? Aesthetics and standards have risen today, but tolerance for error has decreased

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🚦 Crossroads is Steve Jobs's metaphor for Apple — standing at the intersection of technology and liberal arts, where great products are born. AI is transforming industries across the board. We seek out, interview, and bring together a new generation of AI founders and active participants in the AI era. Together with them, we explore and embrace the new changes, the new possibilities.

👦🏻 Host Koji: I co-founded Jiepang / The Fair / Tangdao, and launched AI Hacker House, a community space for a new generation of AI founders. I believe technology, especially AI, represents the greatest value-creation opportunity of our generation. Feel free to reach out to chat, bounce ideas, and connect on what's next. Koji on Jike, Koji's website

👧🏻 Host Ronghui: I've worked at a dollar-denominated VC and spent five years as a Silicon Valley correspondent, following tech development and business stories. Feel free to reach out to chat and exchange thoughts. Ronghui on Jike

🎄 This podcast is supported by The Fair's Sound Forest Podcast Initiative.