The Unforgettable Series C Funding of Moonshot AI

@Zhiyan Chen

Lately everyone's been talking about DeepSeek's funding round — we'll get to that once it's finalized. Today, let's talk about Kimi.

Not long ago, Kimi announced a new funding round at a $20 billion post-money valuation, more than quadrupling its roughly $4.3 billion valuation from last November. But the real comparison worth making isn't against that Series C at $4.3 billion — after which, Kimi's fundraising went relatively smoothly. The meaningful contrast is with its $3.3 billion Series B completed in mid-2024.

Between $3.3 billion and $4.3 billion, a year and a half elapsed. In that span, Kimi faced successive crises: team members cashing out, an arbitration case, the Yutong Zhang controversy, its user acquisition spending spree, and the sudden emergence of DeepSeek.

It was arguably the darkest period for this star company.

Yet IDG ultimately appeared, entering as the lead investor. If the mark of a clever investment comes down to timing or size, this one was clever in both senses. It came right before dawn — or perhaps, it was precisely this investment that made dawn arrive faster.

elsewhere spoke with several people close to the deal. Here are a few stories from before and after this investment.

1

Many people know the history between HSG, ZhenFund, Monolith, and Kimi; and because of Yutong Zhang, Kimi raised without a financial advisor. But one key figure in this round was Kathy Xu of Capital Today.

In Q3 2024, Kimi was still sitting on the round led by Tencent and Gaorong Capital, having gone more than a year without fresh funding. It was then that Kathy Xu urged Zhilin Yang: you need to get out and raise.

A person close to Capital Today told me that Kathy Xu's judgment rested on two points. First, foundation models are a high-stakes game where massive capital bets on a massive future, and money is the chip that keeps you at the table. Second, Kimi had just released its K2 model, the world's first open-source Agentic Intelligence large model — technically, it could still compete.

At the time, Kimi's management had a psychological target of $500 million for the raise, but Kathy Xu believed that wouldn't be enough.

Even within Capital Today, there was disagreement about Kimi. Especially from the secondary team's perspective: did the numbers work? This round valued Kimi at roughly $3.8 billion pre-money, yet revenue was essentially negligible.

Reportedly, Capital Today's check size alone was insufficient; the lead needed deep pockets.

There was even a suggestion that Capital Today proposed finding a lead to put in $800 million, for a total raise of $1 billion.

"Because you need to burn big money, maybe, to have a shot at training the next milestone. If the raise is too small, the odds aren't there."

This story has echoes. JD.com was similar: when Richard Liu tentatively asked Kathy Xu for $2 million, she said $2 million wasn't enough — you need to build warehouses, fight price wars — and gave him $10 million.

Indeed, half-measure funding may be worse than none at all. If you're going to bet, push your chips to a height your rivals can't match.

But the question remained: who would put up that $800 million?

2

Before the story continues, a question worth answering: why was Kathy Xu so invested in Kimi?

A detail many overlooked: Capital Today was Kimi's first-round investor. But many were misled by the false rumor that "Sister Xu had exited the primary market," leading them to underestimate Capital Today's AI bets. Beyond Kimi, Capital Today has invested in Sand.AI, Zhipu AI, Xinghai Tu, Vbot, and others.

In mid-2023, when Zhilin Yang met Kathy Xu, he had already seen several investors, but few who could decide on the spot. Kathy Xu moved quickly.

Two small stories here.

A partner at an FA firm told me he met Kathy Xu one day in 2023. It was in Hong Kong; she appeared at 10 a.m., visibly tired. Only after talking did he learn that the night before, she had been working until 4 a.m. on the co-lead investment terms for Kimi. "Of course, Neil Shen was the same." (That round saw joint investment from Capital Today and HSG.)

At the end of 2024, when Kimi faced a crisis over historical issues, the team briefly considered yielding equity to settle matters. But Kathy Xu firmly told Zhilin Yang not to.

She believed they couldn't just pay to make the problem go away. Yang had already compensated former shareholders; subsequent issues should be left to lawyers. The Hong Kong lawyer Kimi hired for the arbitration case was also introduced through Kathy Xu.

Of course, in trying to resolve this dispute, Monolith's Xi Cao and others also played important roles. More on that another time.

According to elsewhere's understanding, until Alibaba Cloud's major investment, Capital Today was among Kimi's largest financial investors by ownership.

3

Back to the $4.3 billion Series C.

At this point, Alibaba was already Kimi's largest shareholder, and few dollar-era mega funds remained. Who else would be interested?

Kathy Xu first aimed at Tencent, personally calling Martin Lau.

Tencent was already among the Series B leads for Kimi, and with its foundation model efforts clearly trailing ByteDance and Alibaba, it quickly decided to invest. For a time, rumors of Tencent investing in Kimi's Series C stemmed from this. But a person close to the deal told me that Alibaba, as major shareholder, exercised veto power at the board level, stipulating that Tencent could only follow on.

This wasn't hard to understand. Alibaba was clearly wary of Tencent reaching into its compute territory and carving up quality model assets. Even during Tencent's Series B lead, Alibaba had exercised super pro-rata rights to protect its stake.

Kathy Xu then turned to Hillhouse's Lei Zhang. Reportedly, Zhang was willing to put up the $800 million. But it ultimately didn't happen.

The lead position hung empty again. Then IDG stepped in.

For IDG, going heavy on Kimi was hardly an easy call, especially with MiniMax having just confidentially filed for a Hong Kong IPO.

As early as early 2022, IDG had co-invested in the MiniMax team alongside Hillhouse and others. Through late 2023, IDG also participated in StepFun's Series A. But for a player of IDG's size, this allocation was still insufficient.

Regarding the decision-making behind IDG's investment, I asked numerous relevant parties without getting clear answers. IDG itself chose to stay low-profile.

In any case, after weighing options, IDG ultimately didn't provide the hoped-for $800 million, but did meet Kimi's psychological threshold — $500 million.

The most critical funding round was thus completed. Kimi's fundraising story became relatively smooth after that.

elsewhere also understands that several family offices participated in Kimi's subsequent funding rounds.

4

A brief elaboration.

China's two mega VCs — HSG and IDG — formed a kind of symmetry in their pacing on Kimi and MiniMax.

HSG invested in Kimi first, then MiniMax; IDG did the reverse, MiniMax first, then Kimi.

Though HSG had looked at MiniMax early on, it didn't push forward. By mid-2023, at the delicate window when ByteDance abandoned its MiniMax investment and Hillhouse had completed three rounds of super pro-rata execution, HSG moved decisively, leading MiniMax's $50 million Series A+ and pushing its post-money valuation to $1.6 billion.

A small aside: perhaps as compensation for earlier hesitation, Neil Shen had promised Junjie Yan that MiniMax would be the Chinese model company where HSG deployed the most capital in absolute terms. This was part of what moved Yan.

Ultimately, among the "Six Little Tigers" of foundation models, HSG invested in four, excluding only Baichuan and 01.AI. When Zhipu AI and MiniMax filed for IPO, elsewhere wrote about how high HSG's bar actually is.

An investor told elsewhere that HSG's logic for foundation models runs something like this: bet broadly early on, but don't invest in people who came up through the mobile internet era.

When news broke recently that 01.AI was planning a Hong Kong IPO, elsewhere inquired about the situation. The official response was a long message, one sentence of which read: "Following the announcement by the Embassy of Kazakhstan in China that President Tokayev once again met with Dr. Kai-Fu Lee to discuss expanding AI cooperation, 01.AI's global expansion is accelerating."

I wasn't quite sure how to respond to that.

For IDG, meanwhile, the Kimi investment does have something of a masterstroke quality to it. When the day comes that it can be revealed, we'll see how IDG tells the story.

That's all for now — just a small slice of Kimi's funding story. But the intellectual effort, maneuvering, and conviction displayed by the investors involved are vividly apparent.

The stories of Kimi with its other investors — Alibaba, Tencent, Monolith, ZhenFund, Gaorong Capital, Huiwen Wang, and others — for next time.

Cover image: La Tour, The Cheat with the Ace of Clubs, 1634, Preston Park Museum