No More 2020-Too, a Hopeful 2023 — Linear Capital's 2022 Year in Review

2022 was a difficult year for many, and the venture capital industry was no exception. Linear Capital has long been bullish on the future of AI-industry integration and digitalization, but in 2022, uncertainty increased, and even tech investment — long seen as "an oasis in the desert" — was not immune to pessimism. According to data from IT Juzi, both the number and value of investment deals in China's new economy declined for two consecutive quarters in the first half of the year, and transaction activity remained subdued after the third quarter. Investment firms were more conservative and cautious than in the past. When the iceberg melts, every coastline suffers.

Faced with such a complex environment, many investment firms adjusted their strategies accordingly. From Linear Capital's perspective, we established our conviction from day one: technology is the primary productive force, and we remain committed to tech investing. Whether it was years ago when tech investing didn't command the attention it does today, or the past two years when it became so white-hot that people switched careers to join the frenzy, or this past year when many of those same people left — these cycles of "cold" and "hot" don't change our strategy: We firmly believe in the value of tech investing, particularly in how original technology will transform industries. It will undoubtedly be the biggest engine of China's future development. Everything we did this year revolved around this belief and investment thesis. By year-end, we tallied the numbers: in 2022, Linear made 22 new investments and 23 follow-on investments, with total deployed capital across USD and RMB funds at roughly $100 million — maintaining our pace and velocity even as the overall industry slowed. While many peers saw their deal counts and capital deployed effectively "halved," our own pace dropping by 30% only underscored our confidence in China's future. We may not agree with every top-level policy decision, but we believe in the people of this land — the smartest, most diligent, most courageous, most resilient, and absolutely most "juan" (intensely competitive) people in the world. We've seen plenty to disappoint us, but we believe that extremism must eventually reconcile with reason, and China will return to normal; just as through all the "most perilous moments" of the past 100-plus years, the country has always found its way back to a rational course.

As in years past, we've organized Linear Capital's milestones and reflections chronologically.

January

Linear's seed investment Lightin Tech launched its general-purpose consumer AR glasses Lightin Me and the HandPlus interaction module. Yimu Technology, which uses AI to advance smart ranch management, had its solution selected for the China Smart Livestock Farming Guidebook and won multiple startup competitions — another representative case of frontier technology landing in industry, exactly what Linear Capital cares most about. Internally, we hosted an OpenHouse at our new office before the Spring Festival, inviting portfolio companies to come by. We wanted this office to be more than a workplace — a bridge for fostering connections among our companies.

February

Three of Linear's seed investments — Heywhale, which combines PLG and community models, Guandata, focused on data analytics and business intelligence, and Hongjing Drive, a leading full-stack autonomous driving solution provider — each announced new funding rounds. Additionally, cloud-native RPA vendor Yunna Technology completed two rounds totaling tens of millions of RMB within six months, with Linear Capital leading the Pre-A round.

March

ACXEL, a digital microfluidics platform where Linear led the seed round, and Hebin Intelligence, an ultrasound robotics company, announced Pre-A+ and Pre-A rounds respectively, with Linear continuing to support both as an existing shareholder. Simulation industrial software company Shifeng Technology announced Series A and A+ rounds, with Linear participating and remaining bullish on the future of domestic simulation industrial software. Boolv, focused on AI-powered and data-driven video generation, also completed two rounds within three months, with Linear participating in both.

April–May

Shanghai, where Linear is headquartered, entered a two-month lockdown, and all our work moved online. Linear's seed investment Lumitrix Life Sciences, an AI proteomics company, and mobile robotics firm Jexecho each completed seed and Pre-A rounds over several months, with Linear supporting early and adding to our positions in subsequent rounds. eVTOL innovator WEFLY and commercial design AI planning solution inCreate each announced seed rounds with Linear's participation. Earlier investments Sensors Data, a big data analytics and marketing technology service provider, and computer graphics engine company Gritworld announced Series D and B+ rounds respectively during this period. Confined to our homes for two months, we still managed to issue 5 new term sheets.

During this period, we also did our best to practice "disaster" management for our team and portfolio companies. First, we had portfolio companies assess their burn rates, runway, and optimization potential. Second, during the worst logistics shortages, we managed to deliver food packages to all our Shanghai-based employees and portfolio company founders. Third, we maintained regular services and support — hosting 9 online events over those two months, covering topics from pandemic-era HR management to capital market shifts. We wanted our portfolio founders to know that whether they needed serious advice or just "psychological massage," we were always "on" the line.

What moved us was how many of our companies found ways to visit customers through the cracks of rigid lockdown policies, pushing their businesses forward with everything they had. Seize every opportunity available; create opportunities where none exist — including stories of climbing walls and hiking over back hills (best not elaborated here). Most portfolio companies still achieved 20–50% revenue growth for 2022 (30–70% below original targets).

We were also acutely aware that USD and RMB fund LPs were eager to understand how our fund and companies were faring under these exceptional circumstances. We proactively reached out to most institutional LPs, held several LP update calls, classified portfolio companies by operational health (red/yellow/green), and summarized the short- and long-term impact on fund performance. We repeatedly communicated our stance: short-term caution but long-term optimism for China's tech entrepreneurship, explaining our continued "selective cherry-picking" of the best opportunities and the thesis behind it. Our "in China, for China, long China" philosophy remained unshaken.

June

AI frontier technology company Mindverse and metaverse company Qiyihuo Technology, which offers integrated solutions for trusted digital asset minting, programming, and virtual space construction, announced seed rounds with Linear's participation or lead. Mindverse builds on the convergence of neuroscience and AI to create original digital minds with autonomous consciousness and reasoning capabilities; Qiyihuo provides NFT-as-a-Service to brands and enterprises at low cost and high efficiency — both key investments in their respective domains for Linear. Additionally, Agricx, a smart crop decision-making service where Linear led the Pre-A, announced Series A and A+ rounds with Linear continuing to add support.

After Shanghai lifted lockdown, we quickly returned to normal operations. Of course, with the "after-effects" of prolonged confinement, many colleagues immediately left Shanghai and embarked on 30–60 days of "revenge travel," doubling up on missed meetings. I personally visited 13 cities in 56 days, catching up with portfolio companies and friends I hadn't seen.

July

As the Series A lead, Linear continued to participate in the A+ round of marketing technology company Jingshuo Technology. Despite the pandemic's impact on venture capital, Linear still made new investments in Yumeibo Biotech, focused on gene editing and exosome technology; Biosysen, a synthetic biology company specializing in species design and application; and Guoguang Shunneng, which uses new energy vehicle technology to build safe, efficient MPS mobile energy products — marking Linear's expansion into life sciences and energy storage. Additionally, YuanYe Technology, which Linear had seeded in 2019, completed three years and seven months of R&D to launch the world's first muscle exosuit — a wearable robot that enhances muscle performance for people with movement disorders, helping them complete physical movements more stably, easily, and accurately.

August

Linear led the seed round of zero-trust access management cloud platform Feiyue Cloud. Additionally, earlier investments Semaitech, an AI middleware company for video intelligence analysis and spatiotemporal data management; ThinkingData, a game big data analytics service; and Baoxiaohe, an online 3D packaging design and printing platform — each announced new funding rounds with Linear's continued support.

On the portfolio services side, beyond regular programs like "Linear Academy," we launched the "Linear Fellow" initiative in May — inviting young scholars from overseas universities and tech industry practitioners to use Linear's platform as a bridge for regular technical exchange. After launching the program, we received over a hundred inquiries and applications. Following two months of interviews and discussions, we confirmed the inaugural cohort and officially kicked off this year's Linear Fellow program.

September

Linear led the Pre-A round of Zhongtu Shiren, a sensitive data access control security vendor, and continued to support follow-on rounds for previous leads Lure New Materials, a materials and temperature-control solutions company; Zion, a no-code cloud IDE; and Yunna Technology. Other portfolio companies also announced product updates: Agile Robots launched its "Agile Core & Diana" product series, and ThinkingData released its next-generation game big data engine.

In late September, while meeting LPs visiting Asia in Southeast Asia, I got an early experience with Omicron. I probably caught the "mild strain" — tested negative in 4 days, peak fever of 37.7°C, only one day of low-grade fever, basically no other symptoms. Hot baths every day, appetite totally fine, though the cough lingered for over a month after recovery. Looking back, I was pretty lucky 😅.

October

We led the seed round of database startup Chengzhang Data. To better explain our investment thesis and share our tech investing stories more broadly, we used this investment as a case study to produce the "L-Series" video series, hoping to regularly share portfolio company stories and help more people understand Linear's approach to tech investing.

November–December

Toward year-end, many Linear portfolio companies shared product updates. AI frontier company Mindverse released its new AI character generation engine MindOS, pushing AIGC from content generation toward creating digital life. Guandata held its online intelligent decision-making summit and product launch, releasing "Guandata One-Stop Intelligent Analytics 5.0." Intelligent ultrasound robotics company Hebin Intelligence developed a world-leading 7-DOF force-controlled intelligent remote ultrasound robot, which passed medical device product inspection at the Medical Device Inspection Institute by mid-2022. Yunna Technology released an intelligent document recognition platform to accelerate logistics document automation. Lingshu Intelligence, which builds cloud-native SaaS technology that abstracts advanced management systems into digital product "combos," participated in standard-setting for the Ministry of Industry and Information Technology's SME Digital Transformation Guide, issued for manufacturing enterprises, digital transformation service providers, and local government departments.

December finally brought the long-awaited reopening, though at a speed and scale no one anticipated. I remain firmly convinced that based on the extensive global Omicron data since late last year, reopening was net positive for society as a whole. In this situation, earlier reopening was better than later reopening (compounding positives vs. accumulated negatives). Reopening certainly had costs, but "whether to reopen" and "how to reopen" are two different questions. The answer to the former was beyond doubt given the objective reality that the economy couldn't sustain closure; the answer to the latter is now moot and left for history to judge. For a ruling party with absolute control, making a difficult but correct change at a critical moment — one that follows (the majority's) popular will, respects economic laws, and acknowledges the objective physical reality of the virus's relatively milder mutation — is no easy feat. I remain confident in our government — I supported the zero-COVID lockdowns of 2020 and 2021, and I support the reopening decision of late 2022; on matters of fundamental importance, our government can seek truth from facts and make the right big decisions. Execution can certainly improve, but right now the most important thing is to help each other and cross this river together. At the same time, we shouldn't negate the early successful containment due to temporary chaos from rapid reopening — judge everything by final results.

Linear grew from 19 people at the start of 2022 to 22 today through optimization and new hires, expanding against the trend (by the way, we're still hiring). Currently, aside from 2 "chosen winter yin workers" (those who somehow never caught COVID), everyone else has been through it. The process was unpleasant, but no one had severe symptoms.

Due to space constraints and confidentiality needs of certain portfolio companies, we've only listed a portion of our 2022 new and follow-on investments here. We hope this gives friends who care about Linear some intuitive sense of: what Linear cares about, what Linear persists in.

Key Takeaways from 2022

• You can never rationally predict the future — you need logic, plus conviction

Friends who have attended Linear's internal sharing sessions know that after the Shanghai lockdown, we predicted that COVID restrictions across China would tighten further — but not to the extent they did. In mid-October, we predicted that China's zero-COVID policy would inevitably loosen, but not with such abruptness and speed. Our directional calls on the macro trend were correct, based entirely on common sense and reason. Yet the magnitude and velocity often only make sense in hindsight, through the lens of "China characteristics"...

But the hard part is knowing what to do beneath your own thesis. Getting it right but acting wrong is useless. The old internet playbook of野蛮增长, reaping wildly, is history. The era of earnestly and solidly making hard money through technological innovation has arrived. From our observation, the vast majority of tech entrepreneurs we care about remain confident in the China market. They kept working through this bumpy year — a confidence grounded in the market's future and in the Chinese sense of家国情怀. As long as we still have kindred spirits, we have reason to be confident in the future.**

• "Crisis" is always just "danger" for many, but for a select few it is also "opportunity"

In conversations with many founders, most have shown the resilience and conviction to weather the economic downturn, seizing the moment to optimize operational efficiency, cut costs, and hoping for a rebound once the government relaxes pandemic controls. I share their optimism. They are not only the most innovative people, but also the best at catching fleeting windows of opportunity under shifting COVID policies. Linear is no different. For new investments we're evaluating, valuations for high-quality startups are roughly half what they were 12 months ago. And from what we see, project quality in 2022 is markedly higher than in the capital-frenzied 2021. Our read: in the worst periods of the capital markets, only the most exceptional people dare to leave their jobs, start companies, and successfully raise funding. And if we believe — and we do — that China will ultimately get through this cycle, this may be one of the best historical opportunities to bet on China's finest tech startups at prices far below normal. The only way to survive cycles is to hold the best assets at the best prices, at the earliest stages. We've also changed how we invest: when we back a company, we do so with the intention of supporting them for at least three rounds (until proven unworthy). This raises the bar for our initial investment decisions, but I believe this is the right adaptation for difficult times. We know many peers hold pessimistic views of the macro environment and have slowed their investment pace considerably. This is a normal, understandable reaction. But "being correctly pessimistic" is pointless. It wastes the "opportunity" that crises create. We strive to be "cautiously optimistic and correct," betting on the most resilient and capable founders, working alongside them to help them sail through turbulent waters ahead. Conviction only becomes truly precious in difficult times.

• "Being adaptive & being persistent" is the only rule for survival and growth

In this VUCA era of "great change," many things have become Volatile, Uncertain, Complex, and Ambiguous. Being ready to improve, ready to admit mistakes, ready to iterate is a required mindset. Who at the start of 2022 could have imagined that by year-end, so many excellent Chinese concept stocks would have fallen 80-95%? Those who tried to guess right and act right in one shot have likely been battered black and blue over the past three years, and plenty have folded and left the table. But if you can constantly observe this changeable era — after all, there are many external factors beyond our control, such as US-China decoupling, US delistings, COVID lockdowns, policy adjustments, market sentiment, and so on — and make necessary changes, there is at least a fighting chance, rather than being complacent and hoping for a one-time fix. But if everything changes, you can never accomplish anything great. What should not change, what requires being persistent? That is the original intention behind doing something, the vision behind doing something. We have seen many entrepreneurs who hoped to use frontier technology to transform the backward state of certain industries, who did not change their original intention through ups and downs, though they may have adjusted execution strategy — for example, using a "more money" approach when capital markets were strong, and a "less money" approach when they were weak. As long as the underlying logic of industrial upgrading has not changed, there is no reason to give up due to macro shifts beyond individual control; the better path is to adopt pragmatic tactics to "cross the grasslands and climb the snow mountains," while keeping the "revolutionary original intention" unchanged. It is this resilience and pragmatism, seen in the best entrepreneurs, that gives us firm confidence in Linear's pursuit of supporting the best frontier technology to improve industrial efficiency and realize industrial upgrading as an epochal opportunity. We will continue "being adaptive & being persistent."

• Confident but respectful of luck, and staying humble

It must be said that Linear was relatively at ease in 2022, in large part because we completed a $500 million new fund and over 400 million RMB first close at the end of 2021. This owed much to luck. Had we dragged into March 2022 or later, regardless of how excellent or confident we were, the fundraising difficulties caused by dollar LPs pausing China investments would have been a universal problem — one that will persist at least until mid-next year. Do all you can first, then accept heaven's will; revere the unpredictability of the world, yet remain actively and stubbornly resilient; as long as you stay in the game, there remains a chance to "make a comeback" — this is one of our profound realizations from the past year. When things go well, be confident but not arrogant; when they don't, still be confident but not regretful. Either way, a little humility helps.

• Life is short. With a small number of people, do a large number of things

Some people say goodbye, and it really is forever. It's hard to imagine that many friends I met abroad in 2019, including many LPs who strongly supported us, would not be seen again for three years. I've also seen, though not many, peers in my social circle who, facing the unpredictability of the pandemic, passed away before their time. Since life is short, why not in limited time work with some of the best people on things that are big enough, hard enough, and meaningful enough? If an entrepreneur hopes to earn their first bucket of gold through startup, be content with modest wealth, and take the safe route — why not go to those "pragmatic" funds that repeatedly calculate risk for you and obsess over three-year payback? We seek the so-called "desperados" who want to go big or go home — those who hope to use frontier technology innovation to improve the efficiency of a specific industry, who can bring real and massive contribution to that industry and ultimately to society. If we find such people, who understand technology, are willing to understand industry, and can ultimately execute — then support them more, support them continuously. Not just financially, but spiritually too; spend more time with these people. And treat every meeting with a friend as if it were the last, because in this changeable era, you never know if there will be a next time, or when. So, spend quality time with quality people, do great stuff, and of course, have fun! On to 2023.

Sectors We're Bullish On

To summarize, in 2022 the sectors that drew the most market attention were undoubtedly AIGC, new energy, new materials, and so on. For Linear, we don't chase hot topics. From our founding in 2014 to today, what has never changed is our focus on frontier technology + industrial efficiency, consistently betting on frontier technology that empowers industrial upgrading. Our main areas of focus can be summarized as frontier technology represented by data intelligence, digital new infrastructure, next-generation robotics technology, and new technology transformation in traditional domains (such as biomedicine, materials, energy, etc.). In these areas, what new opportunities do we see? We've shared some existing opportunities before and won't repeat them here. Here we mainly discuss new opportunities we're particularly optimistic about in coming years. Life Sciences

In life sciences, the most fundamental change is that the development of interdisciplinary fields will enormously accelerate its R&D process. We can already see that a series of factors and conditions in life sciences have gradually matured: the emergence of tools (such as CRISPR gene editing technology), the generation of large volumes of high-quality data, plus low-cost measurement instruments, and improvements in computing power and algorithms — all of which allow us to hope that laboratory research may truly become science.

Therefore, in the life sciences services sector — such as research reagents, model organisms, laboratory equipment and consumables, sequencing and library construction services — the outlook is promising. Domestic substitution in the existing market, plus cell and gene therapy, new delivery systems, synthetic biology and other emerging fields will bring additional incremental growth.

Actually, life sciences was already receiving considerable attention in 2019-2020, and has now cooled somewhat. But we don't believe this means it's no longer hot. Rather, similar to the Gartner Hype Cycle (which holds that technologies, like people, have life cycles; a technology from conception to maturity passes through five stages: innovation trigger, peak of inflated expectations, trough of disillusionment, slope of enlightenment, and plateau of productivity), it needs to go through this developmental process. Energy

Humanity's pursuit of energy is eternal. As the share of new energy generation increases further, mandatory energy storage pairing will become the mainstream solution for new energy consumption and grid stability. Among these, long-duration energy storage will be a critical trend, and we are very optimistic about related novel storage technologies. We also believe that addressing large-scale renewable energy generation fluctuations through long-duration storage and high-penetration renewable energy active support technologies will be a significant development direction for the energy storage industry. With the rapid advancement of distributed energy and energy information and communication technologies — particularly the establishment of trading market platforms — energy production "endpoints" will become more diversified, smaller-scale, and intelligent. The number of trading entities will expand dramatically, competition will become more robust and transparent, and massive amounts of data will be generated. The energy internet sector built on this foundation is also promising.

Advanced Manufacturing

In recent years, the investment opportunities from cost reduction, efficiency gains, and automation have been remarkably certain in the manufacturing sector. Technologies represented by artificial intelligence, cloud computing, and the Internet of Things will drive the service robotics industry toward rapid advancement in intelligence, innovation, and digitization. Robots will become entry points and connectors for scenario data. Service robots will also begin penetrating various industries.

There's a saying in venture capital: the best products are gradually refined at the user end. China's domestic market advantages are especially evident in advanced manufacturing: we have the best application scenarios, the most complete upstream and downstream industrial chains, and a massive domestic market. If technology R&D and industrial strengths can be effectively combined, tremendous value will be created.

In Summary

Compared to other sectors, technology investment has one distinctive characteristic: very long return cycles. Based on our experience, translating cutting-edge technology into industrial applications requires considerable patience. In an uncertain market environment, if asked what we can say with confidence about 2023: from the development and fundraising progress of our portfolio companies, the more technology-driven a company is, and the more genuinely it solves industrial problems, the more competitive it proves to be — both commercially and in capital markets. 2023 will certainly be better. Technology-driven companies will certainly go further. We are fully confident.

Hopes for Linear, Our Portfolio Companies, and China in 2023

We need some new operating principles. Perhaps we've always practiced them, but under the pandemic's impact, I believe firmly emphasizing these principles has become more important than ever. We not only require this of Linear's employees but also expect all our portfolio companies to understand and embrace them.

• Seek truth: Speak honestly. Don't distort reality. No sugarcoating, no embellishment. Either say nothing, or tell the truth.
• Be courageous: We fear when others fear. But if we can see the truth, have data, and hold conviction, we should persist in our beliefs and act bravely. This courage enables us to break through constraints at the hardest moments, seize narrow windows of opportunity, and get things done.
• Innovate: A new era demands new investment directions; new circumstances (perhaps adversity) require new methods. Maintain openness to new ideas. We previously refused to make investment decisions without in-person meetings. During the toughest two months, we accepted it — and the results have been good. Once the strictest lockdowns ended, we reinstated the multiple in-person meeting requirement. No dogma. Any new method that solves problems under current conditions, without crossing bottom lines, is worth trying.
• Persevere: It's hard to get major things right on the first attempt. The environment won't operate according to any individual's ideal vision (perhaps your ideal is someone else's hell). Can we persist in our original aspirations and ideals in a VUCA environment, and keep pushing forward while others lie flat? There are no shortcuts to success. As long as we avoid fatal strategic errors, success is simply the cumulative integral of daily effort.

One wish for 2023: we hope our new government leadership will respect market economics and the spirit of contract more than ever before — providing more policy continuity and guidance, less hands-on administrative direction; using rule of law to set boundaries and red lines, not personally intervening to establish models. Create space for strivers to experiment and fail. Let the hardworking, courageous, and resilient Chinese people carve out an innovative path. When ordinary people can earn money, society naturally gains vitality, and the country naturally has hope.

In any case, goodbye 2022. No matter what, hello 2023. We look forward to 2023 being better, and believe it will be.

About Linear Capital

We are hiring talent to join our investment team. Multiple positions are currently open. For details, please click here.

Linear Capital is a professional investment institution focused on "Data Intelligence" and "Frontier Technology."

Linear Capital currently manages ten funds with total assets under management of approximately $2 billion.

We focus primarily on early-stage projects in "Data Application," "Data Infrastructure," and "Frontier Technology" applications. Our investment stage centers on leading angel to Series A rounds, with typical investment sizes of $3 to $8 million or RMB equivalent.

To date, we have made early-stage investments in over 120 startup teams including Horizon Robotics ($3B valuation), Tongdun (>$1B), Kujiale (>$1B), Sensors Data, Tezign, Rokid, Guandata, Agile Robots, and others. The combined valuation of Linear's portfolio companies is approximately $20 billion.

In the near term, Linear Capital is working to become the premier "Data Intelligence Technology Fund," and over the long term, gradually build itself into the most influential "Frontier Technology Application Fund."