Summary of Key Points
In the past, family offices (referred to as "FOs") were the "backseat investors" in the venture capital (VC) industry—either handing over their funds to VCs like Sequoia and Hillhouse as limited partners (LPs) or only making cautious investments when projects reached the B/C rounds (where the technology was mature enough for commercialization). However, since 2026, these FOs, with their access to long-term capital, have begun to directly participate in the earliest stages of AI investment, even competing with VCs for projects. They bring not only capital but also resources such as their own factories, supply chains, and industry-specific data, shifting the relationship from one of delegation to one of collaboration and competition. This shift is driven by factors such as the earlier emergence of AI opportunities, FOs' desire to position themselves for future industrial developments, and the flexibility of their funding terms, which have introduced new rules to the VC landscape: capital that can be applied to practical applications (such as factories and orders) has become even more scarce than mere financial resources.
Detailed Analysis
1. From "Backseat Investors" to "Frontline Players": Changing Roles
Previously, FOs had a more hands-off approach: they entrusted their funds to professional VCs (as LPs) and waited for the returns without being involved in the day-to-day management of the projects. Occasionally, they would invest directly, but only when the projects were well-established. Now, they are no longer content with just being financiers; they are taking a more active role:
- Direct Investment in Early Stages: For example, the nearly 100 million yuan in funding for Zenbot came from three family offices of manufacturing companies. The controlling families of Xtep, Inovance, and Joyoung have also become shareholders in companies like Wujie Zhihang and Qianxun Intelligence.
- Competing for Projects with VCs: FOs are no longer content with merely holding indirect stakes in AI assets through VCs; they are now investing alongside them, even competing for high-quality early-stage projects. Companies like VAST and Moushen Intelligence have seen participation from industrial FOs.
In short, FOs have gone from being the "rich benefactors" of VCs to equal partners in the investment process.
2. Why FOs Dare to Enter the Risky Early Stages of AI?
There are several reasons why FOs are willing to invest in early-stage AI projects despite the high risks:
- Erlier Opportunity Window: AI is evolving rapidly—2024 focused on video generation, 2025 on world models, and 2026 on embodied intelligence. By the time projects reach the B/C rounds, the technology may have changed significantly, increasing the value of the investments.
- Locking in Future Industries: For industrial FOs, investing in early-stage AI is about securing a foothold in future industries. For instance, investing in robotics companies allows them to test the technology in their own factories and integrate it with their supply chains to avoid being left behind by new technologies.
- Flexible Funding: VC funds typically have a 7+2 year cycle (7 years of investment, 2 years for exit), forcing them to generate returns quickly. FOs, on the other hand, manage funds that span multiple generations and can afford to wait for returns, as long as one project is successful.
- Fast Decision-Making: FOs can make decisions quickly, without the lengthy processes involved with VCs (project initiation, interviews, and board meetings). Family members can make decisions based on product demonstrations and on-site inspections, leveraging their industry experience and intuition.
3. FOs Bring More Than Just Capital
Early-stage AI companies need more than just financial support; they need resources that can be practically applied:
- Real-World Applications: For example, three manufacturing FOs invested in Zenbot because they wanted to see how the robots could be integrated into their factories for material recognition and obstacle avoidance.
- Supply Chains and Customers: Inovance's FOs invested in Qianxun Intelligence because Inovance provides industrial automation solutions, and Xtep's FOs invested in Wujie Zhihang because Physical AI can be applied in smart factories and sports products.
- Industry Experience: FOs have valuable knowledge about where to source components, how to streamline production lines, and the challenges involved in moving from prototypes to mass production, which are crucial for the success of AI projects.
4. FOs and VCs: From Partners to Competitors
The emergence of FOs as active investors does not mean they are replacing VCs; rather, their roles have become more complex:
- Competition: FOs compete with VCs for high-quality early-stage projects, offering unique resources such as factory capabilities.
- Collaboration: After making investments, both parties need to work together to support the growth of the companies. VCs excel in structuring capital and securing follow-up funding, while FOs provide industry expertise and practical support.
Companies now consider more than just the valuation when choosing investors; they look for resources that can add value to their businesses. VCs that can only provide capital may become less attractive, while FOs rely on VCs for expertise in areas like listing guidance and compliance management.
5. Challenges FOs Face
While FOs have gained more influence, they also face challenges:
- Risk of Personal Judgment: Family members' decisions may replace thorough due diligence, leading to losses if they are incorrect.
- Boundary Issues: FOs must separate their funds from the businesses of listed companies to avoid conflicts of interest.
- Industrial Collaboration: While agreements may emphasize collaboration, opening up factories and customer data can be difficult due to internal company resistance.
- Post-Investment Management: New generations of FOs and industry veterans may have different visions, leading to conflicts over strategic directions.
In summary, in the AI era, capital is no longer the most scarce resource. What really matters is capital that can transform technology from the lab into practical applications. FOs' involvement in early-stage investment is a natural outcome of industrial transformation. However, early-stage investing remains risky, and whether FOs will succeed depends on their ability to convert their industry resources into competitive advantages for the projects they invest in.