Summary of Key Points
This interview focuses on Liu Yiran, a managing partner at Yuanjing Capital. It discusses his career transition from a doctor in engineering to the financial sector, from private equity (PE) to venture capital (VC), and how Yuanjing Capital has evolved from focusing on the internet industry to investing in hard technology while building an industrial ecosystem. He also shares his investment methodologies, such as the “Three Core Laws,” “Portfolio Investing,” and “Caterpillar Approach.” Additionally, he compares the current trends in AI/embodied intelligence with those of autonomous driving in the past, emphasizing the importance of investors adopting a long-term perspective.
1. From Engineer to VC Leader: Transition is Not Random, but About Proactively Seeking Opportunities
Liu Yiran’s transitions may seem like cross-disciplinary moves, but each step was well-thought-out:
- From Engineering to Finance: As a doctor in optoelectronics, he noticed the saturation of the industry (undersea cable bandwidth would last for 20 years) and was attracted by the atmosphere in London. He proactively sent emails to seven investment banks and received an offer outside the regular recruitment period, alongside a rejection from a university recruitment.
- From PE to VC: While working at Temasek in PE, he witnessed the rise of the mobile internet (observing companies like Xiaomi and Didi). Realizing his preference for innovation over numerical analysis, he shifted to early-stage investing. Temasek’s comprehensive training provided him with a holistic view of projects.
- Joining Yuanjing: In 2016, he saw VC entering a new era (one that required collaboration with industry giants) and recognized Yuanjing’s strengths in both the younger generation of managers and its access to industrial resources. He joined to explore new investment strategies.
His transitions were not passive; they were the result of his proactive efforts to seek opportunities.
2. Yuanjing’s Ecosystem: Moving from the Internet to Hard Technology, Step by Step
Yuanjing started in the internet industry and gradually expanded into hard technology using a “caterpillar approach” (steady progress without reckless cross-industry moves):
- Breakthrough: Investing in Li Auto allowed Yuanjing to enter the automotive sector and pave the way for investments in hard technology. This led to further expansions into autonomous driving (Li Auto, MINIEYE, Qingzhou Zhihang), robotics (Xingdong Jiyuan, and several other companies), forming three key industrial pillars.
- Ecosystem Building: The process started with a single project, progressed to an entire industry, and then to a comprehensive ecosystem. For example, they expanded from Li Auto to related industries such as autonomous driving and robotics, leveraging Alibaba’s AI resources to create an “intelligent technology ecosystem.”
- Differentiation: Instead of competing with giants for market share, Yuanjing focuses on building an ecosystem of financial capital. They use portfolio investing to diversify risks and avoid being overwhelmed by larger VC firms.
In other words, Yuanjing doesn’t start from scratch in new industries; they build on their existing expertise and gradually expand into new areas.
3. Investment Methodologies: Simplifying Complex Issues with Portfolio Investing
Liu Yiran’s investment approach is practical:
- The Three Core Laws: For any project, identify the 1–3 most critical reasons for investing and prioritize them (e.g., the primary reason accounts for 50%, the second for 30%). Ignore minor details to focus on what matters most.
- Portfolio Investing: To manage uncertainties in large industries like autonomous driving or robotics, he uses a “triangular portfolio” strategy. For example, in autonomous driving, he invests in different types of companies: main manufacturers (Li Auto), assisted driving (MINIEYE, which is more commercially viable), and advanced unmanned systems (Qingzhou Zhihang). This diversification reduces risk.
- Military Strategy Thinking: Inspired by his time at Temasek’s investment committee (where retired officers used military strategies to analyze industries), he analyzes the industry landscape to understand competitive dynamics and avoid following trends blindly.
These methods increase the chances of successful investments in uncertain markets.
4. AI/Embodied Intelligence: Faster and More Technological
Liu Yiran compares current AI/embodied intelligence with autonomous driving:
- Similarities: Both are billion-dollar industries with potential bubbles, but many companies will emerge (over a dozen autonomous driving firms have gone public). Patience is needed, as bubbles drive investment in new technologies.
- Differences:
- Faster Pace: There is intense fundraising activity, with multiple rounds of financing for several companies in the same quarter, giving investors less time to make decisions.
- Higher Technological Complexity: Many startups are led by scientists, and generalization capabilities (e.g., using AI in robotics) are crucial, rather than just simple model innovations.
- Greater Resistance to Monopolization: The combination of software and hardware makes it harder for giants to dominate, giving startups a better chance of success (unlike shared bicycles, which were easily taken over by companies like Meituan/Didi).
- Investment Strategy: Early involvement in robotics projects (often in the first two rounds of financing) and diversification through portfolio investing help mitigate risks. They prefer teams with industry experience to transform technology into viable products.
He believes that robotics will not repeat the mistakes of shared bicycles, due to higher technical barriers and diverse application scenarios.
5. The “Right-Attitude” Investor: Not Rigid, but Proven by Results
Liu Yiran is known for his approach:
- Proven Methodology: He has a professional, dedicated methodology that avoids extreme approaches (e.g., not betting on mergers for profit, as seen with shared bicycles).
- Results-Driven: His investments have been successful, such as the repurchase of Yuanjing’s third fund by top institutions and the IPOs of companies like Li Auto and Tuiga. This validates his investment strategies.
- Respecting History and Tradition: He acknowledges that past experiences are valuable, providing a foundation for new investments.
In summary, Liu Yiran’s story reflects China’s VC industry’s transition from the internet to hard technology. His proactive approach and methodology have helped him find a place in a rapidly changing landscape. Yuanjing’s ecosystem building provides a model for financial capital to compete with larger VC firms. For everyone, his approach—proactive initiative, focus on essential issues, and long-term vision—is worth considering.