Dado Ruvic | ReutersBEIJING — DeepSeek’s artificial intelligence breakthrough is stirring up China’s venture capital world after three straight years of decline.As DeepSeek released its OpenAI rival in late January, AI drug discovery company Insilico Medicine was finalizing a $110 million series E financing round led by Hong Kong-based Value Partners, the startup’s CEO and founder Alex Zhavoronkov told CNBC in an exclusive interview. The deal closed last month.But so many Chinese funds wanted to participate at the last minute — “like an avalanche” — that Insilico is planning a series “E2” raise, Zhavoronkov said. “We have never seen this level of interest before.”Qiming Ventures-backed Insilico uses AI from DeepSeek and other companies to create models for developing drugs. Ten of the startup’s drugs have already received approval for clinical tests, according to Insilico, which lists research labs in China, the U.S. and the Middle East.Zhavoronkov added that during his U.S. travels in the last few weeks, many U.S. and other global investors have asked him about ways to invest in Chinese AI companies.”It looks like the DeepSeek moment, it created a lot of interest from global investors to invest in China,” he said Monday. “I think the funding is going to come back.”Regulatory uncertainty in both China and the U.S., especially around IPOs, and slow economic growth have contributed to a sharp drop in Chinese venture capital activity in recent years. VC investment into China-based companies has fallen for the last three years, reaching just $48.86 billion in 2024, the lowest on record going back to at least 2016, according to Pitchbook data.Now, as regulatory clarity emerges, sentiment is changing — and encouraging investors to take a different approach to the past, when internet-based startups such as Alibaba emerged.”People are rushing just to find the next DeepSeek,” said Annabelle Yu Long, founding and managing partner of BAI Capital in Beijing. She also sits on the board of Coach parent Tapestry.”Everybody is making investments, …
