By Sansheng

The ongoing "arbitration" incident in the venture capital and AI large model fields, known as the Moon's Dark Side, has sparked heated discussions. Yang Zhilin has published an article detailing the events from start to finish, supporting Zhang Yutong, who is caught in the controversy, while also explaining the rights and wrongs of the entire incident.

The issue of undisclosed shareholdings is indeed a procedural flaw. However, there is another important fact: the shareholdings of Recycle.ai and the old shareholders in Moon's Dark Side were determined from the outset, with the split occurring before Zhang Yutong's shareholding, as described by Yang Zhilin as "mutually independent." Regardless of whether Zhang Yutong subsequently held shares or how many, it did not affect the interests of Recycle.ai or the old shareholders.

The uproar caused by this Hong Kong arbitration case not only concerns the future of Moon's Dark Side but also has the potential to become a historic event in the tech venture capital community.

01 The Source of Trouble: Kimi Goes Viral

In fact, Moon's Dark Side was not an early entrant in the AI large model race. Excluding foreign competitors like OpenAI, the domestic market had already seen many large model products emerge before its inception, with various internet giants gearing up for the "Hundred Models War."

In terms of background strength and team reputation, Kimi, with relatively little experience, did not have many advantages at the beginning of its venture. However, today, Kimi has amassed a large number of loyal users and can be considered a "hotshot" in the domestic large model field.

According to the latest data from the AI Product Rankings, Kimi's website visits exceeded 32 million in November, ranking first among similar domestic products. Officially announced monthly active users across all platforms for October exceeded 36 million. Recently, on the one-year anniversary of Kimi's full launch, Kimi officially released a new generation of mathematical reasoning models, directly competing with OpenAI's GPT-4 series in capabilities. Kimi from Moon's Dark Side has become one of China's representatives in the battle against OpenAI across the Pacific Ocean.

For ordinary users, it is likely that they only started using Kimi after March this year. However, prior to that, Kimi and Moon's Dark Side had already gained popularity in investment circles.

In February 2024, Moon's Dark Side completed a round of financing exceeding $1 billion, led by Alibaba, with participation from Sequoia China, Meituan, Xiaohongshu, among others. The post-investment valuation reached $2.5 billion (approximately RMB 18 billion).

After this round of financing, Moon's Dark Side became the highest-valued "unicorn" in the domestic large model race. Prior to this, earlier entrants like Zhipu AI and Minimax, which placed more emphasis on the toB market, had already surpassed a valuation of $1.6 billion and were heading towards even higher valuations.

It can be said that before this round of financing, Kimi was not in a favorable position in the competition and was at risk of being eliminated. However, with the entry of Alibaba and subsequent involvement of Tencent, Kimi, with its significantly enhanced financial strength, was able to unleash its potential and ultimately go viral.

However, along with the popularity of Kimi and Moon's Dark Side came troubles.

02 Missing a Month, Missing an Era

From a timeline perspective, before March 2023, the AI large model sector, fueled by ChatGPT, exploded in popularity, with all parties racing against time to enter the market.

In the first half of 2023, Moon's Dark Side secured over $200 million in angel round financing, with a valuation of $300 million at the time. In June and July, it received A-round financing from investors such as Meituan Longzhu and BlueRun Ventures.

By October 2023, Moon's Dark Side had launched Kimi, the world's first intelligent assistant capable of processing up to 200,000 Chinese characters, marking the company's breakthrough. Investments from giants like Alibaba followed, and the valuation skyrocketed.

From the financing and development history, it is not difficult to see that Moon's Dark Side developed at a rapid pace. The urgency stemmed from the very short window of opportunity for AI large model startups.

Yang Zhilin once said in an interview, "We started focusing on the first round of financing in February 2023. If we had delayed until April, there would have been Almost no chance left . But if we had done it in December 2022 or January 2023, there also would have been no opportunity due to the pandemic. So, the real window was just one month."

Missing that one month could mean missing an entire era.

Success and failure are often separated by a fine line. In such situations, some imperfections in the process are almost inevitable. The current public opinion is the price entrepreneurs have to pay... But if given another choice, they would likely prioritize building the company first.

The ideal procedural steps would be to complete the shareholder meetings of existing investors and the board of directors of the invested company, then spin off the new project, with core personnel going full-time on it.

This is the ideal scenario, but opportunities don't wait. By the time all procedures are completed, a year might have passed, and it would be too late to start a venture.

Another point of contention is Zhang Yutong, a key figure for the old shareholders who missed out on co-investment.

Firstly, it should be clarified that the split plan between Recycle.ai and Moon's Dark Side preceded the shareholding, so regardless of how many shares Zhang Yutong held, it did not change the interests of the old shareholders.

Secondly, while the lack of disclosure was indeed a flaw, Zhang Yutong played a crucial role in Moon's Dark Side's financing, strategy, and business development. Moreover, her shares were not granted all at once but as compensation for continuous work over many years.

It is important to distinguish between the ideal state and reality. Borrowing the viewpoint of an investor friend on social media:

"Essentially, all shareholders agreed, and Zhang Yutong's vote was not decisive. Yang Zhilin did not 'bribe' her with any intention. The 14% given to Zhang Yutong by Moon's Dark Side was not based on her position at GSR Ventures but on the 'compensation' for the value she could bring to Moon's Dark Side in the future, which needed four years to prove and was granted in installments. If one must accuse of 'shady dealings,' then let's ask ourselves, how many of us can find our next opportunity without 'looking for a better horse while riding one'? Especially since Zhang Yutong, as the managing partner of GSR Ventures, it is almost inevitable that she would have some lingering ties when leaving the fund. In venture capital and private equity, it is not uncommon for startups to offer kickbacks to fund managers to secure investments, but that is a different matter from job-related corruption.""

Ultimately, it is because Moon's Dark Side and Kimi have become so popular.

As another investor put it, "The main contradiction between the two sides stems from the significant increase in Moon's Dark Side's valuation, coupled with the frustration of several institutions that missed out on investing." "Especially when asked by limited partners, they need to give an account."

This may explain why old shareholders represented by GSR Ventures chose arbitration over direct court action. As there were not many obvious issues throughout the process, the arbitration process is lengthy, providing ample room for negotiation between the parties. The most likely outcome is that they will negotiate a satisfactory compensation amount or shares to end the dispute.

03 Let the Dispute Rest, the Future is More Important

In fact, it is difficult to determine who owes what between Recycle.ai and Moon's Dark Side.

In February 2023, Yang Zhilin and Chen Qicong, the former CEO of Recycle.ai, reached an agreement to establish Moon's Dark Side as a separate company, with Recycle.ai receiving a certain percentage of shares in Moon's Dark Side for free.

The following month, a significant event occurred in the American banking sector: the collapse of Silicon Valley Bank.

At that time, as most of Recycle.ai's cash was deposited in Silicon Valley Bank, the company faced a cash flow crisis. It was in this context that Yang Zhilin helped connect with three institutions willing to purchase old shares during the company's first round of financing, agreeing to sell millions of dollars worth of old shares in Moon's Dark Side to alleviate the cash flow crisis.

It can be said that Yang Zhilin's assistance to Recycle.ai was quite "righteous." However, the irony of life lies in the fact that the arbitration initiated by the old shareholders against Moon's Dark Side utilized Recycle.ai as a springboard.

When Yang Zhilin encountered the arbitration storm, the old shareholders who did not invest in the new company selectively forgot this history.

Yang Zhilin did not complain much about this. What he truly cares about is the fleeting opportunities in the AI era and the relentless competition where no mistakes are tolerated.

"While we are discussing this issue, teams across the ocean are releasing new AI products," he said in response.

His concerns are evident.

On December 5, OpenAI officially announced that it would hold 12 press conferences over the next 12 days to unveil its latest technological advancements. At the conference, they launched ChatGPT GPT-4 and GPT-4 Pro, with GPT-4 Pro priced at $200 per month, making it the most expensive subscription plan for individual users in the AI field to date.

What new tricks is OpenAI up to? All AI technology companies worldwide are feeling the tension.

Yang Zhilin emphasized in his response that the current priority is to "continue to work tirelessly with the team to improve Kimi's technology and products." He promised that the team would "fight day and night."

Do not let short-term interest disputes delay the dreams of AI 'unicorns' with a promising future.

*The cover image is generated by AI