China’s AI Start-Up DeepSeek Closes $7.4 Bn Funding Round, Founder Chips In $3 Bn

DeepSeek, a China-based AI start-up, has completed its first external funding round, raising over $7.4 billion at a valuation above $50 billion, according to The Wall Street Journal report. With this, it has become China's most valuable AI start-up.

Founder Liang Wenfeng made the largest contribution of about $3 billion in this funding round, via a limited partnership that locks investors in for five years without voting rights, preserving his tight control as the firm pursues global AI ambitions.

The fundraising marks a historic milestone for the Hangzhou-based company, which oversees a reversal in its strategy of not seeking outside capital. The shift highlights that the company is now setting its sights on more ambitious goals in the global AI race.

A Unique Fundraiser

Rather than investing directly in Deepseek, the investors are required to put their capital into a limited partnership managed by Liang Wenfeng.

Investors are subjected to a five-year lock-up period, without any voting rights, according to Reuters, effectively allowing Wenfeng to retain major control over the firm.

Among the notable investors, as reported by Reuters earlier this month, are tech giant Tencent, considering a contribution of 10 billion yuan, while battery and energy giant CATL is looking at 5 billion yuan, making them the largest external investors.

China's National Artificial Intelligence Industry Investment Fund, a government-backed vehicle, invested around $150 million directly into DeepSeek, uniquely retaining both voting rights and freedom from the lock-up arrangement.

Where DeepSeek Stands in Global AI Race?

Despite this landmark fundraiser, DeepSeek's position in the broader global AI competition remains a study in contrasts, formidable in reputation, but constrained by geopolitics and capital.

The funding gap between DeepSeek and its Western rivals remains stark. The WSJ noted that DeepSeek's $50 billion-plus valuation remains a fraction of the huge figures commanded by leading American labs.

Anthropic raised $65 billion last month, while OpenAI secured a staggering $122 billion in March, benefiting from the vast and fluid capital markets of the West.

A Beijing-based analyst and manufacturing director at Ankura China Advisor, told Reuters, that the Western bans mean DeepSeek cannot access frontier American silicon, and without the ability to buy that hardware, they've no reason to match the multi-billion-dollar computing budgets of their US rivals.

DeepSeek plans to deploy the new capital towards advancing research and development and expanding its computing infrastructure, according to a WSJ report. But with the US trade restrictions limiting China's access to high-end American semiconductors, securing domestic computing power is also a pressing priority for the start-up.