DeepSeek, a leading Chinese AI startup that has recently made waves in Silicon Valley, is taking an unconventional approach to funding. Unlike many of its counterparts in the AI sector, DeepSeek's founder Liang Wenfeng has opted not to seek external investment, despite significant interest from venture capitalists (VCs). This decision stems from Liang's desire to maintain full control over the company and his skepticism toward VCs' focus on rapid monetization rather than foundational research. The unique financial backing from Liang’s hedge fund, High-Flyer, has allowed DeepSeek to operate without the need for outside capital. However, as the company faces increasing challenges, including chip shortages and regulatory scrutiny, the possibility of seeking external funding remains open.

Liang Wenfeng's vision for DeepSeek differs markedly from that of other AI startups. While many companies in this space frequently announce large-scale fundraising rounds with prestigious investors, DeepSeek has remained notably silent on this front. According to corporate records analyzed by TechCrunch, Liang holds an impressive 84% stake in the company, with the remaining shares held by individuals associated with his hedge fund, High-Flyer. This level of ownership means that DeepSeek operates more like a personal project than a typical startup reliant on external capital. Liang's past experiences with VCs have left him wary of their emphasis on quick returns, which he believes can detract from the pursuit of long-term innovation. In a 2023 interview, Liang expressed concerns about how VCs prioritize short-term gains over deep scientific exploration.

One of the primary reasons Liang has resisted outside investment is the potential loss of control over DeepSeek. He has been vocal about his reservations regarding VC influence, particularly when it comes to the pressure to commercialize AI technologies prematurely. Instead, Liang prefers to focus on advancing fundamental research, an area he deems crucial for the long-term success of AI. Moreover, accepting investment from certain entities could exacerbate existing trust and privacy issues. As a Chinese company, DeepSeek already operates under strict regulations that grant the government broad access to data. Any association with Chinese state-backed investors might intensify international scrutiny and lead to further restrictions or bans on DeepSeek's operations. This concern is not unfounded, given the U.S. government's history of sanctioning Chinese tech firms perceived as close to the state, such as Huawei and DJI.

Despite its current self-sufficiency, DeepSeek may eventually find itself in need of external capital. The company's reliance on High-Flyer's profits has worked well so far, but recent underperformance in some of High-Flyer's flagship funds since 2022 suggests that this model may not be sustainable indefinitely. Additionally, the Chinese government's increased regulation of quantitative funds like High-Flyer adds another layer of uncertainty. To stay competitive in the rapidly evolving AI landscape, DeepSeek will likely require access to more advanced AI chips—a critical bottleneck in its development. These chips are both expensive and subject to stringent U.S. export controls, making them difficult to obtain in China. As DeepSeek begins to signal a shift towards monetization, evidenced by its recent announcement of theoretical profit margins, the allure of external investment could become harder to resist. Companies like Tencent and Alibaba have reportedly shown interest in investing, potentially opening a new chapter for DeepSeek.

The path forward for DeepSeek remains uncertain. While Liang Wenfeng has successfully maintained control over the company thus far, the challenges ahead—ranging from chip shortages to regulatory pressures—may compel him to reconsider his stance on external funding. The future of DeepSeek will likely depend on how it navigates these complex dynamics, balancing the need for resources against the desire for independence and long-term innovation.