China leads world in number of generative AI start-ups to receive funding in first half of 2023, report finds

China had 22 generative AI start-ups receive funding in the period, while the US had 21, according to Zhidongxi report
The start-up that received the biggest round of funding in China was Light Year, which was established in February by Wang Huiwen

Artificial intelligence

Xinmei Shen

Published: 9:00pm, 10 Jul 2023

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China has led a surge of global investment into generative artificial intelligence (AI) in the first half of the year, with the country reporting the largest number of start-ups in the sector to receive funding, according to a research report.

During the first six months of this year, 51 generative AI start-ups around the world raised about 100 billion yuan (US$13.8 billion), ten times the funding size the sector received in 2022, according to Zhidongxi, an AI-focused research firm in China.

China had 22 generative AI start-ups receive funding in the period, while the US had 21 and the UK had four, according to the Zhidongxi report. Although China had the most generative AI start-ups to receive funding, US firms received more funding, the report showed.

Eighteen generative AI firms received more than 100 million yuan (US$138,287) in funding in the first half, and of these 12 were from the US, while only three were from China, according to the report.

China’s Big Tech firms and start-ups are jockeying to catch up with their peers in the US after ChatGPT was launched by Microsoft-backed OpenAI last year. While tech giants including Tencent Holdings, Baidu and the Post’s owner Alibaba Group Holding are developing their own large language models (LLMs), they are also pouring money into start-ups.

During the first half, Tencent invested in three generative AI start-ups, DeepLang AI, Light Year and MiniMax, according to the Zhidongxi report.

The start-up that received the biggest round of funding in China was Light Year, which was established in February by Wang Huiwen, co-founder and ex-director at Chinese food delivery services giant Meituan.

The firm reportedly raised more than 1.6 billion yuan in June from investors including Source Code Capital and Tencent, before being acquired by Meituan late last month.

Lee Kai-fu, a prominent venture capitalist and former president of Google China, earlier this month also unveiled his own generative AI start-up Lingyi Wanwu. The company, helmed by former head of metaverse operations at Baidu Ma Jie, is aiming to build its own LLM from scratch, a move that Lee described as “the most difficult path”.

With interest in generative AI remaining high in China, the debate over how companies can benefit from the technology is heating up.

Zhou Hongyi, founder of cybersecurity firm 360 Security Technology, said earlier this month that government bodies and enterprises in China should take a cautious approach towards adopting LLMs as they are still “unreliable”. They should “keep LLMs in a cage” by having them independent and separate from existing businesses, he suggested.

Allen Zhu Xiaohu, managing partner at venture capital firm GSR Ventures, reportedly said at a conference in Beijing in March that ChatGPT could be a curse for AI start-ups, as the service is so powerful that it can perform better than many of their existing functions.

Fu Sheng, CEO of internet company Cheetah Mobile and a well-known Chinese entrepreneur, later said in a post on WeChat that Zhu’s comments showed he was “fearlessly ignorant” about the business potential that ChatGPT can unlock.