Why DeepSeek’s CEO is turning down millions in funding

DeepSeek’s founder Liang Wenfeng is delaying outside investment as the AI startup navigates its rapid growth and the complexities of funding, according to a Wall Street Journal report.

Liang Wenfeng maintains 84% ownership of DeepSeek, with the remaining shares held by individuals tied to his hedge fund, High-Flyer, making it a largely self-funded operation. Unlike many startups dependent on outside capital and investor influence, Liang’s strong control over the company limits external pressure.

Previously, Liang expressed discomfort with venture capitalists’ focus on quick monetization, which contrasts with his commitment to fundamental research in AI. In a 2023 interview with Chinese media, he stated, “I don’t want to share control of my company,” highlighting his reluctance to engage with investors pushing for rapid returns.

DeepSeek has successfully funded its initiatives through profits generated by High-Flyer, alleviating financial constraints. Liang emphasized the importance of technological limitations rather than funding, stating, “Money has never been the problem for us; bans on shipments of advanced chips are the problem,” underscoring the challenges posed by U.S. export controls.

As a Chinese company, DeepSeek faces increasing scrutiny due to data privacy concerns, resulting in bans from several governments and companies. Accepting funding from Chinese investors could exacerbate these issues, as such investors may share similar worries regarding government access to data. The U.S. government has historically sanctioned Chinese tech firms perceived as closely aligned with Beijing, exemplified by actions against Huawei and DJI. While state entities have approached DeepSeek for potential investment, there is no indication that these offers have been accepted.

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Despite Liang’s current stance, circumstances may evolve. Recently, DeepSeek reported a profit margin, marking its first indication of moving towards monetization, an area typically favored by investors. Moreover, to remain competitive with other leading AI developers, DeepSeek may require more advanced AI chips, which are heavily restricted in China.

DeepSeek may also be facing diminishing self-sustainability as High-Flyer’s performance has declined, with several of its flagship funds underperforming since 2022. Additionally, the Chinese government has tightened regulations on quantitative funds like High-Flyer since 2024. Reports indicate interest from major tech players like Tencent and Alibaba, although Liang’s focus remains on maintaining a science project ethos rather than pursuing immediate financial gains.

DeepSeek’s chatbot has attracted millions of users but often experiences service interruptions. This high usage has led the company to offer discounts during off-peak hours to alleviate server strain. Some major Chinese tech firms are testing DeepSeek’s capabilities to enhance their platforms without direct cost, using the free code provided by DeepSeek.

Liang has approached various venture capital firms, including international entities, but has faced challenges in securing investment, primarily due to concerns over the lack of a clear monetization strategy. Despite this, increasing interest remains, yet Liang continues to prioritize a long-term vision, stating, “We don’t do applications, we just do research and exploration,” reinforcing his desire to uphold the foundational integrity of DeepSeek’s operations.

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