DeepSeek Investment Round Suspended: What Liang Wenfeng’s Leaked Remarks Really Cost the Company

The way that weeks of meticulous negotiation can be ruined by a single leaked conversation is almost cinematic. In late July, DeepSeek, an AI startup based in Hangzhou, discreetly told potential investors that it was suspending its second fundraising round, at least temporarily. No official statement, no press release. Potential backers were only informed verbally that they shouldn’t anticipate any signatures in the upcoming days.

Days after remarks purportedly made by Liang Wenfeng, the founder of DeepSeek, started making the rounds online, the company was suspended. On Chinese social media and elsewhere, a transcript of what appeared to be a private investor meeting from the company’s initial funding round began circulating. According to the transcript, whose veracity Bloomberg has not confirmed, Liang was open about DeepSeek’s dependence on Nvidia chips and admitted that China still lags behind the US in some areas of AI sophistication. By all accounts, these are delicate subjects, particularly for a business that has grown to be somewhat of a national symbol in China’s larger endeavor to compete in the global technology market.

It’s unclear if the quotes were true or taken out of context. However, the moment had already been damaged. According to people with knowledge of the situation, Liang’s dissatisfaction with the way private discussions had turned into a public spectacle, rather than the investors themselves, was a contributing factor in the suspension. It makes sense that you would be frustrated. Almost every word has weight that it wasn’t intended to have when building a company as closely watched as DeepSeek.

It’s worth taking a moment to consider how unique this context is. Tencent Holdings and battery giant CATL were among the backers in DeepSeek’s record-breaking June fundraising round, which brought in about $7 billion. For a Chinese tech startup raising money for the first time, that was already historic. The business then quickly changed course and started a second round with a pre-money valuation of at least 480 billion yuan, or roughly $74 billion, and a target of at least 10 billion yuan in additional capital. The investors’ and DeepSeek’s appetite was impressive.

It’s easy to figure out what motivated that hunger. Last year, DeepSeek unveiled a model that truly shocked both Chinese and foreign audiences. It proved that a state-of-the-art, effective AI platform could be constructed with less computing power than Silicon Valley behemoths were using, something the industry had been discussing in private. Given the US export restrictions on cutting-edge chips that Chinese companies are still navigating, that accomplishment was especially difficult to achieve. All of a sudden, DeepSeek was more than just a promising startup. It served as proof of concept for a whole national strategy.

There are issues of its own with that kind of symbolic weight. When a company’s founder openly discusses their reliance on Nvidia or their inability to compete with American AI, the remarks don’t stay in the room. Liang might have grasped this concept intellectually, but it’s possible that he misjudged the speed at which a transcript, whether authentic or fake, could spread.

According to people with knowledge of the situation, negotiations are still ongoing, and DeepSeek may decide to move forward with the round at a later time. It’s unclear if every potential investor got the same message or if some are still awaiting word. Additionally, the company seems to be getting ready for an IPO, possibly filing on Shanghai’s STAR Market as early as this year. Regardless of when or if the current fundraising resumes, this would be a momentous occasion for China’s technology sector.

One of the most well-known artificial intelligence companies has decided to take a break from pressure for the time being. The speed at which the commotion surrounding that leaked transcript subsides will likely determine whether that proves to be a prudent and wise instinct or an expensive one.