DeepSeek Seeks Funding Despite Cash-Rich Status

DeepSeek, a Hangzhou-based AI company spun off from hedge fund High-Flyer, is raising external capital for the first time by selling no more than 3% of its equity despite not urgently needing outside funds. The company seeks at least $300 million at a minimum $10 billion valuation, though estimates suggest it could be valued above $100 billion. The strategic fundraising round prioritizes state-backed investors and China's Big Fund III affiliates who can provide AI infrastructure resources, while aiming to establish a market benchmark for employee stock options and stem departures amid aggressive poaching by rivals.

DeepSeek's Strategic Fundraising Approach and Equity Structure

• ▪DeepSeek's estimated valuation could exceed US$100 billion.
• ▪DeepSeek has begun raising external capital for the first time.
• ▪DeepSeek is seeking to sell no more than 3 per cent of its equity.
• ▪DeepSeek is keeping its initial fundraising round deliberately small to limit equity dilution while retaining key talent.
• ▪DeepSeek is seeking to raise at least US$300 million at a valuation of at least US$10 billion.

Talent Retention and Employee Stock Valuation Objectives

• ▪DeepSeek's fundraising round is aimed at stemming departures amid aggressive poaching by well-funded rivals.
• ▪DeepSeek's fundraising round was intended to establish a market benchmark for its valuation.
• ▪DeepSeek's fundraising round aims to give employees greater clarity on the worth of their stock options.

Investor Selection Criteria and State-Backed Participation

• ▪DeepSeek is prioritising state-backed and industrial investors in its fundraising round.
• ▪DeepSeek is favouring investors that can provide strategic resources such as AI infrastructure over purely financial capital.
• ▪AI-focused affiliates of China's Big Fund III were expected to participate in DeepSeek's fundraising round.
• ▪DeepSeek is prioritising local government guidance funds and affiliated platforms in its fundraising round.
• ▪Large state-backed funds were expected to participate in DeepSeek's fundraising round.
• ▪DeepSeek is being highly selective in its fundraising round.

Perspective of DeepSeek employees

• ▪DeepSeek employees have been aggressively poached by well-funded rival AI companies.

Perspective of State-backed investors

• ▪China's Big Fund III AI-focused affiliates represent preferred investors for DeepSeek's fundraising round.

Perspective of High-Flyer hedge fund

• ▪High-Flyer hedge fund retains over 97% ownership of DeepSeek after the planned equity sale.

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