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Text | Science and Technology News

Following Alibaba, Tencent also showed interest in the dark side of the moon.

Recently, according to media reports, the domestic large-scale model unicorn Dark Side of the Moon completed its latest round of financing of over US$300 million. New investors in this round of financing include Tencent, Gaorong Venture Capital, etc.

In this regard, an insider close to the company said that the news of Tencent's participation in the investment was true. The Dark Side of the Moon responded that it would not comment on the financing news.

If this investment is successful, Dark Side of the Moon's valuation will reach a new high after breaking through US$3 billion, becoming the largest large-scale model startup in China.

Although the threshold of the technological war needs to be paved with funds, the computing power and talents that the big models are competing for at this stage cannot be separated from the support of funds. However, behind the large amount of financial support and high valuations, the hidden worries of the dark side of the moon are gradually revealed.

The Dark Side of the Moon is currently leading in valuation

In this round of AI wave, Dark Side of the Moon is undoubtedly the most dazzling startup company. It has won multiple rounds of financing in less than a year and a half since its establishment, and star capitals and Internet giants are competing to invest in it.

Tianyancha shows that Dark Side of the Moon received its first angel round of financing of over US$200 million in June 2023. Investors included Zhen Fund and Sequoia China, and its valuation was US$300 million at the time. In July of the same year, the company received a Series A financing from investors such as Meituan Longzhu and BlueRun Ventures.

However, the most eye-catching event in the market was the A+ round of financing of over US$1 billion in February this year, with investors including Sequoia China, Xiaohongshu, Alibaba, and old shareholders. This round of financing is also the largest single round of financing obtained by a Chinese large model startup since the emergence of ChatGPT, which also makes the valuation of Dark Side of the Moon jump to US$2.5 billion.

However, the first round of financing completed was actually $800 million, with Alibaba as the investor. This does not include the increase in investment from old shareholders and institutions that have not yet completed the investment process due to the Spring Festival.

In its financial report in May this year, Alibaba disclosed that it would invest a total of approximately US$800 million in Dark Side of the Moon in fiscal year 2024, purchasing approximately 36% of the shares. However, this US$800 million was not all in cash, as part of it was settled with the computing power provided by Alibaba Cloud, and the actual investment amount was less than US$600 million.

Since its establishment, Dark Side of the Moon has gone through four rounds of financing. If this round of financing is successful, its valuation will reach 3.3 billion US dollars, leading the "Six Little Dragons of AI" and becoming the most highly valued domestic large-scale model startup. At present, domestic large-scale model unicorns with a valuation of over 20 billion yuan also include Zhipu AI and Baichuan Intelligence.

According to public data, there have been 107 financing events in the global AIGC field this year, of which 20 domestic large-scale model companies have raised funds of 100 million yuan. Among the "New AI Six Little Dragons", Zero One Everything, Baichuan Intelligence, Zhipu AI, Dark Side of the Moon and Minimax have all received financing of more than 100 million yuan this year. Another company, Step Star, was also reported in June this year to be conducting a new round of financing with a valuation of 2 billion US dollars.

It is worth mentioning that shortly after the Dark Side of the Moon announced its financing, media reported that Zero One Everything, an AI model company founded by Kai-Fu Lee, had completed a new round of financing, with the amount reaching hundreds of millions of dollars. According to people familiar with the matter, the participants in this round of financing include a certain international strategic investment, a Southeast Asian consortium and other institutions.

Capital's renewed favor for AI unicorns also means that a new round of AI financing is about to come.

Pan Helin, a well-known economist and member of the Information and Communication Economics Expert Committee of the Ministry of Industry and Information Technology, said that compared with last year's financing boom, this year's big model investors are mainly focused on the application landing. For example, Dark Side of the Moon is due to Kimi's user growth, and Baichuan Intelligence is due to its application landing in vertical fields such as industry. Since AI big models ultimately rely on application monetization, investors pay more attention to the possibility of future profitability of AI big model companies.

Do Tencent and Alibaba have their own agenda?

Among all the AI ​​unicorns, it is not difficult to find that Tencent and Alibaba have invested in four leading domestic large-scale models, and they are also shareholders of Zhipu AI, MiniMax, Baichuan Intelligence and Dark Side of the Moon. This phenomenon of two leading companies investing in both companies is relatively rare in the past mobile Internet entrepreneurial boom.

However, from a strategic point of view, we can also know a thing or two.

As mentioned above, Alibaba invested and obtained nearly 40% of the shares. After that, it became a mystery how many shares the founders of Dark Side of the Moon still had. Although in the industry that has burned more money in the past, when the company finally went public, the CEO's shares would not be too much.

Of course, there is also the valuation issue. Due to policy reasons, for domestic AI startups, the only suitable listing market is Hong Kong, but there is uncertainty about how to list and at what valuation. After all, SenseTime’s valuation was not as high as that of Dark Side of the Moon and Zhipu AI, but the latter two are still far behind SenseTime in terms of revenue scale.

If Dark Side of the Moon is not ready for listing, or has no chance to go public, it is likely to be acquired, which is also the development path of some foreign unicorns. "After all, in the round of Alibaba's investment, Dark Side of the Moon gave up so many shares, and no one knows whether it can be acquired in the end," said a senior investor.

In fact, in the context of Alibaba's deeper contact with the dark side of the moon, Tencent's appearance is somewhat unexpected. Choosing a giant often means making another giant hesitate. Compared with Alibaba Cloud and Alibaba, Tencent Cloud is obviously not that important. Not long ago, an AI investor also revealed that at the end of last year, after the tightening of game licenses, Tencent had an internal review meeting to "tighten unnecessary investments" and "if new money is invested, it is necessary to calculate whether it can outperform the repurchase of Tencent shares." All these make Tencent's investment this time unusual.

But it is reasonable that among the big companies, Tencent obviously cannot focus on its own big model like ByteDance or Baidu, but hopes to achieve its strategic goals through external investment. Long before Dark Side of the Moon, Tencent has also invested in Zhipu AI, Baichuan Intelligence and MiniMax. The authoritative Silicon Valley media The Information said that this investment may pave the way for cooperation between WeChat and Dark Side of the Moon's chatbot.

In fact, the popularity of Kimi, the voice assistant, inevitably makes Tencent, which sits firmly at the top of the social track, nervous. After all, Tencent's strategic investment missed Zhang Yiming right under its nose, and now Tencent obviously does not want to repeat yesterday's story.

For the Dark Side of the Moon, choosing "not to take sides" is also the smartest approach. Each large company has its own advantages in the field or scenario it is good at. Startups will choose to maintain good relations with all large companies, and do not rule out cooperation with each of them. This is a mature business ecosystem and an inevitable choice.

However, although the dark side of the moon is currently a completely foggy forest, whether there will be more funding in the future and the commercialization problems of large model companies are questions that will have to be faced sooner or later.

How to make money is still a problem

In terms of revenue, the scale of almost all AI startups, such as Dark Side of the Moon, is far from enough to support their valuations. However, finding a commercialization path is extremely difficult, especially for Dark Side of the Moon, which is determined to bet on the to C track.

A notable feature of Dark Side of the Moon's C-end commercialization is to create a "super model" + "super application", that is, a dual-driven route of technology + product.

At the beginning, Dark Side of the Moon was known for its large model Kimi with excellent long text capabilities, and based on Kimi, it launched the Kimi Chat related application. Through the instant feedback mechanism that allows C-end users to directly feedback on the product experience and functions, Kimi Chat can quickly iterate and optimize products.

Data shows that from December 2023 to February 2024, Kimi's monthly active users were 508,300, 1,128,500 and 2,984,600 respectively. In particular, in February 2024, the number of users was almost six times that of December 2023. Data from the web and APP also show a growth trend. On the web, the number of daily active users on March 14 was 345,700, a significant increase from 127,900 on March 9. On the APP side, the number of daily active users on March 16 was 50,000, while on March 2 it was less than 20,000.

Although Kimi's data is growing significantly, the reality is that Kimi is still far from being a true super app. The industry consensus on super apps is that they must meet three conditions, including high app reliability, the ability to fully understand user intent, and a DAU between 30 million and 300 million. Kimi still has gaps in all three aspects.

However, for tool applications such as big models, embedding them into other application ecosystems in the form of intelligent assistants is also an important direction. Baidu, Tencent, iFlytek, ByteDance, and 360 have all released AI application assistants. It can be said that all major manufacturers are increasing their investment in C-end applications. With their own advantages in ecology and users, major manufacturers will be easily accepted by users in the C-end track.

Of course, it does not mean that Kimi does not have the potential to become a super app, but that the big companies that already have super apps and ecosystems have already won at the starting line. To give a very realistic example, the monthly analysis report on the hot spots of the Chinese generative AI industry market in May 2024 released by Yuehu Data, a subsidiary of Jiguang, disclosed the active status of mainstream generative AI applications on domestic mobile terminals in May. Among them, Wenxin Yiyan App ranked first, Doubao took the second place with the help of Byte, and Kimi ranked fifth.

As for more specific business models, there are two popular ones at present: one is subscription. Charging according to the number of users, but this model cannot create greater commercial value with the product, and subscription will not be the final business model. The second is commission. Among them, advertising has been verified by the Internet and has a higher certainty, but people's attention and time are limited, so the opportunities of this business model may not be that great.

In essence, the commercialization path of the entire AI large model startup is very direct, so everyone will quickly enter the stage of naked bayonet fighting. Investors or the market expect these companies to come up with new products or convincing results every quarter or half a year, such as user volume, revenue, influence, etc. This is also one of the main reasons why Dark Side of the Moon wants Kimi to continue to be active.

It cannot be denied that in the current business environment, Dark Side of the Moon has undoubtedly achieved certain results by exploring Kimi in the C-end market. With the continuous advancement of technology and the gradual maturity of the market, Kimi, as a flagship product, has demonstrated strong potential and appeal. However, commercial success is not achieved overnight. It takes time to cultivate the market, optimize products, and build an ecosystem. In this vast market space and prospects, Dark Side of the Moon has opportunities, but also challenges.