As one of the domestic AI unicorns with rapid development momentum, Dark Side of the Moon’s valuation has increased rapidly this year, but this also hides a crisis.
Recently, Dark Side of the Moon founder Yang Zhilin and co-founder and CTO Zhang Yutao received arbitration notices from their former company Circular Intelligence and its investment institutions Jinshajiang Venture Capital, Jingya Capital, Boyu Capital, Huashan Capital, and Wanwu Capital. The arbitration institution for the Hong Kong International Arbitration Center.
According to Wall Street Insights, the reason for the arbitration was that Yang Zhilin, Zhang Yutao and others started financing and establishing Dark Side of the Moon without waiting for the consent and exemption letters from five investors including Jinshajiang Venture Capital.
Agreeing to the waiver is only superficial. Analysts believe that the essence of the problem is that the two parties may have differences on equity allocation, and some investors believe that the equity given is less.
According to IT Orange data, in the early days of Dark Side of the Moon, both Sequoia China and Zhen Fund participated in angel round financing. Sequoia China even participated in the first three rounds of financing in a row, while institutions such as Jinshajiang Venture Capital had no direct investment. According to people familiar with the matter, the five institutions including Jinshajiang Venture Capital that filed the arbitration this time indirectly held shares in Dark Side of the Moon through Circular Intelligence.
A senior investor who did not want to be named said that investment institutions are worried about the founders of start-up companies starting a new business. In order to protect their rights and interests, they usually require priority investment rights in new companies. In more stringent cases, they must obtain the consent of the investors or issue a document. It is common for founders to obtain waivers to protect themselves from liability.
According to the above-mentioned people familiar with the matter, in January 2023, Yang Zhilin planned to start an independent business and received the support of Circular Intelligence CEO Chen Qicong and major shareholders. The two parties reached an agreement that Dark Side of the Moon would give equity in return. At the end of March, Chen Qicong sent an email to shareholders informing them of the plan. Within the agreed time limit, it was confirmed by shareholders and no one raised any objections. The board later approved the resolution.
According to this person, in March 2024, after Alibaba invested heavily, Dark Side of the Moon further stepped out of the circle. Some investors in Circular Intelligence believed that the initial equity they received was too small and needed compensation, and began to frequently threaten and make small moves, threatening to sue.
There are rumors that Circular Intelligence, Jinshajiang Venture Capital, etc. have filed for arbitration, and their demand for Dark Side of the Moon is to obtain half of the equity of the company’s founding team.
So far, Dark Side of the Moon and Loop Intelligence have not responded.
In fact, in the field of venture capital, conflicts similar to the distribution of rights and interests between founders and investors of start-up companies are not uncommon. In the final analysis, it is a question of profit distribution.
This dispute also starts with Circular Intelligence. It was founded in 2016 and is an AI enterprise service provider for sales scenarios. Yang Zhilin and Zhang Yutao are both co-founders. The former is the person in charge of AI and products, and the latter Serving as CTO, the CEO of Circular Intelligence is Chen Qicong, and the COO is Jiefang.
This is a young entrepreneurial team composed of super academics. Chen Qicong is a master's degree in computer science at Carnegie Mellon University. He is an early core team member of GrowingIO. Dr. Yang Zhilin graduated from Carnegie Mellon University and worked for Google Brain. and Facebook AI, Zhang Yutao won the first prize of Wu Wenjun Artificial Intelligence Technology Progress Award.
According to IT Orange data, Circular Intelligence received millions of angel investments from Jinshajiang Venture Capital in 2016. Since then, Jingya Capital, Zhen Fund, Huashan Capital, Sequoia China, Wanwu Capital, etc. have joined in. In 2021, Circular Intelligence will be completed The last war investment of US$38 million was mainly funded by old shareholders.
At the end of 2022, ChatGPT became popular all over the world, quickly triggering changes in the AI large model industry. Yang Zhilin saw this opportunity and established Dark Side of the Moon in March 2023 to focus on general artificial intelligence. Dark Side of the Moon launched the Kimi smart assistant for the consumer in September. The product gained widespread attention at the beginning of this year due to its "long text" issue.
Dark Side of the Moon also stands out among many AI startups. In February 2024, led by Alibaba and Ant, with participation from Sequoia, Meituan, Xiaohongshu, etc., Dark Side of the Moon completed a US$1 billion Series A financing, with a post-money valuation of US$2.5 billion, becoming the highest valuation unicorn.
However, it was Dark Side of the Moon’s high valuation that became the trigger for Circular Intelligence and the investment institutions behind it to initiate arbitration.
Arbitration is a dispute resolution method based on the agreement of the parties, which enables the parties to obtain an award through confidential and fair procedures.
At present, Yang Zhilin and Zhang Yutao have entrusted Mingde Law Firm to handle the matter. Lawyer David Morrison, a senior partner of the firm, said that they have paid attention to relevant arbitration matters. "We believe that this matter lacks both legal and factual basis, and our firm will file a defense in accordance with the law."
This also means that Yang Zhilin and Zhang Yutao have a relatively firm attitude towards arbitration.
Huisheng International Capital President Huang Lichong told Wall Street Insights that according to the arbitration process, after raising a legal defense, the respondent needs to submit a defense within the specified time, detailing the reasons for its defense and relevant evidence.
An insider close to Dark Side of the Moon revealed that Dark Side of the Moon is ready to actively respond to the lawsuit and is relatively confident internally. "Legally, Dark Side of the Moon has no concerns."
The AI large model technology competition is in full swing around the world, and related business model exploration is also in its infancy. For Dark Side of the Moon, if it wants to win this war without gunpowder as soon as possible, the challenges it faces are far greater than imagined. More.