ZhenFund's Handover: After Xu Xiaoping Steps Back, Partners Can't Tax the Young
ZhenFund fights the erosion of its first-generation edge with all-hands sourcing and per-project individual ownership — every logo hangs under one name, and partners can't coast on decision-making.
The video won't play here. Listen to the audio instead:
The argument · tap a timestamp to hear it
Xu Xiaoping's exit was Schrödinger-style
In 2018 Xu Xiaoping began attending only half of the investment committee meetings, but no one knew which half — Fang Aizhi's phrasing is "you might see Teacher Xu today, you might not." By 2020 he took no part in any deal-level discussion, not even the weekly meeting. Liuyan says this exit was "really thorough," and not improvised: from very early on, Xu Xiaoping and Wang Qiang repeatedly said "after another couple of funds, this fund is yours." Liuyan says he heard it for eight years. This kind of handover — planned years ahead, phased out step by step — has almost no precedent among China's top-tier funds.
— listener mailZhenFund's IC doesn't decide by partner vote count
At nearly every Chinese VC the IC is made up of partners and only partners vote; Liuyan calls ZhenFund "the only outlier": analysts through partners all take part, each person gets one vote, and votes aren't counted. The decision method is to see who holds a strong opinion about the project — if both Anna and Yusen think it's good, they invest; if one thinks it's good and one doesn't, they look at other colleagues; if everyone thinks it's bad, it depends on how strong the conviction of the colleague pushing the project is. Someone will say "I won't invest, but I also won't block this project." Only recently did they start using anonymous Feishu voting, but only to keep track, not as a decision criterion.
— listener mailPartners can't levy a tax on the young
From day one ZhenFund has insisted partners source deals themselves: every month each person has to submit a table of the projects they sourced, and Anna has to write one and tick the boxes too. A colleague said straight out in a meeting that Anna hadn't looked at many projects this month and surely didn't know this track very well. Back when Xu Xiaoping was still around he said that if one day ZhenFund's partners only made decisions and let the young people go find projects, "ZhenFund is finished." Liuyan's summary is "you partners can't levy a tax on the young" — levying a tax means degeneration. The old partner Zhaoyu complained before leaving: if you can't levy a tax and you always have to find projects, then what's the point of being a partner.
— listener mailEach project hangs under only one name
On ZhenFund's website and in its fundraising decks, every project has only one person's ownership, occasionally two, but eighty or ninety percent are one person — no matter whether that person is an analyst, an investment manager or a partner. Xiaohongshu is Anna's, Party Animals is Yusen's, a certain Mendan is Liuyan's. Tianjie, whom Liuyan recruited, invested in a partnership biology project; Liuyan invested in it too, but "his project is his, my project is mine" — Liuyan never knew the data on Tianjie's project. This structure lets young colleagues truly own a deal, and it also means partners can't skim a cut off the young.
— listener mailZhenFund's methodology is incompatible with other funds
Liuyan says ZhenFund's core philosophy of judging people is actually hard for someone trained at another fund to agree with — everyone else looks at how big the market is, compares how many companies are in the industry, who's number one; ZhenFund isn't that line of thinking. Someone from Sequoia can go to IDG or Hillhouse and adapt quickly, but ZhenFund's methodology may be fundamentally at odds with those. The philosophical split at the bottom is: is your judgment of the market more accurate, or is a good founder's judgment of the market more accurate. So ZhenFund tends to cultivate people from a blank sheet; Xu Xiaoping's slogan is "faith makes it work" — believe in the founder, and internally you also have to believe in this business of betting on people. In ten years only three colleagues went to another fund.
— listener mailProfessors who don't found full-time do better
ZhenFund studied all Chinese listed companies and companies founded successfully by professors, sorting professors into categories: those who served as CEO themselves, those with a PhD as CEO, and those merely lending their name. The conclusion overturns the received view: the most successful projects aren't professors founding full-time, but professors not full-time and students full-time. Liuyan stresses this isn't necessarily causal — it's not that it's bad once a professor comes out, but that in many cases the professor had no choice about coming out and the company still made it. So ZhenFund is now a bit more tolerant about whether a professor is full-time, and looks more at whether the student is full-time and whether the student is CEO. Another finding is that the golden age for founding is roughly 26, 28, but if you take all A-share listed companies rather than just the internet, 35 becomes the main standard.
— listener mailExecutive founders have the lowest success rate
Liuyan says that across the four quadrants, executives have the lowest success rate as founders, because "the best founders don't go become executives." ZhenFund began systematically looking at executives in 2016-2018, and by 2020 realized the whole executive group was very dangerous. The reason: a person who chooses to become an executive is essentially risk-averse, and finding a risk-taker among the risk-averse is a harder task. Executive founders are the hardest to judge, because with platform amplification it's very hard to separate the platform's advantage from their own. Now zero-to-one founding experience is strongly preferred, and a big-company background has instead become a disadvantage you have to explain. But this isn't an absolute theory — Shen Peng fought the food-delivery war inside Meituan, Wang Xiaofeng and Kate did a city at Uber, and both got funded.
— listener mailOnce the first-generation edge is gone, only a system can fight back
Liuyan says Xu Xiaoping back then held something close to the position of martial-arts alliance leader among early angels; as long as Teacher Xu stepped in, they could even get a cheaper price than others. Today those first-generation advantages are gone, "we're using a system to fight back." He tells a story that hit him hard: while competing for a project, Tina, who had risen from intern to director, faced a rival fund whose big shot went to pitch in person, and the founder said he wouldn't let ZhenFund invest. Tina asked Teacher Xu to step in — in 2015-2016 this was an invincible move, like carrying the Ark of the Covenant into battle. But that time Teacher Xu refused Tina; the moment the call connected Tina burst into tears, and Teacher Xu spent forty minutes telling her why he was no longer needed, like a teacher or a father saying "you have to get used to days without me."
— listener mailIn their own words · checked verbatim
He's just a Schrödinger's appearance. We hold IC every Tuesday. He could, and half the time he wouldn't come. And you wouldn't know whether he was coming today or not.
他就是个薛定谔的出现 我们每周二开投委会 他可以他就会有一半不来 然后你也不知道 是他今天来还是不来
listener mail18:07
We can never let partners live in comfort and privilege, sitting there only making decisions — because decisions, we don't think that's the hardest part of this industry.
我们永远不能让合伙人 养尊处优 就是处在一个 只做决策 因为决策 我们不觉得是这个行业 最难的一部分
listener mail39:18
Things that do you no harm and do others good — do as many of them as you can.
对自己没坏处 对别人有好处的事情 能多做尽量多做
listener mail1:16:36
It was really like a teacher, or a father: you have to get used to days without me.
就很像一个 真的是一个老师 或者一个父亲 你要习惯没有我的日子
listener mail1:20:36
Figures
| ZhenFund's early team size | 4 people | 9:05 |
| Year Xu Xiaoping began attending only half of IC meetings | 2018 | 18:07 |
| Year Fang Aizhi was additionally named founding partner | 2019 | 18:07 |
| Number of founders Liuyan meets in a month | about 30 | 39:18 |
| Upper limit on founders a colleague meets in a month | sixty to seventy | 39:18 |
| Number of Chinese unicorns | 640+ | 43:25 |
| Golden age for founding (internet measure) | 26, 28 | 44:26 |
| Main age standard for founding (all-listed-companies measure) | 35 | 44:26 |
| Times colleagues left for another fund in ZhenFund's ten years | 3 | 42:25 |
Glossary
- IC / Investment Committee
- The internal VC meeting that decides whether to invest in a project.
- sourcing
- The process of investors actively seeking out and approaching potential startup projects.
- carry
- The share of a fund's returns paid out to the investment team, usually settled per project exit.
- principal
- A VC rank, usually above VP and below partner.
- lateral hire
- Bringing in experienced people directly from other institutions rather than cultivating them internally.
- imposter
- Liuyan's term for opportunistic founders with good backgrounds who chase hot trends and take VC money to start companies.
How to listen
Founders, investors and fund LPs curious about VC organizational design and handover mechanisms, especially those watching generational succession in Chinese venture capital.
The song and self-introduction at the start, 0:00-2:02, and the chat about artsy youth and entrepreneurship at 1:04:34-1:07:34.