Zhu Xiaohu Addresses Arbitration Over Moonshot AI Controversy

On December 5th, Zhu Xiaohu, the managing partner of Jinsha River Venture Capital, addressed the recent arbitration case initiated by some investors of Loop Intelligence against Moonshot AI founders Yang Zhilin and co-founder Zhang Yutao in Hong Kong.

Zhu clarified that Moonshot AI was originally an internal project developed by Loop Intelligence over two years and had not yet received formal approval from its shareholders. This ongoing dispute not only involves issues surrounding a waiver letter but also highlights delays in board resolutions and perceived conflicts of interest.

Background of Moonshot AI

Established in March 2023, Moonshot AI launched its flagship product, Kimi, in October that year, quickly gaining industry attention and reportedly surpassing other competitors such as Wenxin Yiyan. However, the launch became contentious when Yang Zhilin and Zhang Yutao proceeded with fundraising efforts without obtaining a consent waiver from Loop Intelligence's investors, provoking strong reactions from the investor community.

In a social media post, Zhu Xiaohu emphasized that Moonshot AI was not a spontaneous endeavor but rather a culmination of two years of technology development within Loop Intelligence. Despite the project's long-standing development, the necessary shareholder resolution within Loop Intelligence was not signed until January of the current year. Zhu alleged that a director, Zhang Yutong, may have concealed a conflict of interest, potentially invalidating the resolution.

Additionally, Zhu revealed that Zhang Yutong had hidden the acquisition of a significant number of shares (approximately 9 million shares, representing 14% of the initial shares) in the newly established company. This action, according to Zhu, breached his fiduciary duties to the fund partners and shareholders, ultimately leading to Zhang Yutong’s dismissal from Jinsha River.

Core Controversy

The crux of the arbitration controversy revolves around Yang Zhilin and Zhang Yutao's actions in fundraising and establishing Moonshot AI without obtaining the necessary consent from Loop Intelligence's investors. Despite Moonshot AI engaging legal counsel to navigate the situation, the case underscores the complexities that Chinese startups face regarding spin-offs, shareholder rights, and fiduciary responsibilities. It is anticipated to become a landmark case in the venture capital sector.

Despite the tumult, Moonshot AI has achieved a valuation of up to $3.3 billion due to successful financing rounds and technological advancements. However, some early investors have expressed dissatisfaction regarding the equity arrangements between Loop Intelligence and Moonshot AI, contributing to the emergence of this investment dispute.

Key Points

1. Zhu Xiaohu confirmed that Moonshot AI was developed internally by Loop Intelligence.
2. The arbitration case involves allegations of unauthorized fundraising actions by the founders.
3. Zhang Yutong’s alleged concealment of shares and conflict of interest may complicate the shareholder resolution.
4. Moonshot AI has rapidly grown to a valuation of $3.3 billion, despite investor dissatisfaction.
5. The incident highlights broader issues in governance and fiduciary duties within Chinese startups.