Bob Xu Steps Back, Anna Fang Steps Forward: China's First Succession Story in Venture Capital

By Benita Zhang (张小珺)

The Chinese Version of this Article Premiered on Tencent News

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Xu Xiaoping (Bob） rarely steps into the new headquarters of ZhenFund, which is located on the 25th floor of an office building in Guomao.

This 67-year-old Chinese angel investor personally participated in the office design. ZhenFund has moved three times in the past 12 years until this time, they decided to settle down for the long term. Xu Xiaoping specifically hired a designer who had previously worked on his own home.

As a former music teacher, Xu has a penchant for showcasing unique aesthetics. The headquarters is just across the street from his residence in Beijing Yintai. It is a stylish space composed of curved glass facades and bold color blocks. Influenced by the architect Gaudí's belief that "straight lines belong to men, curves belong to God," there are hardly any straight lines in the entire building. There are 15 elliptical meeting rooms, each featuring an extravagant bright color – red, magenta, or purple. The all-hands meeting is held in the large red meeting room on the left as you enter, complete with a circular seating arrangement reminiscent of an opera house.

In 2021, the fund's 60 members moved into this lavish office space. Only the soul designer Xu Xiaoping deliberately reduced his visits.

Xu Xiaoping meticulously planned not only the new headquarters but also a further delegation of authority. This angel investment organization, founded by Xu Xiaoping and Wang Qiang in 2011, has managed seven funds with an AUM (assets under management) of over 12 billion RMB after operating for 12 years. They quietly replaced top decision-makers.

Xu has not only stepped back in terms of management but has also actively reduced profit sharing. At the end of 2021, ZhenFund completed its seventh USD fundraising round, and to motivate the young team, Xu Xiaoping significantly reduced his share of the profits from that fund. "In fact, he proposed to reduce it to zero," says ZhenFund's founding partner Fang Aizhi (Anna), "I said you can't reduce it to zero; I still need you. In some important decisions, I definitely need his guidance." She and Managing Partner Dai Yusen are currently the actual decision-makers for investments; Xu Xiaoping and Wang Qiang focus more on macro-strategies, exit decisions, and team building.

This may be the first succession case in the history of Chinese venture capital. With over 20 years of VC experience in China, most first-line funds have no precedent for succession, and most founders are still in their 50s and 60s, far from retirement. Xu Xiaoping is relatively older, born in 1956, which prompted ZhenFund to face the issue of the founder aging and selecting the next-generation successor. The uniqueness of fund succession lies in the fact that the venture capital industry, especially in China, often emphasizes individual heroism, and how the successor becomes another leader and flag-bearer is critical.

Through ZhenFund, we can see that the Chinese approach to succession differs from the Western business narrative of "business is business." It is also a story of trust, loyalty, and lineage inheritance.

The young team inevitably feels the pressure. "This is definitely a 'big shoes to fill,'" say the two partners.

01

From many perspectives, ZhenFund is a unique fund. The two founders have teaching backgrounds and were involved in founding New Oriental, which carried the dreams of a generation of young Chinese studying abroad. They were not only English teachers but also life mentors with boundless enthusiasm for shaping the destinies of young people. What's even more remarkable is that both of them are co-founders of New Oriental. Don't underestimate the difference – one of the prerequisites for being a co-founder is "not having the personality of the top leader" and "not wanting to be the top leader every day," which eliminates the "top leader problem."

In many ways, the founders, who have a dream-sensitive constitution and lack a thirst for power, have shaped a fund with certain "anti-capital" and "anti-centralized power" characteristics. This culture ultimately manifests itself in the succession process.

In the summer of 2016, Wang Qiang and others planned a trip to Europe to celebrate Xu Xiaoping's 60th birthday. In the same year, Fang Aizhi heard him mention exhaustion for the first time.

At that time, ZhenFund had just turned five years old and was in the process of raising its fourth fund. Under the "double innovation" policy, the number of entrepreneurs had multiplied, and many funds had taken aggressive steps, making angel investing, which was already physically demanding, even more chaotic. Xu Xiaoping, in his late 60s, began to fill his schedule with meetings starting at 10 in the morning, one every hour, attending 6 to 10 meetings a day, with only a brief break for lunch. His condition worsened as the day progressed, and he often attended meetings until 2 a.m. At this point, Xu Xiaoping told Fang Aizhi that she should make independent judgments and not call him for every meeting if she felt it was fine.

Young investors didn't notice any difference. Gradually, Xu started taking more leave from the investment committee meetings, which were crucial for shaping the fund's direction. This was just the beginning of his distancing.

By 2018, when ZhenFund raised its fifth fund, Xu Xiaoping's attendance at investment committee meetings had decreased by half. Liu Yuan, a ZhenFund partner, referred to this as "Schr?dinger's appearance" - "He's not coming for half the time, and you don't know if he'll be there today or not. We told the founders that you might or might not see Professor Xu today." This was the beginning. One year later, in 2019, Xu not only stopped attending investment committee meetings, but also reviewed very few projects that required his confirmation.

In fact, a quiet transition was taking place internally. It was a fairly long process, spanning over five years, and it was hidden in the subtle and implicit Eastern expressions.

ZhenFund emphasizes a family culture. Due to the founders' teaching backgrounds, the internal staff refers to Xu Xiaoping and Wang Qiang as "Teacher Xu" and "Teacher Wang," or collectively as "Uncles." Fang Aizhi, the successor, has been involved in building the fund framework from day one, and her understanding with the uncles is that they never discuss money or promotions.

"I find these things quite awkward," she said. Her initial position at ZhenFund was as the General Manager. Later, whenever a senior person joined the fund, the uncles would proactively promote her. For example, in 2014, when the fund hired a new CIO (Chief Investment Officer), the uncles immediately promoted her to CEO. "I even told them I didn't want this CEO title, it's strange, which other fund has a CEO title? But they said 'listen to me'..."

She never heard the uncles discussing seriously when they would retire, who would succeed them, or why it would be her. It just happened one day when the two casually said, "In the future, this will be yours, and you must...". And it happened like that.

"Since I joined ZhenFund, Teacher Xu and Teacher Wang often said, 'In another two funds, the fund will be yours, and we'll reduce our carry (performance fee) to the minimum.' They had a mentor's mindset. Of course, we all knew that Anna (Fang Aizhi) would be the successor," Liu Yuan, who witnessed Xu Xiaoping stepping back and Fang Aizhi stepping forward, recalled. "Anna would think that Teacher Xu intentionally stepped back. He probably had many things he wanted to say in the group but held back and privately messaged Anna." Even in the early days, when several investors couldn't come to a consensus on a project, they would go to Xu Xiaoping for guidance. Xu suddenly said, "What will happen when I retire? What will happen when I die?" The meeting room fell silent instantly.

In early 2020, as the fund approached its 10th year, Xu Xiaoping and Wang Qiang were planning a significant event. They decided to "promote a leader from the young team" and "establish a new flag." The two of them surprised Fang Aizhi by showing up at her home and informing her. They decided to announce it in a ceremonious setting two days later.

On a winter night, ZhenFund was hosting a New Year's party. Employees were instructed to wear festive red clothing and gather at a bar and restaurant next to the Four Seasons Hotel. ZhenFund prefers an atmosphere with no hierarchy and a sense of camaraderie, where people eat, drink, and play games like Mafia. In the midst of the joyful atmosphere, Xu Xiaoping announced the promotion of Fang Aizhi to "Founding Partner."

For the fund, the title of Founding Partner comes with an extra layer of founder's honor, which is usually enjoyed only by the founders themselves. Internally, the ceremony for Fang Aizhi's promotion marked a significant step in ZhenFund's succession process.

Fang Aizhi's eyes welled up with tears as she took the stage and delivered an emotional speech. "I'm very grateful," she later said.

In the audience, 60 pairs of eyes were fixed on her, showing little surprise. According to one of the investors present, that year, Fang Aizhi reached the peak of her popularity in the consumer investment field with investments in Xiaohongshu (Little Red Book) and Perfect Diary. Although she was Xu Xiaoping's first investment apprentice and the CEO of ZhenFund, it was only with these two projects that she proved her talent as an angel investor. Xu Xiaoping took this opportunity to step back and push Fang Aizhi forward. (At the end of that year, the parent company of Perfect Diary, Yatsen E-commerce, went public on the NYSE with a market capitalization exceeding $14 billion. However, the market value of this domestic beauty brand has since declined and is now only $533 million.)

After the party, a global black swan event occurred, unexpectedly accelerating the succession process. Xu Xiaoping was on vacation for the Chinese New Year when the COVID-19 outbreak happened, and he decided to delegate more authority. Without any breaks, Fang Aizhi became the top leader, in charge of the fund's operations. Some investors believe that this provided space for a smooth transition of power.

Xu Xiaoping's last internal meeting was the strategy meeting attended by a small number of people on Mondays, which he attended weekly in 2020. However, one year later, he began to repeat the "Schr?dinger's old trick" - taking more and more leaves. In Fang Aizhi's view, "he has been slowly stepping back from these roles."

A year after Fang Aizhi independently took over, in 2021, Dai Yusen was promoted to Managing Partner and started co-managing the fund with Fang Aizhi. In the same year, Liu Yuan and Yin Le were promoted to Partners.

Dai Yusen was once a co-founder of Jumei Youpin, which emphasized the "co-founder" aspect of the organization. Two generations of co-founders and managing partners, three-quarters of whom were former co-founders, tend to be humble, supportive, and less obsessed with power. Like Xu Xiaoping and Wang Qiang, Dai Yusen also poured his youth into entrepreneurship, had expectations of being a CEO, and felt both hopeful and disappointed when parting with the company, and he shares a mutual respect with the two elders.

This "co-founder" trait, to some extent, explains the "letting" culture that ZhenFund has displayed in dealing with the sensitive and often turbulent issue of succession that many organizations face.

Speaking of "succession," Dai Yusen reveals a hint of concern, "It's like having a scepter handed to you." But upon further thought, he said, "I have to say, ZhenFund is indeed the only fund among the top Chinese funds that has accomplished something like this."

He uses the term "something like this" to indirectly address the issue of "succession." This is partly out of respect for the founders who started the movement. The other part of the doubt comes from the fact that even though Xu Xiaoping voluntarily stepped down and distanced himself from operational details, the investment philosophy, influence, and cultural impact he left behind remain strong. His life attitude and wise words are still cherished by his disciples.

02

The story of ZhenFund begins with two uncles. With New Oriental's listing on the NYSE in 2006, the "Three Masters" became the richest teachers in China. However, Xu Xiaoping said, "Life ends in the moment of going public."

He and Wang Qiang took a step back, meeting at a café in Guomao every day, and then finding a small pub at night to ponder their next direction in life.

This situation continued until October 2011 when they decided to embark on a second entrepreneurial journey. Before that, they had occasionally provided funding to young entrepreneurs. At that time, angel investing in China was accelerating, but the focus was on individual actions, often following the "big boss with an assistant" model. They decided to move away from going solo and adopt a more structured approach. What was more tempting than making money was continuing the passion from their New Oriental days of "supporting young people in their lives and dreams." Two months later, an angel investment organization founded by English teachers and life counselors was born.

Xu Xiaoping and Wang Qiang represent two completely different personalities. Xu Xiaoping is an enthusiastic and expressive sentimentalist. He's from Taizhou, Jiangsu, and people's first impression of him is "his hearty laughter," "a warm handshake every time," and the fact that this idol on television can even say "TMD."

He is full of vitality, sharp-witted, loves to play, and can be quite dramatic - he once had a "pillow fight" with an entrepreneur. He is a lover of music, good food, and fine wine, with Peking duck being one of his favorites. However, he is also easily influenced by his surroundings and driven by empathy or fear. At that time, there was a general summary of his investment style in the industry: who can secure an investment depends on who can make Xu Xiaoping cry.

Wang Qiang is quite the opposite. He is a principled purist. Since the New Oriental era, he has been ready to "trigger a physical bomb" at any time for the sake of principles. If anyone dared to disrupt the agreed-upon way of doing things, he would be the first to "fight to the death" with them. When he was in charge of the Discipline Inspection Commission, he heard that someone had sent crabs to Yu Minhong, the founder of New Oriental, he "waited outside Yu's home late at night." During his time as the president, he was a "presidential person." He said that in the movie "American Dreams in China," from a personality perspective, he is more like the strong-willed character played by Deng Chao, while Xu Xiaoping is closer to the glue character played by Tong Dawei. "How can a fiery steed be harmonious?" said this Inner Mongolian.

Unlike Xu Xiaoping's pursuit of a vibrant and colorful life, Wang Qiang is more scholarly and appreciates minimalism. He is a bibliophile and collector of ancient books, with his favorite philosopher being Immanuel Kant. During the long New Year holidays, he enjoys watching the Spring Festival Gala with his parents for one evening, and the rest of the time, he immerses himself in his study with cookies and tomatoes as his sustenance. As one of the "three nobodies" (no driver, no nanny, no car), he gave away his car, along with the Beijing license plate, to an entrepreneur who couldn't secure a license through the lottery system. He chose to commute by subway. He said, "It's not about pursuing a carbon-free lifestyle, but I can read books on the subway."

Xu Xiaoping is more worldly, lively, and extroverted, while Wang Qiang is introverted and serious. This difference can also be seen in the books they've written - Wang Qiang's book is titled "書蟲牛津消夏記" (The Bookworm's Oxford Summer), and it's a hardcover book with a title in traditional Chinese characters. Xu Xiaoping's book is called "黄金是怎样炼成的" (How Gold is Refined).

The process of naming the fund demonstrated how these two contrasting personalities coexisted. At first, Xu had a sudden inspiration. He appreciated the depth of the English word "Integrity," which translates directly to "诚信" in Chinese, meaning honesty and consistency, and thus he translated it into "真格" (ZhenFund).

Xu shared his idea with his old partner, and the former English teacher immediately engaged in a spirited discussion and deliberation about the words. He thought of Zhu Xi's "格物致知," where "格" implies study; he then related it to the Chinese terms "人格" (personality) and "神格" (divinity), where "格" represents a standard and universality. "It's brilliant," Wang Qiang praised enthusiastically, repeatedly emphasizing, "Placing '真' (real) alongside '格' is very profound."

Wang Qiang said that around the naming process, they asked a series of questions about the fund's necessity and philosophical foundation, laying the cultural genes for the next ten years. Their division of labor was clear: Xu Xiaoping would lead all investments, and Wang Qiang would be involved in culture, organization, and direction building. The two principles they established at that time were:

They hoped to create the largest small fund in the world (small in terms of AUM, with a focus on angel rounds).

They wanted to build a legacy that could be passed down rather than an institution that showcased personal heroism.

"I always tell them, don't think you're working for me and Xu Xiaoping. This fund will eventually be yours," Wang Qiang said. "There probably isn't a second fund that says that."

03

In the financial industry, where self-interest and a strong alpha-male presence prevail, Xu Xiaoping's emotional side has often left people bewildered. Even his most loyal disciples have gone through a series of transformations, moving from hesitation and confusion to assimilation.

Fang Aizhi was Xu Xiaoping's first disciple, although their initial meeting didn't exactly ignite any sparks. In 2011, at the age of 29, Fang Aizhi met Xu Xiaoping at the Beijing Shangri-La Hotel. She had just gone through two career transitions, working at JPMorgan and General Electric, and was a staunch rationalist. On that day, Fang Aizhi, dressed in a crisp white suit with a laptop in hand, listened to Xu Xiaoping's artistically delivered speech and asked, puzzled, "Are you doing charity?"

"Of course not!" Xu Xiaoping responded firmly.

As she left the hotel, Fang Aizhi's only thought was, "I can't work with him."

"I was a little upset at the time," Xu Xiaoping recalled. "She was typing away, not listening to me. I wanted eye contact." But he noticed that Fang Aizhi was organizing his words into a document.

At that time, Xu Xiaoping and Wang Qiang were in need of a chief of staff, and Fang Aizhi was introduced to them. Their first meeting was unproductive, and Fang Aizhi even flew to Hong Kong to meet with Shen Nanpeng, a founding partner and managing partner at Sequoia Capital, who was one of the initiators and LPs (limited partners). During their meeting at the Shangri-La Hotel in Hong Kong, Shen Nanpeng easily convinced Fang Aizhi, with two simple arguments, to embrace angel investing. She questioned, "Why angel investing?" and he replied, "Because the market is getting more expensive, and we need to move forward." She then asked, "Why choose Xu Xiaoping?" and he responded, "Because he has influence, and entrepreneurs like him."

"At that time, my dream was to become Sheryl Sandberg (the former COO of Meta). I wanted to find the next Uber through venture capital and then go on to be a COO or something," Fang Aizhi said. However, she didn't expect that "the job was so enjoyable from day one," and she eventually fell in love with the work.

Upon joining, Fang Aizhi was tasked with learning about investments under Xu Xiaoping's guidance while also diving into various administrative tasks such as setting up bank accounts, finding office space, and making restaurant and hotel reservations.

There were plenty of conflicts between the rational and emotional approaches. Fang Aizhi had a disciplined routine of morning runs, while Xu Xiaoping was the opposite. She commented, "I need to adjust my schedule." Her husband complained, "Can't he (Xu Xiaoping) adjust instead? Working in the morning is normal, isn't it?"

Fang Aizhi was also responsible for replying to emails from entrepreneurs. Every day, they received dozens of business plans (BPs), and Xu Xiaoping demanded personalized responses. She disagreed with this approach, thinking it was a waste of time. But Xu Xiaoping insisted that if someone took the time to write a letter, ZhenFund should at least provide some feedback. He asked her to change her email signature to 'Dream Center.'

Their biggest disagreement was in the area of investment. Fang Aizhi believed that market analysis should take priority when evaluating startups, but Xu Xiaoping taught her from day one to "flip to the team introduction page when you receive a BP." She was initially skeptical of his team-first approach. However, it took her two years to become convinced that looking at the team was essential.

Fang Aizhi was the first disciple to learn under Xu Xiaoping's guidance. She explained, "Following him during that time and having him analyze all investments, I typically had a more negative evaluation, but I'd listen to why he said 'yes.' One of his favorite sayings was, 'Invest in their strengths and overlook the rest' (meaning to invest in a person's strengths without focusing on their weaknesses)."

In the first couple of years, perhaps due to her performance, Xu Xiaoping invited her for a one-on-one breakfast meeting. His communication style was such that "he generally doesn't state his purpose when he talks to you; he talks, and the purpose eventually surfaces." The conversation ultimately revealed that Fang Aizhi lacked clear direction when seeking investment opportunities. Xu quickly diagnosed the issue and offered a remedy: the "S strategy" – narrowing the search scope and focusing solely on entrepreneurs from Stanford University.

In China ten years ago, the mainstream choice for graduates from prestigious universities was typically high-paying jobs in industries like investment banking, and entrepreneurship was a niche pursuit. Xu Xiaoping, using his dual roles as a teacher and public speaker, encouraged young people to embrace entrepreneurship. He wrote letters to Chinese youth, such as "Seven Paths to Entrepreneurial Success," and gave speeches around the United States to inspire young people to return to China. He argued that, in the United States, there might be beautiful landscapes but also depression, while China was rapidly developing, so why stay in the US?

Internally, he devised a slogan: "Don't be afraid of high prices; just look at the multiples."

ZhenFund's early team consisted of just a few individuals. In addition to Fang Aizhi, there were Gu Minman (now a founding partner at Wumart Capital) and Wu Dan (now CEO of Hero Games). They absorbed the entrepreneurial spirit and built the fund and company. The fourth disciple to stay was Liu Yuan.

This youthful and artistic-looking investor, who had a baby face, shared one significant commonality with Xu Xiaoping – they both loved to write letters. He started his career at the U.S.-based venture capital firm Greenspring Associates, but soon found himself feeling underappreciated. He hoped that Greenspring would send him back to China to establish an office, but his hopes were dashed. In his own words, he was seeking a wise lord to serve and dedicate his life to.

At the age of 25, he wrote a lengthy email to Shen Nanpeng, pleading for a job opportunity. In the email, he described his frustration with not being recognized at Greenspring using eloquent language, "I deem myself a tiger, but I've been treated like an ape, unable to reach higher ranks."

Shen Nanpeng replied in just three minutes. The influential figure in the investment world responded with a brief message: "Sorry, we are not having one right now, but we'll follow up if there are any opportunities."

Liu Yuan's encounter with Xu Xiaoping was a stroke of luck. Although Greenspring held a lukewarm attitude towards the Chinese market, Liu Yuan was determined to raise funds in China as a GP (general partner). He had already established close contacts with angel investors at Renrenche (a Chinese used car marketplace). When he had a phone conversation about raising funds with these contacts, Xu Xiaoping was the one they recommended. In 2013, Liu Yuan attended a birthday dinner in Beijing where Xu Xiaoping served as the host.

Xu Xiaoping was highly enthusiastic about the mother fund concept and asked Liu Yuan a barrage of questions about various European, American, Indian, and Israeli funds. The conversation went well, but then Xu Xiaoping took a surprising turn. He suggested that Liu Yuan visit the United States to meet someone personally. In a mysterious tone, Xu Xiaoping said, "You'll get along with her very well."

On Christmas that year, Liu Yuan met Fang Aizhi, who encouraged him to return to China and join ZhenFund. He was at a crossroads.

Following their meeting, Xu Xiaoping's trusted associate initiated a series of high-intensity interactions. Liu Yuan recalls, "I told her I needed two weeks to think about it. Anna said, 'OK.' After two days, she asked, 'Why do you need two weeks? Can't you decide in one week?' I said, 'Okay.' But on the third day, she asked, 'What are you going to do during this one week? Why will you be clearer in one week compared to today?' At that moment, Fang Aizhi's husband offered her a strategy: 'You can say you want to go to Google Ventures or a16z (a well-known American venture capital company). Of course, you'd say a16z.'"

Liu Yuan, who hadn't fallen under pressure or temptation, ended up surrendering to a small moment. Fang Aizhi was very frugal. "To what extent?" She said, "Don't call my phone; it's costly. We use Skype." In 2014, after his interviews with the investment departments of various internet companies in China, Liu Yuan went through seven rounds of interviews. He initially planned to finish and return to the United States immediately. Fang Aizhi invited him to stay one more day and attend an event with Xu Xiaoping. "I'll upgrade your flight," she said. "At that moment, I felt overwhelmed by someone who still uses Skype to make phone calls," Liu Yuan recalled. The next day, Liu Yuan saw a pregnant Fang Aizhi waiting at his hotel early in the morning to pick him up.

The night before, he had just negotiated an offer with a top-tier venture capital firm. But in that moment, he was moved and gave in. This investor, who had a sense of a scholar, felt that he had been "invited three times to the thatched cottage." On the way to the event, he made an impulsive decision: to give up a bigger platform and higher salary to join ZhenFund. (He later became an investor in Momenta, Know Yourself, and New Vision.)

Yin Le (Emma) became a partner at ZhenFund in 2014 because of a wallet. She was a graduate student at Stanford, and ZhenFund's team was giving a talk at the school. Yin Le was a staff member at the school. After the event, she found a lost wallet and offered to return it to the owner. It was summer break, and she tentatively inquired about the possibility of interning at ZhenFund. Xu Xiaoping agreed, sipping coffee. She had a smooth journey at ZhenFund, inheriting Fang Aizhi's "S strategy," covering entrepreneurs from Stanford and Silicon Valley. (She later became an investor in HeSai Technology, AutoX, Lingming Photonics, Youai Zhihe, Black Lake Technologies, and Xingsheng Youxuan.)

Managing Partner Dai Yusen only joined in 2017. After leaving Jumei, he received invitations from Sequoia Capital and ZhenFund Venture Partners. Venture Partners are more like consultants, and he felt it was somewhat superficial. He conducted a rational analysis and decided to go full-time. He believed his industry perspective and network accumulated among internet veterans could complement ZhenFund. Moreover, Jumei had brought substantial returns to Xu Xiaoping, and they had a good personal relationship—Xu Xiaoping was his wedding officiant. (Dai was originally a product manager with a focus on product-based companies and invested in Guan Xia and Party Animals.)

They were all first-generation apprentices who grew under Xu Xiaoping's mentorship. Many people enter the investment world as blank slates. Some young investors feel that ZhenFund, to a certain extent, serves as an education system for angel investing.

Xu Xiaoping and Wang Qiang, without financial backgrounds, chose to assimilate young individuals with similar values. "In the financial industry, angel investing is an unconventional presence. We need to have passion when doing it," Dai Yusen said. "In finance, you can make money. You might earn more through private equity and secondary investments." Xu Xiaoping said that his investment philosophy is: faith brings results.

Liu Yuan transformed into a devout disciple. At the 2015 bustling entrepreneurial conference, Liu Yuan played the role of a bodyguard beside Xu Xiaoping. The quality of entrepreneurs varied. One individual, who appeared somewhat paranoid, was vociferously demanding to meet Professor Xu. Liu Yuan intercepted him. While Xu Xiaoping went into the restroom, the entrepreneur followed him and slipped his business plan under the restroom stall. Liu Yuan heard the commotion and was furious. He immediately went in, pulled the impolite man out. Xu Xiaoping was inside, having diarrhea, and yelled, "Don't scold him, don't scold him." Then he rushed out, holding up his pants, and hastily took the business plan, saying repeatedly, "I've received it, I've received it; we will look at it later." The man was satisfied, and he said to Liu Yuan with a raised neck, "See? Professor Xu said he would take a look!"

Later, because of this incident, Xu Xiaoping criticized Liu Yuan multiple times, saying, "You are one in a thousand among those who return from overseas. Our daily work is about finding one in a thousand among one in a thousand. But during the process, you will meet many one in ten thousand people, or even the worst one. You should think about it; this person might only have one opportunity to meet ZhenFund in his life. You cannot shatter his dreams in front of him. For you, he is someone you'll forget immediately; for him, it will be a lifelong psychological trauma."

Finally, Xu said, "You need to remember one thing, do things that are good for others even if there is no harm to yourself."

There are many details that have touched the hearts of Xu Xiaoping's apprentices: someone sent an email claiming that their father had committed murder and was in prison, and their life had reached a dead-end. They would commit suicide if Xu Xiaoping didn't meet them, and Xu Xiaoping did meet them. Someone sat at ZhenFund's entrance, claiming they needed funding for a street stall. The front desk considered calling the police. Xu Xiaoping met them. It was heard that some ZhenFund investors met with entrepreneurs for only 15 minutes and then asked them to leave. Xu Xiaoping was extremely upset about this.

Xu Xiaoping said that most of the time, as an investor, you have to reject people. How can you make someone who is rejected walk away happily? You have to provide sincere advice. He also said that if someone succeeds, no matter how low the valuation is in the angel round, they will think, "Why was it so cheap? This is the angel's paradox." He advocated giving up the right to liquidation preference, avoiding intense negotiations, and simplifying terms as much as possible (one-page core terms and a two-page SPA). He also said that he wanted to work with students and young people throughout his life.

All of these have become shining moments in the hearts of ZhenFund's first-generation apprentices. "All of this is his creativity as a musician, not as a capitalist," the sentimental Liu Yuan said. "Our genes and our culture are defined by stories like these." Influenced by his mentor, he stands up to walk entrepreneurs to the elevator after meeting them. He also repeatedly advises younger colleagues—second-generation and even third-generation apprentices who didn't have the opportunity to work closely with Xu Xiaoping—to be empathetic and do things that are good for others.

Fang Aizhi still remembers that when Xu Xiaoping encountered a courier, he couldn't help but offer advice before the courier even spoke: "The founder of UPS started with delivering packages; you can do it too." "Oh my god," Fang Aizhi thought, standing beside him, "he has this kind of love for everyone."

04

However, the depth of Xu Xiaoping's sensitivity and his desires, as well as the valley of fear hidden behind those desires, is remarkable.

One day in July 2018, Fang Aizhi was working out on a treadmill, preparing for her vacation in Italy the next day. Her plans were all set. Suddenly, the TV showed the news of Pinduoduo's listing on the NASDAQ. This company, which went public after just over three years, had become China's second-largest e-commerce platform, and ZhenFund missed investing in it. This sudden news shattered her mood completely. She said, "I felt like I was going to be fired. I knew that missing out on this was something Xu Teacher would find very hard to accept." She canceled her vacation plans and anxiously kept checking her phone to see if Xu Xiaoping had reached out to her.

But there was no message from him. "The less he contacts me, the more anxious I get," she said.

Finally, Wang Qiang spoke up in their group and calmly said, "Is there a problem with this?"

During the angel stage, the most crucial and challenging asset for a company is its people. ZhenFund was one of the few investment organizations that focused intensely on researching and assessing individuals. Missing out on Pinduoduo served as a wakeup call for them.

Historically, ZhenFund had scouted entrepreneurial talent from overseas students. This approach was an extension of Xu Xiaoping and Wang Qiang's experience at New Oriental during the early days of the tech explosion and the "copy to China" era. However, as the startup landscape in China shifted, with differences emerging between Chinese and American models, and as entrepreneurs moved into more challenging territories, local founders began to exhibit distinct advantages. A classic example is Colin Huang of Pinduoduo. Pinduoduo marked a turning point, but, at that time, such founders had not yet activated ZhenFund's radar. Their lack of sensitivity to this new breed of entrepreneurs was hard to forgive.

Xu Xiaoping was also processing his emotions in solitude. Soon after, they organized an emergency meeting. Xu took the responsibility on himself and self-critically acknowledged that he had spent too much time with first-time entrepreneurs, without realizing the importance of engaging more with successful entrepreneurs. Fang Aizhi quickly intervened, saying, "No, Xu Teacher, it's my fault, it's our fault."

The atmosphere in the room was heavy.

Only those who were close to Xu Xiaoping in his day-to-day life could glimpse the depth of his anxiety. "He's especially anxious. You know, Anna doesn't dare to live in Yintai," a ZhenFund investor said. "Anna feels that if she lives in China World Trade Center, Xu Teacher will call her over in the middle of the night. I've been summoned in the middle of the night too, often at midnight or one o'clock. We have a drink together and talk. The topic is always anxiety."

These were the recurrent themes. "Are we lagging behind? Are we facing serious issues now? Would founders invited to ZhenFund's Investment Committee feel uncomfortable? Are we getting too caught up in discussions about various matters and losing focus on assessing people? Should we step back a bit? Could avoiding high valuations be a fatal problem for us?" He's often anxious at night.

ZhenFund's investment philosophy is fundamentally different from that of most other funds. You could call it a "people-oriented" or "people's portfolio" approach. While other funds often begin with a focus on industry sectors and then select projects, ZhenFund starts with people. For instance, if Little Red Book (Xiaohongshu) were under the purview of most other funds, it would probably be categorized as a consumer project. In ZhenFund's case, it was initiated by entrepreneurs who studied at Stanford, and the person covering this group was Fang Aizhi. This is a radically different logic: other funds adopt a top-down approach—industry sectors, investment professionals assigned to the sectors, and projects. ZhenFund's approach is more bottom-up—investors, people they cover, and projects, with a strong emphasis on the people.

You can think of ZhenFund as a platform with over a dozen investors, each of them having their own specific focus. This focus doesn't necessarily have to be AI or the new energy sector; it could be entrepreneurs coming from Tsinghua/Peking University or those who transitioned from internet giants, or even hacker communities. There are more than a dozen people, acting like copies of Xu Xiaoping, each managing several to hundreds of projects, collectively forming the portfolio of ZhenFund. People are on one side of the scale, while the projects are on the other. Their focus on people's instincts, aesthetics, and standards must go beyond Xu Xiaoping's own mind and be ingrained in every investor's head.

In order to make the theory of people sustainable, Xu Xiaoping has summarized several methodologies. This was the ZhenFund 1.0 phase, and he introduced the 3L theory: Founders should possess three strengths (Learning, Working, Influence).

He also further defined the 3C model for teams: Chemistry, Complementarity, Compromise. This was a somewhat personal interpretation. New Oriental was co-founded by three people, and he favored a similar configuration—a single founder is too lonely, two co-founders are prone to conflict, but three co-founders create a strong and balanced team. Chemistry indicates that founders have a deep connection. Complementarity means they have complementary personalities and skills, and the final component is Compromise, where the leader should be clear, and equity incentives for co-founders should be adequate. However, Xu Xiaoping gradually realized that the 3C model wasn't applicable to some of the later, strong-willed leaders, such as serial entrepreneurs Colin Huang (Pinduoduo) and Tang Binsen (Dingdong Maicai), who were both single founders.

As times evolved, and the landscape of entrepreneurs changed, the theory of people also needed to adapt. Xu Xiaoping and Wang Qiang's advantage within the pool of overseas students became limited and even lost its effectiveness. In their earlier approach, many of ZhenFund's projects were tilted towards entrepreneurs with overseas educational backgrounds. This had caused them to overlook the group of entrepreneurs who had struggled and hustled in the local market, such as TMD (ByteDance, Meituan, Didi), and Weixiaoli (NIO, Xiaopeng Motors, Xpeng Motors). One of Dai Yusen's responsibilities when he joined ZhenFund was to upgrade the theory of people.

As a Stanford-educated serial entrepreneur who rang the bell at the NYSE at the age of 27, Dai came equipped with a stringent standard. He aimed to make people's categorization more systematic and comprehensive using social science methods, breaking down founders into four quadrants: Young Genius (young entrepreneurs), Old Hand (serial entrepreneurs), Operator (senior executives from large companies), and Scientist. This marked the ZhenFund 2.0 phase.

In the past, ZhenFund had relatively successful investments in "Young Geniuses" and painful misses and regrets when it came to "Old Hands," while "Operators" concealed the most pitfalls.

The four-quadrant theory provided a framework for sourcing projects, but the assessment for individual projects required specific validation. Being a people-focused research institution, their investors were constantly observing, evaluating, and summarizing people. Their decision-making process had an elusive aspect to it. For instance, during their weekly Investment Committee meetings, the process resembled a group of individuals relentlessly shaking the founder, fervently questioning, "Are you strong enough? Are you top-notch enough?" On the other hand, they also attempted to quantify the most intangible aspect—people. The following are key points from interviews:

Regarding "Young Geniuses": When describing a person's talent, age should not be a limiting factor; he or she is considered a genius if the talent is there. Take Mozart, for example: at 16, he was the chief musician in the court orchestra, not because he was 16, but because he was the best musician of his time.

Relatively speaking, "Young Genius" entrepreneurs are suitable for the early stages of technical innovation. When an industry matures, "Old Hands" and "Operators" take over.

Regarding "Operators": Simplifying "Operators" as executives is incorrect. In the early stages of systematically identifying executive-type entrepreneurs, ZhenFund faced challenges, and they formulated the "Yangchenghu Hairy Crab Theory" based on their mistakes. They advised being cautious of people who had impressive titles, high salaries, and a large following but had never operated a business on their own. It was like "a hairy crab taking a dip in Yangchenghu Lake; the crab and the lake had no real connection." They paid special attention to investigating who should be credited for the achievements: the platform, the boss, or the executive.

"Operators" were better at accurately describing the kind of people they were looking for. The core indicator for identifying an "Operator" was having made critical decisions. Critical decisions could be further divided into taking a business from 0 to 1, from 1 to 100, or from poor to good. Typical examples include Shen Peng founding Waterdrop (after working in innovative business at Meituan) and Wang Ying founding Yue Ke (after being Uber's General Manager in China).

Two subtle observations about senior executives in large companies:

The person who truly makes key decisions in a company may not hold the highest title. The person most valued by the boss is often the best executor, in charge of the company's core product, but it reflects the boss's will. This person excels in execution and coordination. "Operators" might grow on the fringes of large systems, like WeChat within Tencent.

Senior executives can be divided into two types: professional managers and entrepreneurial managers. When interpreting the same event, the former tend to focus on internal resources and personnel deployment, using phrases like, "Whose person is this? Who moved my person? Who is responsible for this? What resources do I have? What did I gain?" The latter tend to approach the issue from the perspectives of users, products, and competition.

Regarding "Old Hands": This group was where ZhenFund had the most regrets among the four quadrants. Companies like Pinduoduo, Weixiaoli, Dingdong Maicai all belong to this category. They increasingly believed that entrepreneurship is a matter of character and that entrepreneurs are a "different animal."

While they used to favor people with impressive resumes, their perspective had shifted. Compared to executives who frequently changed jobs, serial entrepreneurs became more attractive. "When looking for entrepreneurs among high-level executives, it has a flavor of seeking the adventurous within the risk-averse," they said. Impressive resumes had transitioned from being an advantage to something that needed clarification: Why didn't you start your own business before? Of course, this was subject to industry-specific characteristics; for executives in the enterprise services sector, the advantage was more significant.

How do you differentiate between a serial entrepreneur and a serial failure? It depends on whether they continuously had excellent people following them, whether they were continuously improving, and whether the mistakes they made became more sophisticated. For instance, Zhang Yiming went from founding Jiujufang to Bytedance, undergoing significant leaps in the process.

Regarding "Scientists": This category was suitable for hard-tech fields, and the benchmark for identifying a "Scientist" was, "We are looking for a Yao Ming."

A quantified study debunked one of their biases. They looked at all the cases of professors succeeding in entrepreneurship, classifying them into scenarios where the professor became the CEO, and cases where the professor retained their title, and a student became the CEO. They were surprised to find that the most successful companies were when the professor was part-time and the student was full-time (as in the case of DJI). This shattered their previous belief that professors needed to be full-time for them to invest, relaxing their criteria.

Two quantified studies: They analyzed the backgrounds of over 640 unicorn founders, examining factors like birthplace, schools, majors, age when they started a business, previous entrepreneurial experience, and the distribution of equity among co-founders. From the distribution, entrepreneurs from coastal areas were more common, those from Northeastern regions were less common, and STEM majors were more prevalent than liberal arts. The ideal age for internet entrepreneurs to start a business was around 26-28, but when they included A-share listed companies from the past 20 years, this age rose to around 35.

Talent is unevenly distributed across time and space. Entrepreneurs from Google and Stanford were more common, as were those from select high schools (such as Chengdu 7th High School, Beijing 4th High School, and RDFZ). Huaqing Jiayuan was an important hub for the mobile internet era. Three chief editors of NetEase (Tang Yan, Li Xueling, and Li Yong) all succeeded in entrepreneurship and held the same position. As a result, it was crucial to predict the next region with a high density of talent. In the future, Tsinghua might become an increasingly important intersection of time and space.

Four subjective observations:

Reflect on what constitutes intelligence. Good oratory skills and fast speech are not necessarily indicators of intelligence. Confidence doesn't necessarily indicate intelligence, nor does possessing asymmetric knowledge. Intelligence is measured by rapid growth and having a deep and far-reaching perspective (like Elon Musk and Wang Xing).

Invest in people you'd want to work for, not in people who you think would be great to work for you.

Investing in angel investments is like opening a blind box. Following the Bayesian theory, young people who have already achieved and will continue to achieve have a higher probability. To be more critical, some people are still not successful even in their 40s, and their blind boxes have already been depleted.

Entrepreneurs in suits and ties are a danger signal; it signifies living within the rules.

In the environment of VC beginning to invest in older entrepreneurs, they have made a counter-mainstream choice. "We naturally lean towards people with nothing, who are starting from scratch, who are creating something from nothing." At the same time, in choosing the direction for entrepreneurship, it should align with the national direction.

This theory of people can also be reflected internally. In ZhenFund, Wang Qiang played the calm counterpart to Xu Xiaoping. While Xu Xiaoping was full of emotions, Wang Qiang, on the other hand, was calm. However, he was also susceptible to anxiety due to the fear of missing out on opportunities. When the style was drifting, it was Wang Qiang who brought Xu Xiaoping back to the discipline of investing in people and angel investors.

Starting from the third fund, ZhenFund introduced external LPs (limited partners) besides Sequoia. LPs suggested expanding the fund's management scale, which appealed to Xu Xiaoping. However, Wang Qiang opposed this as he believed that scaling up contradicted the pursuit of extraordinary returns. When VCs, who initially invested in growth, started extending into angel investments and even full industry coverage, Xu Xiaoping contemplated following suit. Yet, Wang Qiang remained opposed to this idea. He argued that achieving full coverage was an illusion, and when VCs with deep pockets start making small investments, it's easy to get carried away and keep investing, leading to inevitable losses. This would also weaken ZhenFund's focus on investing in people. There was a time when there was a surge in investment institutions going public and crowdfunding. Xu Xiaoping considered giving it a try, but Wang Qiang was against it. Wang Qiang said that their partnership was like a person getting ready to jump off a cliff, and the other person had tied a rope to them to prevent them from falling.

Today, the two founders of ZhenFund have found reflections in their successors. Fang Aizhi is more intuitive and driven by emotions, emphasizing building personal connections with people. In ZhenFund, she was known as "Zhen Mom" because she used to know the personal details of everyone. One of ZhenFund's second-generation disciples stated that it was not surprising that Fang Aizhi had a position equal to founders, given her investment style was closest to Xu Xiaoping's. Among the 42 unicorns they co-invested in, 9 came from Xu Xiaoping, and 9 from Fang Aizhi. She had been there from the first day, and many colleagues felt indebted to her. "I learned angel investment since I began, and what I saw when I started was Anna investing 20 points in Perfect Diary." Wang Qiang, on the other hand, was an avid reader and had a different taste in books. Wang Huiwen, who was Wang Xing's partner, jokingly commented, "You are a walking CITIC Bookstore."

Dai Yusheng hopes to be more like Wang Qiang. He described himself as a "right-hand man" kind of person. His life role models were Charlie Munger, Warren Buffet's partner, and he also admired Wang Xing's partner, Wang Huiwen (when Wang Huiwen decided to get into large-scale entrepreneurship, Dai Yusheng immediately decided to invest in him). He said, "I enjoy playing the roles of adviser and general." He loves digital technology and military strategy. Compared to Fang Aizhi, he is more introverted, enjoys solitude, and is more principled. When Fang Aizhi is anxious about missing out, he reassures her, "Anna, you can trust me; we won't miss this opportunity." However, because of his rationality, he is not easily influenced by entrepreneurs.

Like Wang Qiang, he loves reading. He started reading university textbooks in kindergarten at his father's request, and now he reads 150 books a year. His reading tastes are somewhat different from Wang Qiang's. Wang Huiwen teasingly said to Dai Yusheng, "You are a walking CITIC Bookstore."

Please note that this is a lengthy and complex text, and my translation might have some variations in tone and nuances. If you have specific questions or need further clarification on any part, feel free to ask.

05

Big shoes to fill" is a colloquial expression. The young team uses it to describe the current situation – the rich legacy left by their predecessors and the challenging road ahead.

In Dai Yusheng's eyes, 2019 marked a significant milestone for ZhenFund as it transitioned from personal angel investing to institutionalized operations. The fund's operations were no longer reliant on Xu Xiaoping personally – he didn't even need to be hands-on anymore. Dai Yusheng remarked, "Rather than calling it succession, you might as well say we graduated."

They established a distinctive operating mechanism with a strong ZhenFund flavor. Firstly, it operates as a platform organization rather than a partnership. They require all team members to source and pitch projects, whether they are partners, investors, or analysts. Everyone is expected to submit a deal flow report each month, ensuring that partners and analysts are equally involved in sourcing and pitching projects. Therefore, younger team members don't serve the partners, and the credit for projects doesn't go solely to partners. Even if a partner recruits a younger team member and personally mentors them, the projects that result still belong to the younger member. The ownership of each project is clear-cut. Partners can't take a passive role by profiting from "taxing" younger team members; instead, they must move into higher-level circles to establish a network and cover multi-dimensional entrepreneurs.

Secondly, in investment decisions, both GPs and partners don't have absolute authority. Most investment firms have only partners participating in their investment committees (IC). ZhenFund allows all team members to participate and vote, but the final decision isn't based solely on voting. The ultimate decision is influenced by "those colleagues who have strong opinions and how their views are considered." They aim to have as many team members as possible express their opinions at IC meetings. If two founders or managing partners agree on an investment, it's likely to proceed. If they have opposing views, they will seek input from other partners or professionals with expertise in a particular area. If everyone deems it unsatisfactory, it doesn't mean the discussion ends; it depends on how persistent the person advocating for the project is – of course, they are staking their professional reputation on it. One viewpoint is that bad ICs are based on the consensus of everyone, while good ICs allow individuals to break free from the consensus.

Their IC mechanism is relatively flexible. Since investments aren't categorized by sectors, one sector can have three different investors each investing in different companies with non-overlapping sources. If these companies compete or create conflicts, the investors can request a mini-IC meeting that excludes investors with competing interests.

ZhenFund encourages its team members to use "silver bullets" for independent decision-making. This is typically used when time is tight and on-the-spot decisions are needed or when a project wasn't approved by the IC. Depending on their seniority level, each team member gets 1-3 opportunities per year, with individual investment amounts averaging around $2 million.

It's important to note that these "big shoes" left by the senior partners are being filled by the younger generation. The two founding and managing partners of ZhenFund are from the '80s generation – Fang Aizhi was born in 1982, and Dai Yusheng in 1986. Partners like Liu Yuan (born in 1989) and Yin Le (born in 1991) are also from the '80s and '90s generations. Except for these three '80s generation partners, the entire investment team is from the '90s. This makes ZhenFund one of the youngest major venture capital firms in China. Xu Xiaoping and Wang Qiang mentioned that these young team members belong to the "golden generation" of ZhenFund. Many of them have spent over five years with ZhenFund, growing alongside Xu Xiaoping, "learning warfare during the battle." They share common anxieties and pains, reflections, and progress. Unfortunately, the second and third-generation apprentices of ZhenFund might not have the same opportunities.

In a flat organizational structure, one challenge for young team members at ZhenFund is to find the right domain (a sector to search for entrepreneurs) and build their network. The organization has considered whether to create specialized industry groups like other VC branches. However, this approach didn't align with their investment logic, and they wanted to eliminate a "well territory" mentality, so they abandoned this idea. As a result, the organization doesn't directly assign young team members to specific sectors; they need to explore their path independently.

Yin Le's rapid promotion, for example, is partly due to her courage – she dares to take the lead, send cold emails, or write checks on the spot. Another part of her success is attributed to her ability to build a network, starting with Stanford entrepreneurs and then branching out to Tsinghua and hard-tech entrepreneurs. However, the freedom of choice for young team members also carries risks.

In 2022, Fang Aizhi visited Benchmark and Founders Fund in the United States. Benchmark's veteran partner, Bill Gurley, retired in 2020, and many leading venture capitalists in the United States made similar choices, leaving work and moving to Hawaii. Bill Gurley's response to why he retired was, "This is a young person's game." Fang Aizhi could relate to this statement. The ideal age for entrepreneurs is typically between their twenties and mid-thirties. Many of her friends in the same age group were once full of entrepreneurial passion, but in recent years, very few are involved in startups. She needs to cultivate a young team for faster growth.

At the same time, ZhenFund, despite being a small-scale fund, offers her some inspiration in terms of governance. Benchmark, for example, has only five partners and no analysts. Their relationships are close-knit, and they gather for a full day of meetings every Monday. In the evenings, they have a Michelin chef prepare dinner, and they invite an external guest to join. She is considering adopting a similar practice at the partner level – keeping a good atmosphere and enjoying each other's company. The night we finished our conversation, she made a reservation at XiangShangXiang restaurant, taking the first step.

Founders Fund's approach to the game is also worth considering. They have established a simple three-tier system – investment manager, director, and partner. Anyone can apply for promotion to director at any time, but once they cross that threshold, a four-year countdown begins. Within these four years, they must either step up to become a partner or leave the organization. She is contemplating whether to introduce this stringent but self-driven mechanism at ZhenFund.

Regarding the culture at ZhenFund, Fang Aizhi maintains Xu Xiaoping's tradition of creating a culture of joyful work and life. She didn't understand some of Xu's practices in the past, such as his emphasis on team bonding, often demanding team-building activities. They have traveled together to the United States, Dubai, Thailand, and Japan. Once in Japan, Fang Aizhi prepared materials for discussions and presentations during their trip, but Xu Xiaoping insisted on not having any meetings. She complained, "Who goes on a trip and doesn't hold meetings for the company?" Xu Xiaoping replied that meetings can happen later, but they should play together and have fun now. Today, she understands it better: "Open discussions are essential for project discussions. If it's only about work, it can be too formal. If we're friends, you won't think, 'I intentionally don't like your project,' and it's easier to express sincere thoughts." – Feedback is a gift.

"The taste of our culture is powerful. While many places call themselves capital, we call ourselves a fund, and we have Zhen Family. When I joined ZhenFund, I was the youngest among full-time employees. I thought of myself as Zhen Baby. Now, I suddenly realize I'm the oldest and most senior person who came to the office today." This highlights that ZhenFund doesn't operate like a cutthroat business organization but promotes a friendly, equal, and anti-"involution" culture.

ZhenFund's culture is often described as a family, offering a warm and welcoming atmosphere. During their annual meetings, employees are not required to perform but are instead encouraged to socialize, dine, and celebrate various achievements. Some awards are related to investments, such as the Best Deal Sourcing Award or Best Exit Award, while others focus on culture, such as the "Happiest" award, introduced during the pandemic year and presented to finance colleagues who smiled every day.

On the flip side, Fang Aizhi has adopted Wang Qiang's strictness. Wang Qiang considers himself a cloud floating above the fund, and every person who leaves ZhenFund is someone he identified as not meeting the standards. He doesn't blink, he says. Since ZhenFund is an organization that recruits young people and allows them to rise through the ranks, each step is as numbers-driven as possible, considering DPI (Distribution to Paid-in capital), MOIC (Multiple on Invested Capital), and TVPI (Total Value to Paid-in Capital). They emphasize fairness and conduct annual eliminations, removing those who fail to meet the standards.

Starting from the 5th fund, Fang Aizhi began informing the Limited Partners (LPs) that Xu Xiaoping would reduce his involvement in the fund. At that time, Xu Xiaoping expressed his intention to let Fang Aizhi independently manage the fund. Fang Aizhi requested that he continue to accompany the fund for two more rounds.

At the end of 2021, as Fang Aizhi prepared to raise funds for the 7th round, Xu Xiaoping made several calls to her. "This time, I really want a smaller share," he said. He insisted that Wang Qiang, who had spent more time in the office in the past two years, should receive his share. However, when Wang Qiang heard this, he also declined, saying, "I think it should go to Anna." This led to some back and forth regarding carry distribution. Finally, Fang Aizhi declined to decide and said, "Let's put it in the pool; whoever makes money gets it." In addition, Xu Xiaoping withdrew a portion of his carry from the 5th and 6th funds, distributing it to his colleagues. Wang Qiang often tells Fang Aizhi, "If you think the team doesn't need us anymore, you can stop paying our salaries at any time."

Taking full control of the fund, Fang Aizhi became even busier, and her stress levels increased. She mentioned that the 7th fund is particularly challenging and an opportunity for the young team to prove themselves comprehensively. She said, "Missing another Pinduoduo would be disastrous."

There has been a change in the fund's approach, leaning towards more aggressive tactics. As projects become more expensive, ZhenFund's average investment amount has increased from $1 million to $5 million, with a cap of up to $10 million. They aim to take significant stakes in seed-stage startups, targeting 10x returns, not just three to five points. Fang Aizhi sets the requirement that the fund's return should be at least 5x, with the ideal being in the double digits. She said, "I just like to win." According to colleagues, she plays poker aggressively and enjoys the thrill of competition.

In her private life, Fang Aizhi has experienced some minor changes. She used to meticulously plan her schedules, restaurants, and menus down to the smallest detail. Recently, her assistant sent her two menus, and she replied, "I don't care."

Sebastian Mallaby, the author of "The Power Law," a book that documents the history of venture capital, mentioned to me that venture capital is a team sport. This team dynamic can enable funds to continue for 50 years or even longer. The main reason a mature institution fails is often the selection of the wrong individuals as the next leaders. This leads to different destinies for two gems in Silicon Valley's venture capital history: Sequoia, which continues to shine, and KPCB, which has declined.

Liao Tianshu, BCG China's Chairman and Global Senior Partner, mentioned that Western societies are rooted in religious beliefs and maritime civilization, creating a "bundle" pattern with distinct boundaries between the internal and external. Companies are primarily driven by the rule of law, with clear responsibilities and rights and a strong focus on the spirit of contracts. In contrast, Chinese society is rooted in Confucianism and agrarian civilization, forming a "water wave" pattern where there's a decreasing difference between the internal and external. This makes Chinese companies lean toward governance by individuals, with vague responsibilities and rights, relying on trust and friendship as driving forces and lubricants. The ideal successor for Chinese companies is someone with outstanding abilities who can also safeguard core values and long-term interests.

In addition to seeking to invest in the next ByteDance or Meituan in the coming years, as Fang Aizhi advances in her investment career, she will also consider the choice of successors. She mentioned, "Yushen and I are not power-hungry people. If there is someone who can do a better job than me, once that person is ready, I want to pass the platform to them." One of her goals going forward is to have at least three ZhenFund investors make it onto the Forbes Midas List. She believes that ZhenFund can only succeed if it has three people better than her. "We are truly a group of the best angel investors, sharing the benefits on one platform. If there aren't three people better than me, this fund will fail."

After the departure of Xu Xiaoping, who rarely visited ZhenFund's headquarters, there are only three independent offices. These offices belong to senior partners from the older generation. At the request of these senior partners, Xu Xiaoping's office must remain welcoming with an open-door policy. Wang Qiang's office has bookshelves filled with books that can't be finished. Fang Aizhi and Dai Yusheng don't have offices. This seems to imply a cultural significance, as they've maintained the teacher and apprentice relationship throughout their journey.

An LP, after conducting in-depth interviews, admitted that he had underestimated Xu Xiaoping's influence on ZhenFund. He initially thought that Xu was just a mascot or symbol. However, as the interviews progressed, he realized that Xu Xiaoping's philosophy of identifying talent was deeply ingrained in the hearts of these young people.

Nonetheless, the significant challenge for the young team at ZhenFund is identifying their new competitive advantage once the first-generation leader, who holds a near Wu Lin League status, steps back. In the past, they could rely on the ace card, Xu Xiaoping, to win nearly every project, "just like having the Ark of the Covenant." Sometimes, out of respect for Xu Xiaoping, founders would proactively lower their valuations to allow ZhenFund to enter. But now, in a more competitive landscape with later-stage investors fiercely targeting deals in the angel space, in the hard tech sector where there's a lack of strong recognition for the ZhenFund brand, and even among entrepreneurs from the post-2000 generation who don't hold the symbol of New Oriental in high regard, what is the new ace card for this organization?

Last year, a young colleague was on the front lines, competing to secure a project, just like other venture capitalists who were out there with their bosses and their bosses' bosses. She also asked Xu Xiaoping for support. At the first moment that Xu Xiaoping's phone call was connected, the young investor started crying.

However, Xu Xiaoping didn't agree to appear in person. Instead, he gave her an extended phone call and shared his experiences.

06

The report, spanning over a year of interviews, had its ups and downs. Succession, for any organization, is a sensitive and intricate topic, and the individuals involved often grapple with complex and intertwined feelings.

At the outset, Xu Xiaoping remained behind the scenes, but his presence lingered in every conversation. He was always the imposing figure looming behind this fund. As discussions progressed, everyone shared their perspectives and speculations on his gradual withdrawal, except for Xu Xiaoping himself. Finally, towards the conclusion of these interviews, Xu Xiaoping agreed to provide the missing piece of the puzzle.

"At heart, I am not an entrepreneur," Xu Xiaoping revealed. Entrepreneurs constantly need to scrutinize costs and enhance profitability, but "from the first day of New Oriental, I've never managed a cent, never signed an invoice."

He confessed that, after the "stormy entrepreneurial adventure" of New Oriental, he realized his strengths lay in being a "deputy" in a business and a "brand builder." He understood that he wasn't skilled at "managing people" or "managing money." This is why his first move when founding ZhenFund was to hire a general manager to handle personnel and finances on his behalf. All other team members, including himself and Wang Qiang, had their salaries managed by Fang Aizhi.

"I excel at promotion, customer service. In New Oriental, customer service meant career and education guidance for students. Students loved me, and I particularly enjoyed this process. But if you asked me to hire and fire people, adjust salaries—God! Thanks to Anna, I've been spared that ordeal," Xu Xiaoping stated. He saw this as a proud experiment in separating ownership from management. "Thinking about it makes me really happy. If you asked me to manage, I promise you, I would have made a complete mess. As a result, I wouldn't have benefited because I lacked that capability."

"I have absolute trust and confidence in her," he reflected. "I should have let the team become independent sooner." Objectively speaking, his sudden step back in 2019 had more direct and passive triggering factors.

Xu Xiaoping spoke about how, after reaching his sixties, he experienced a unique personal crisis in the years 2017, 2018, and 2019. "I was truly exhausted," he confessed. When he worked as a consultant for New Oriental, he often pushed himself to the brink of collapse and even to the point of needing hospitalization. He never felt moved by this; it was his source of joy during his fiery and passionate years. But over time, the more he burned, the more fatigued he became. There was a period when it was a deep struggle. I remember gaining 15 kilograms of body weight at one point. From January to April 2019, I underwent two major surgeries. These surgeries weren't significant, but they were significant warning signs. They forced me to reflect on how I should live."

During this time, he suffered from depression. "I would be on stage, jumping around, cheerful. But I would go home and couldn't fall asleep. I just couldn't sleep. I had to exhaust myself to the point of collapsing before I could drift into sleep."

The most depressing and inescapable part was his family issues. "I suddenly became acutely aware of many problems, one of which was that I missed my children's growing-up years. I founded New Oriental in China, while my wife and two children were in Canada. It may sound a bit romantic, but I had struggled all my life and missed the joy of family. When I reminisced about my past with my children, all I felt was regret for being an absentee father."

He continued, "Imagine, if I hadn't joined New Oriental, hadn't created ZhenFund, and had just been an ordinary university teacher. But as long as I had a warm and harmonious relationship with my two sons, and they were confident and successful, I would choose to be an ordinary university teacher rather than have a successful but divided family. But my family was filled with... Ah... filled with misunderstandings and the scars of time. Sometimes, when I'm giving a speech, I think about my sons, and I truly feel remorse for being an absent father."

Over the past four years, he adjusted the balance between his career and personal life, embarking on a journey of self-repair and reconciliation with his children.

"I did the most important thing in my life. Of course, I have a responsibility as a GP, and I have meetings with Anna, Wang Qiang, and Yusheng to discuss significant issues... Career is important, but family is more important. I want to balance the relationship between career and family," he said.

In his eyes, this was an epic of the Chinese spirit, a generation's trauma and cost on the path to seeking glory.

"I can proudly tell you that I have fulfilled this mission," Xu Xiaoping concluded. "I feel this is the greatest success of my life."

Liu Yuan reflected on this with a hint of nostalgia. In these last few years, whenever he faced challenges, he would think of seeking advice from the man who always had the answers standing behind him. However, many times, he restrained himself.

Liu Yuan took out his phone, scrolling through his chat history with Xu Xiaoping. Instead of anxiety, it was filled with various New Year and birthday wishes. Xu Xiaoping wished him a happy 33rd birthday and said he was proud of him. Xu Xiaoping even shared pictures of his own son's workout sessions with him. At one point, his son had been downcast, and Xu Xiaoping shared in the joy of reconciliation between a father and son. "One evening, Xu Xiaoping called me and said, 'I now realize that if I think I haven't made enough money, haven't invested in enough unicorns, this is a dark psychology. Even after reaching the peak of success, I'm still suffering for not being successful enough. It's an unfortunate form of self-torment that arises when success becomes a value, and it's meaningless. I'm not Yu Minhong, nor am I Shen Nanpeng. I am myself.' He was relieved to have broken the spell, let go of success, and the fear that came with it, embarking on a peaceful life."

Liu Yuan felt genuinely happy for him, especially when he heard Xu Xiaoping say that he had become a happy father.

Fang Aizhi said that for the past two years, Xu Xiaoping hasn't attended the IC meetings, only appearing for strategic decisions, personnel allocation, and critical project discussions. She always thinks of a phrase he often used: "Smell the future."

The youngest of them, Yin Le, doesn't feel Xu Xiaoping's absence at all. She said, "I don't have the feeling that Xu Laoshi has left; he is always there."

Wang Qiang, six years younger than Xu Xiaoping, just turned 60 last year. Xu Xiaoping suggested celebrating his birthday, but he found it too bothersome and declined.

Wang Qiang mentioned that by the time he's 65, "I will definitely retire cleanly."

He also said they didn't plan this; it's just that "life should be this way."

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