AI Superpowers

Venture capitalism (VC) is a form of private equity investment usually undertaken by VC firms. These firms choose small, emerging businesses (e.g., startups) with high potential for growth and provide them with funding in exchange for an ownership stake in the company. VC firms typically make short term investments, providing seed money that allows a new company to get off the ground and, with luck, eventually become large and stable enough to attract more traditional investors. VC firms are extremely risky, as the emerging businesses they typically invest in have high failure rates. However, they also present a chance for great success. VC is a staple of the modern tech industry; companies like Facebook, Apple, and Amazon were all initially backed by venture capital firms.

VC firms fill a special niche in the business world that other investors typically cannot. The small businesses they fund are considered private companies. This means their stocks can’t be traded on a stock exchange, where companies can exchange ownership stakes for the capital they need to grow. Venture capital firms find promising private companies and finance them outside of the stock market.  

VC firms are contingent on the formation of limited partnerships (LPs). LPs are agreements wherein two or more parties go into business together. These partnerships are made up of two major factions: limited partners and general partners. The general partners have unlimited liability for the LP’s debt and complete control over the business’s management. Meanwhile, the limited partners are only liable for the amount they’ve invested in the LP, and they are typically uninvolved in management. VC firms fill the role of general partner and control a pool of investments from limited partners.

Kai-Fu Lee founded his venture capital firm, Sinovation Ventures, in 2009, following his departure from Google China. Lee co-founded Sinovation with Hua Wang, a fellow ex-Google China employee. They have invested in hundreds of tech startups across the US and China, although they closed their Silicon Valley office in 2019. According to their website, Sinovation “currently manage[s] around $3B AUM between ten USD and RMB funds in total, and over 400 portfolio companies across the technology spectrum in China” (Sinovation Ventures).

Kai-Fu Lee is a highly successful venture capitalist. In his own words, Lee’s time in the Chinese and American tech industries has rewarded his “obsessive dedication to work” (187). They also guide his focus toward entrepreneurship, investment, and banking when speculating about the economic and social impact of AI. Lee holds the Chinese startups Sinovation invests in—and other businesses like them—in high regard. He also holds a very positive opinion of the venture capital ecosystem in general. He believes that, in the coming decades, VC firms may fund a humanitarian effort that guides national and international economies out of a coming AI-fueled job crisis.