Unicorn Zhipu AI’s Co-Founder CASSTAR Divests its Shares to Less than 1%

Credit: CFP

BEIJING, January 19 (TMTPOST)—CASSTAR, one of founding shareholders of Zhipu AI, a large AI model company in China, has recently sold over 50% of its shares of Zhipu AI for about 120 million yuan (US$ 17 million), reducing its stake to less than 1%.

Mi Lei, the founding partner and Co-CEO of CASSTAR, has retired from the position of the Director of Zhipu AI.

Zhipu AI has declined to respond to TMTPost’s request for comments.

“We are firmly optimistic about AI and Zhipu for a long time. We sold shares because Zhipu has been so strong and attracted many new investors. Due to insufficient shares, new strategic investors have to buy old shares. Considering that new investors can bring better resources to the enterprise and the requirements of the duration of the fund, CASSTAR decided to sell its shares to new shareholders,” CASSTAR said in a note sent to TMTPost on Wednesday afternoon.

“The proceeds from selling shares involves project secrets, so it cannot be disclosed. After the divesture, the shares of CASSTAR are higher than the public information shows,” according to the note.

Initially based on resources from the Department of Computer Science and Technology and Tsinghua University, Zhipu AI, incorporated in 2019, focuses on the research and development of AI large model.

The company’s CEO Zhang Peng graduated from the Department of Computer Science and Technology, Tsinghua University, and its President Wang Shaolan holds a PhD degree from Tsinghua University Innovation Leader Program. Tang Jie, a professor at Tsinghua’s Department of Computer Science, also participated in the research and development of Wudao 2.0, the largest pre-training model in China.

In 2020, Zhipu AI initiated the research and development of GLM pre-training architecture, with an aim to build a new generation of cognitive intelligence model, and train a 10 billion parameter model GLM-10B.

In 2021, the MoE architecture was used to train a trillion sparse model, and in 2022, GLM-130B, a 130 billion-level super-large-scale pre-training general model was launched to build a large-scale model platform and product matrix.

In early 2023, Zhipu AI launched ChatGLM, a dialogue model used by individual developers and companies. In June, Zhipu released ChatGLM2 series models, with the reasoning speed up by 42%. In October, Zhipu AI published ChatGLM3-1. 5B, 3B and 6B parameter models, which improved the ability of multimodal understanding, code module and network search.

On Tuesday, Zhipu AI rolled out a brand-new self-developed fourth-generation multi-modal base large model GLM-4, saying that its performance has been improved by nearly 60% compared with the previous generation. In particular, its Chinese ability can rival GPT-4.

Meanwhile, Zhipu AI also launched a large model venture fund “Z Plan” together with partners, with the total amount of one billion yuan (US$ 100 million). The company has also explored commercialization to create General Artificial Intelligence (AGI) product matrix, including platforms such as intelligent spectrum clear speech and high-efficiency code model CodeGeeX.

Zhang revealed that in the second half of 2023, the company locked in about hundreds of customers with orders, and the total amount of orders reached 100 million yuan in 2023. “So far, Zhipu AI has joined hands with more than 2,000 partners, covering different industries such as finance, energy and manufacturing,” he said.

Zhipu AI raised over 2.5 billion yuan (US$ 350 million) in funding in 2023. It has completed four rounds of financing since its inception over four years ago, receiving investment from Legend Capital, CASSTAR, Meituan, Ali, Tencent, Xiaomi, Sequoia and other big-name investors.

As a unicorn in China’s AI field, Zhipu AI is gearing up for a new round of financing with a valuation of 20 billion yuan (US$ 2.8 billion).

Tianyancha shows that Zhipu AI completed Pre-A financing in June 2019, with 1.067 million yuan (US$ 148,865) from investors including CASSTAR, Huakong Technology Transfer Co., Ltd. and Beijing Kaiaiger Technology Development Center. Their combined initial stake was 10.67%.

The valuation of Zhipu AI stood at 852 million yuan after Round A investment. Based on this, the valuation after the round of angel investment is estimated to be about 100-300 million yuan, and the investment amount during the angel round was about 10 million yuan.

However, as generative AI technology represented by ChatGPT took the world by storm, CASSTAR did not choose to continue investing in Zhipu AI, but reduced shareholdings.

According to public information, CASSTAR has recently transferred its existing shares of Zhipu AI twice to new investors, including its shares acquired in Round B on February 10, 2023 and Round B-4 on October 16, 2023. The transferees included a blind pool fund under Huakong Fund and Ant Financial. In February 2023, CASSTAR sold its 25% stake of Zhipu AI. Upon the completion of the transfer, the remaining capital contribution of CASSTAR was 591,227 yuan, accounting for 44.59% of the total capital contribution. At present, official industry and commercial registration information shows that the latest stake is 3.1022%.

CASSTAR’s actual stake in Zhipu AI is less than 1% through equity dilution. The current shareholding value of CASSTAR in Zhipu AI is about 300-400 million yuan, according to Wechat public account “Investing Ukiyo-e.”

A person familiar with the matter told TMTPost that the shareholding reduction may be related to factors such as the expiration of CASSTAR Fund. The first reduction by CASSTAR was mainly related to the fraud of AI papers on Zhipu AI “Huazhibing” in 2021 and the road map of “Large Model” in 2022.

“We have made strategic planning in the fields of AI, specifically algorithms, data, and computing power. At the time when the AI Four Little Dragons were gaining immense popularity in the algorithmic domain, we discerned that this wasn’t the optimal investment direction for us. Consequently, we embarked on a quest for the next generation of deep learning technology. Our conviction lies in the belief that knowledge mapping and natural language processing will pave the way as the next-gen technologies. Adhering to our strategic logic, we chose to invest in top-tier scientists, leading us to Mr. Tang Jie,” said Mi Lei in 2023.

LUSTER, a listed company engaged in machine visual, invested in Zhipu AI in Round A, and as of February 2023, it held 1.02% of Zhipu’s shares. The company said that it will continue to work with Zhipu AI in the field of AIGC to empower the intelligent production of content in the cultural field.