Han Yan said that after getting the first fundraising in 2025, he would reject all US dollars.
Writer | Chen Zhiyan
Han Yan is an investor who is hard to classify.
In 2008, at the age of 27, he joined Lightspeed when he switched from McKinsey to VC. At that time, this American investment brand had just entered China, and he was just an investment manager. The process of becoming a General Partner (GP) was through participating in the independence of Lightspeed's China office in the United States, leading the transformation and scale growth of the dual-currency. At that time, the path of many of his peers was to leave large institutions and establish VC2.0. He continuously invested in Tujia, Xinyeyunkeji (Paipaidai), Xingren Yisheng, Manbang Group, and Xiaopeng Motors in the company's first round of financing. Han Yan is undoubtedly a good investor. However, in his public expressions, he is more willing to actively mention organizational management topics such as mechanism reform, full support for all employees, and a younger team.
Eight years ago, when Han Yan, who was 35 years old, was selected for the 36under36, we had an in-depth interview with him. In the article we wrote at that time, we mentioned that there are two distinct types of investors in the industry: one focuses on theory and is good at top-down reasoning; the other focuses on practical sense, has a strong perception of the deficiencies and opportunities in the real world, and chooses the right time to get involved. Han Yan is the latter.
This also determines that, compared to many people, Han Yan does not fit the image of those "typical investors". Compared to those uniform investment methodologies, Han Yan is more willing to talk about humanity, the soul, and love. He loves to talk about the stories of the spiritual exchanges with founders, mentions the "eyes of LPs who want to understand China" that he saw when he went to the Middle East, and the time when he broke the restrictions and led the employees to go to Sicily, Italy for a team-building activity. Han Yan says he believes more in the "combination of rational induction and emotional deduction".
Two years ago, Han Yan founded Heart Capital. Today, this new investment brand has completed the first closing of a new RMB fund. The total scale of this "Heart Capital RMB Exploration Fund" is set at 1 billion yuan.
In the challenging primary market, it is often a hurdle for new General Partners (GPs) with a US dollar background to raise RMB funds, and few have successfully crossed this hurdle. When we ask how new GPs from US dollar funds can raise RMB funds, Han Yan's answer is: to have actually made money, and to understand the needs and fears of Limited Partners (LPs), and it took him a year and a half to figure this out.
This answer is still emotional.
Han Yan has clearly put forward a new slogan: to be a Chinese dual-currency fund of RMB and non-US dollars. Although the diversification of the LP structure of US dollar funds has become an industry consensus in recent years, Han Yan's approach is more "radical". He told "Dark Flow Waves", "The meaning of Non-US also includes non-US brands and non-US nationalities. Even if there is 1 million US dollars in the fund pool, it is not allowed."
The reason behind this choice can be seen from the tracks covered by the projects that Heart Capital has invested in, such as new energy, chips, aerospace, and AI large models. In the field of new energy and new transportation, it has invested in Manbang Group, Xiaopeng Motors, Huanshi Logistics, LandSpace, MicroNano Satellite, Xiaopeng Huitian, and Suteng Jucuang; in the direction of artificial intelligence, it has invested in Baichuan Intelligence, Muxi, Blue Lake, HeartShadowFollows, and Shanjitechnology.
Han Yan said that Heart Capital focuses on 1% of the core assets in the hard technology fields such as artificial intelligence, robotics, new energy, and new transportation, and wants to be the "first institutional investor" for outstanding Chinese entrepreneurs in these fields.
If emotion was once Han Yan's method to earlier detect needs and find investment opportunities, on the other hand, in the process of establishing a new brand, emotion seems to be understood as the perception of the temperature of the times and a flexible posture. This might be the real key for Han Yan to cross that hurdle.
The following is a conversation between "Dark Flow Waves" and Han Yan, the founding partner of Heart Capital -
Building a Non-US Dollar Fund
"Dark Flow": What is the most important decision you have made in the past few years?
Han Yan: The world has undergone major changes. The era of US dollars is over, and everyone has to make a choice. My idea at that time was very simple, not to make a wrong but easy decision.
"Dark Flow": What is a "wrong but easy decision"?
Han Yan: Moving one's body to create a sense of security. At that time, many young people moved to Singapore, thinking that they would be safe. This is called a wrong but easy decision.
"Dark Flow": Then what is difficult but correct?
Han Yan: To be an investment institution of "RMB + non-US dollars", a non-US US dollar fund.
The industry is undergoing a major reshuffle, and it is indeed very difficult. The first difficulty is that many people cannot make a decision. The second difficulty is how to understand China, embrace China, and then better open up to the world.
Logically, choosing either China or the United States is correct, as long as these two countries are chosen. And I am Chinese. For a long time, Chinese people could not touch the core assets in the United States. So what else to think about? It is right to go all in on China.
On this basis, since the earth is fragmented, people need to have the ability to adapt to different multilateral situations. I can flexibly embrace China, and I am willing and able to bring outstanding Chinese enterprises to the world. So, it is not that difficult for me.
"Dark Flow": Now, the LP composition of many US dollar funds has shown a trend of diversification, and the proportion of US dollars is decreasing.
Han Yan: The meaning of Non-US also includes non-US brands and non-US nationalities. Even if there is 1 million US dollars in the fund pool, it is not allowed. Unless one is not going to invest in new materials, chips, hard technology, large models, etc., and this list will only get longer.
The competition between China and the United States is actually a very healthy thing, and it is an inevitable outcome of the development of two things to a certain stage. And it is not short-term, but long-term. Later, I completely understood this matter, and then this decision is a natural result.
"Dark Flow": Very few "new GPs" from US dollar funds can successfully raise RMB funds, so do you have to clearly "take a stand"?
Han Yan: The most important point is that I am determined to raise an RMB fund and embrace China. In 2016, Lightspeed China raised the first phase of the RMB fund, and I also went to raise funds. Some of the LPs in it have now become LPs of Heart Capital.
"Dark Flow": But the environment has changed a lot between 8 years ago and today.
Han Yan: Now, the scale basis of RMB fundraising is state-owned capital. What are the needs of local governments? To complete the investment return task and enhance the local industry. So a GP needs to consider three points: First, the investment direction should be in line with the local industry; second, help the government do a good job in risk control to avoid the risk of possible accountability in the future; third, not only think about the first year of investment, but also plan how to exit in the second, third, and fourth years.
Raising RMB funds requires a better understanding of the needs and fears of LPs to create a long-term win-win situation.
"Dark Flow": Specifically?
Han Yan: For example, I will discuss with the local government the cycle of robots and eVTOL. When is it worth investing? When must not rush in. For the local government, the simplest way of "investment instead of investment promotion" is "the investment institution brings three mid-sized companies to settle". They are very happy to complete the indicators in the first year, and they vaguely feel something is wrong in the second year. In the third year, they find that these three are gone. The essence of this kind of GP is a senior intermediary.
My approach is very clear. There will be no more than two enterprises brought to the local area, and probably only one. But these enterprises must be the main chain and must be able to exit. Even if there is a risk, a solution must be found in advance. In return, I ask the government and Heart Capital to spare no effort to support it and help it grow.
"Dark Flow": How does the trust come from in the middle?
Han Yan: We must help the local area to actually make money. The first LP of our RMB fund came to us on its own. At the beginning of 2023, a person called me. He said: "Are you Mr. Han? You probably don't remember me, but I know you." At first, I thought it was a new type of fraud. Later, I found out that he is the director of the Science and Technology Bureau of a local area.
It turned out that Manbang and Jishi that I invested in before landed in that area and became major taxpayers in the local area. At that time, this director did not know that I had established Heart Capital. He came to me to dig for more companies from the portfolio. Later, this very market-oriented state-owned capital became my first confirmed LP.
"Dark Flow": Can we only do RMB funds now?
Han Yan: No, because the companies we invest in will have overseas businesses. I believe they will have more overseas businesses in the future and may be listed in Hong Kong or overseas. I hope Heart Capital can participate in it.
"Dark Flow": So in 2023, you went to the Middle East. Is the purpose to raise funds for the US dollar fund?
Han Yan: It is only one aspect. Ten enterprises from our ecosystem also went with me. In this process, not only did the funds in the Middle East see Chinese technology, but it also brought a lot of cooperation, investment, and orders for our enterprises.
"Dark Flow": What is the biggest feeling during this period?
Han Yan: Chinese enterprises are too easily misunderstood. When I was in Abu Dhabi, a local investor told me that Americans do 1 point and talk about 10 points, Indians do 1 point and talk about 30 points, while Chinese do 10 points and talk about 1 point. Therefore, Heart Capital has also started to recruit global Chinese teams in the UK and Dubai to help outstanding entrepreneurs integrate into the world culture.
"Dark Flow": Why are you able to do this?
Han Yan: In the past three years, I have traveled to many countries in Europe and the Middle East, and went to London, Oslo, and Abu Dhabi. When I communicate with local LPs, they will say that there are very few second-generation Chinese GPs coming over.
There are actually not many investors in China who grew up from a junior to a GP, are not in a hurry to buy various nationalities, can speak English and drink Baijiu.
"Dark Flow": For a first-round fund like Heart Capital, are the mainstream LPs still willing to pay for it?
Han Yan: Most LPs do not think I am a first-round fund. This is my advantage, because I am not an ordinary partner of an institution who comes out to do it by himself, but a shareholder with a 50% stake. Until today, I am still one of the 50% shareholders and key persons of the management companies of the US dollar and RMB funds of Lightspeed China in 2016 and 2019. My team and I will still do a good job in the exit and management work.
"Dark Flow": One trend in the past two years is that the proportion of the primary market in LP's asset allocation is decreasing. Is it still a good time to establish a new institution in this situation?
Han Yan: It is both good and not good. It is not good that it is a new brand, but it doesn't matter. Brands are made by people. Where there are people, there are brands. The good thing is that although I am a new brand, I am the one with the least burden and the most legacy among the new brands. In another dimension, entrepreneurs always need primary market investors. Those who help entrepreneurs create the greatest value must be the ones who believe in them the earliest.
People Need to Embrace Changes
"Dark Flow": From today's perspective, no one would think that 2022 would be a good time to establish a new VC.
Han Yan: I think it is very good, and the opportunities are excellent now. Don't you think so?
"Dark Flow": Isn't it difficult to raise funds, invest in good projects, and exit the invested projects?
Han Yan: I think what makes everyone feel most uncomfortable is that the game has changed. Originally, the model of US dollar funds investing in 100 and getting one home-run definitely does not exist anymore. The future of this world is the "arms race" of hard technology, which is to embrace everything "sensitive" such as AI, energy, robotics, eVTOL, high-end chips, etc.
Then, why can't the companies in these fields exit? Either the company is not making money but only burning money, or the level of scientific and technological innovation is not enough, or it is not the most core asset in China. Why can't we adjust ourselves and invest in the most core assets and the most "sensitive" technologies in China?
"Dark Flow": Is changing the game the most important factor behind your founding of Heart Capital?
Han Yan: I know what you want to ask, but I promised my long-time partner not to mention this problem. Anyway, the important thing is that people need to embrace changes.
"Dark Flow": There is a slogan on the official website of Heart Capital: The earliest companion of non-consensus value. But most of the areas you mentioned earlier have already been the consensus of market investment.
Han Yan: Was the mobile Internet a consensus in the past? Many of my peers invested in a large number of mobile Internet companies, while I invested in Manbang, which is a non-consensus in the mobile Internet. Consensus is the general trend, and non-consensus is the detail. Consensus is the AI large model, and non-consensus is that Heart Capital invested in Baichuan.
"Dark Flow": Why invest in Wang Xiaochuan?
Han Yan: Many people ask me this question. In fact, there is only one reason. Today, the requirements for entrepreneurs are too high. They must have seven major capabilities to "summon the dragon" - the ability to form a team, the technical density of the team, the ability to raise funds, the ability to handle government relations, the ability to commercialize, the ability to handle relationships with large companies, and the ability to handle data.
To do an AI large model, an additional ability to buy computing power cards is also required.
"Dark Flow": Then why were you able to invest in Baichuan?
Han Yan: I met Xiaochuan six or seven years ago. Because we are alumni of China Europe International Business School, I went to the United States with Wang Xiaochuan. It was not to study anything, but just to travel. Ru Liyun, the co-founder of Wang Xiaochuan, is also an old friend. I was an investor in his previous AI education startup.
Later, I could talk with Xiaochuan, mainly because we mutually recognized each other's dreams. When everyone said they wanted to do a general-purpose large model, he said he wanted to focus on healthcare. For smart people, their minds are always on, but for a successful entrepreneur, the "stubbornness" to turn a difficult thing into a success is very important.
"Dark Flow": Non-consensus is the investment logic of typical US dollar funds in the past, but in the end, the essence of making money is the money from high-speed growth. Will there still be such an opportunity today?
Han Yan: China still has high-speed growth, but two things need to be met: First, this direction is a direction that the whole of China and the whole world are optimistic about, that is, it has a concept; second, we need to choose a company in this direction that has both revenue and profit. Having a concept means that financing can continue. Having a concept without revenue can also increase the valuation, but it must not be the largest. And having both a concept and revenue can achieve high growth