Interview with ZHANG Han of HSG China: Is it too late to rush to Shenzhen to invest in projects now?

Zhang Han believes that China has strong hardware and technological capabilities. Just as Japanese companies renewed global home appliance categories back then, Shenzhen's smart hardware entrepreneurs are expected to leverage their own advantages to continuously create globally innovative consumer hardware products.

Recently, Zhang Han, a partner at Sequoia China, has frequently been in Shenzhen. He makes dozens of round - trips a year just to seize the opportunity in the wave of entrepreneurs emerging from the "DJI ecosystem".

After 2025, Shenzhen's smart hardware startups have become stars in the capital market. A large number of investment institutions have flocked in, and the valuations of startups have soared. The group of "DJI - affiliated" entrepreneurs has risen, and the Chinese smart hardware industry centered in Shenzhen is brewing a global category reconstruction.

Data from Tianyancha, a business query platform, shows that in 2025, 77 smart and related smart hardware enterprises in Shenzhen completed 106 investments, with year - on - year growth of 51.0% and 79.7% respectively. The total disclosed investment amount was about 10.049 billion yuan, nearly seven times that of 2024. Shenzhen has become the most active region for smart hardware investment in China.

The rise of this boom is not accidental but the result of the combined effects of technological accumulation, talent supply, supply - chain advantages, and market demand.

In June 2025, Insta360, a Shenzhen - based company, was listed on the Science and Technology Innovation Board. On the first day of listing, its opening price was 285% higher than the issue price, and its latest market value is about 82.8 billion yuan, making it a benchmark enterprise in the field of intelligent imaging. On the other hand, TPU Technology, which originated from DJI's core team, topped the global consumer - grade 3D printing market in four years and had revenues exceeding 10 billion yuan in 2025.

As one of the earliest investors to focus on Shenzhen's smart hardware track, Zhang Han has observed that there has been a change in the supply - demand relationship in Shenzhen's venture - capital circle. Entrepreneurs from large companies, especially those from DJI, have broader horizons and stronger comprehensive capabilities than previous Shenzhen entrepreneurs. "DJI has many product lines, and the person in charge of each line has the ability to start an independent business. What we need to do is to be the first investor to have a conversation with them when they have ideas."

Sequoia China has accelerated its layout. For teams it is optimistic about, it can issue a Term Sheet (TS) in as fast as two or three days to avoid missing out on projects due to a long decision - making cycle.

As the popularity rises, some companies of "DJI - affiliated" entrepreneurs have completed two or even three rounds of financing before they are even fully established. The valuation at the seed round at the beginning of the year can increase several times by the end of the year.

Shenzhen's unique supply - chain advantages support this boom. Zhang Han cited "Shenzhen speed" as an example. If you want to make a basic functional board for an AI toy, after providing the plan and requirements to a Shenzhen factory, you can get a sample the next day at a very low cost. In contrast, this process usually takes one to two months overseas. At the same time, different from the previous model in Shenzhen where "big sellers" only focused on selling products and ignored the brand, current smart hardware entrepreneurs generally pursue a brand - building route. Relying on higher technological content and product quality to pursue high premiums, this also promotes the upgrade of Shenzhen's smart hardware industry from "Made in China" to "Chinese Brands".

Behind the boom, concerns about bubbles are starting to emerge. Zhang Han frankly said that currently, there are already many companies whose valuations have reached tens of millions or even hundreds of millions of dollars before they have launched products. However, as fresh ideas gradually decrease, the market will eventually return to rationality, focusing on product delivery, technological strength, and supply - chain capabilities.

Currently, the innovation directions of smart hardware startups are becoming more diverse. From 3D printing, desktop CNC (desktop computer numerical control machines), to featured products in the field of smart wearables, and the electrification replacement of smart transportation tools, a large number of entrepreneurs are making layouts. The US market, as a natural gathering place for smart hardware consumers, has become an important testing ground for many Shenzhen startups. Zhang Han believes that China has strong hardware and technological capabilities. Just as Japanese companies renewed global home appliance categories back then, Shenzhen's smart hardware entrepreneurs are expected to leverage their own advantages to continuously create globally innovative consumer hardware products and drive Chinese hardware to lead the global market.

This entrepreneurship boom driven by capital, talent, and the supply chain is rewriting the global competitive landscape of smart hardware.

The investment fever has suddenly risen

Caixin: When did you start to frequently visit Shenzhen to look at smart hardware projects?

Zhang Han: Sequoia has always been continuously paying attention to this industry and has been making continuous investments. We invested in Yiwen Technology (a startup in the field of smart glasses) in 2024. At that time, we felt that this direction was very interesting, and more and more good things were emerging. After that, I started to visit Shenzhen frequently and invest in some projects. By 2025, the entire industry suddenly heated up.

Caixin: In what aspects is the fever manifested?

Zhang Han: When we invested in Yiwen, there were still great differences in the valuations of such companies in the outside world. However, by 2025, many entrepreneurs started to emerge. Even before their companies were fully established, they had completed two or even three rounds of financing, and their valuations had reached tens of millions of dollars.

Caixin: Some local investors in Shenzhen mentioned that the arrival of investment institutions such as Sequoia and Hillhouse has led to the increase in the valuations of startups. Do you think there is such a correlation?

Zhang Han: Once there is some consensus in the industry, competition will become fierce, and prices will naturally start to rise. After more entrepreneurs from large companies emerge, they will compare with each other.

The core reason is that entrepreneurs are becoming stronger, and the number of investors is increasing, so the prices are rising.

Last year, there were also several opportunities. One was the listing of Insta360, and at the same time, TPU Technology received a lot of attention in the primary market. Moreover, TPU itself has strong profitability, so people think that this industry is worth investing in. These smart hardware companies have the opportunity to go public and can also make money overseas. Ordinary consumer products do not have a technological attribute and cannot get a higher valuation. So this industry suddenly became bustling.

Caixin: Is it reasonable for entrepreneurs from large companies to compare valuations with each other?

Zhang Han: This is a market behavior determined by the supply - demand relationship. It is an inevitable phenomenon when a large number of people leave large companies to start businesses.

Caixin: How do you specifically keep an eye on people from large companies?

Zhang Han: There are too many talented people in large companies. Any large company has thousands or even tens of thousands of employees, and it is impossible to contact everyone. The specific methods are diverse. You can get to know them through friends or contact them through the companies you previously invested in.

Caixin: From your contact with entrepreneurs from the DJI ecosystem, how is their strength?

Zhang Han: Their overall quality is relatively high. They have experience in independently developing large - scale products, which requires the ability to organize teams, define products, and manage the supply chain.

Caixin: Local investors in Shenzhen mentioned that startups in the smart hardware field in Shenzhen are now all taken by a few large institutions, and they can't get a share. Is it still an "insider - circle" investment?

Zhang Han: If you look at the first - round financing of these startups, there are more leading funds. As the financing rounds progress, the scope will expand because the information becomes more and more public.

Entrepreneurs also need a wider range of investors to come in. For entrepreneurs, this means broader resources and more possibilities, and they will also have more bargaining power.

Caixin: Why can't local investors in Shenzhen get involved?

Zhang Han: This may be related to the decision - making mechanism of funds. Some funds prefer to wait until startups have made clear progress and launched products before making an investment. However, in the current smart hardware field, it is actually a competition for talent. We first compete for excellent teams. At that time, there may only be business ideas and directions, and the products will be developed after the company is established.

It is also related to the stage. In the past, there was not such strong external competition, and you could observe a company for a long time to see its long - term development. Now, the time left for people to "observe" is shorter.

Caixin: How short is the time?

Zhang Han: Some institutions may be able to transfer funds quickly once a managing partner makes a decision. We will also hold an investment decision - making meeting as soon as possible based on the situation to reach a conclusion.

Caixin: Many investors mentioned that smart hardware startups only need two rounds of financing. The first round is used to develop products. After the products are launched and gain traction, the company can make money on its own. The second round is before going public. However, many smart hardware startups have completed several rounds of financing in a short period.

Zhang Han: This description is a bit simplistic. The product differences and competitive environments among startups today are different. If there is no fierce external competition, you can do it like this. In fact, you don't even need to raise funds. You can first do a crowdfunding campaign and use the prepayments to develop products.

However, in the current situation of fierce competition, you need to occupy the market more quickly and make more investments in channel construction and the market, which leads to a longer period of losses. After you gain a foothold and want to develop further, innovate, and compete, you need more financing.

A new generation of entrepreneurs

Caixin: What characteristics do entrepreneurs in the smart hardware field in Shenzhen in 2025 have compared with entrepreneurs in other popular technology industries?

Zhang Han: They don't rely heavily on large - scale models to develop products. Instead, they focus more on engineering problems and look for innovation in more categories. For example, since TPU and xTool (a startup in the field of laser engraving machines) have done very well, we can consider what other directions are worth exploring in the "Maker" track, what household items can be DIYed, and what male and female users need. Then we will find that there are many things to do.

For example, we invested in a desktop CNC project, and there is also a startup project from DJI that is a household textile machine that can be used to weave cloth and knit sweaters at home.

In addition, in the imaging field, DJI's Pocket 3 alone has achieved revenues of tens of billions of yuan, indicating that it is a huge market, and many entrepreneurs are also thinking about this direction.

Caixin: Can these niche - entry projects develop into companies with revenues of tens of billions of yuan?

Zhang Han: It's hard to say no. These demands exist. Many new categories may seem ridiculous at the early stage, but they may eventually become large - scale markets.

Caixin: Shenzhen is the world's factory with an extremely developed supply chain. Once a product sells well, it will be quickly copied.

Zhang Han: The difference between today's smart hardware and the past is that they incorporate more software capabilities. Factories can copy the product's shell, but it's difficult to copy the software and the actual product experience.

So today's entrepreneurs are all moving towards brand - building. They are not just about mass - distributing products. A product needs to have higher quality, incorporate AI capabilities, and be beautiful and portable. All these factors together make the overall hardware design more difficult.

Moreover, there are still many directions and categories for innovation, so there is no need to engage in direct competition right from the start. If you want to create a similar category as others, you need to assemble a team with at least the same or better capabilities, but others have already established a first - mover advantage.

Caixin: We've seen several startups in the field of smart tennis machines in Shenzhen.

Zhang Han: It's not several, but dozens.

I think we can first observe this market. Tennis machines are indeed a product with strong demand, especially in the North American market. There are many tennis courts there, but coaches are expensive, and it's hard to find someone to play tennis with you. The experience of previous tennis machines on the market was very poor. If you want the speed of the tennis balls to be as natural and stable as possible, you need a large counterweight, and the machine may weigh thirty or forty catties. This involves how to apply AI, how to place cameras, and how to help you improve your tennis skills. There is a lot of room for intelligentization, so many people are working on it, but it is still in the competition stage, and we need to see who will succeed.

Caixin: You've already invested in many projects in the past two years. How will you invest in 2026?

Zhang Han: My feeling is that new people are constantly entering this industry. We will continue to look at projects and look forward to the innovative ideas of these entrepreneurs.

Caixin: I thought you would say it's because there are still categories to be explored.

Zhang Han: We can't define the categories precisely, but we have general directions, such as products for female users, products suitable for the elderly, or pet products. In addition to the "Maker" track mentioned earlier, there are also large themes such as wearables and smart transportation tools. However, it is the entrepreneurs who decide which specific categories to work on.

The advantage of the smart hardware industry is that its business model is very mature, and there is no need to educate the market. With the support of large - scale AI models, new business models have emerged. In addition to selling products, companies can also charge fees through software services, such as monthly subscriptions. The business model is better than before.

Caixin: Crowdfunding in the US has now become a popular trend. Some investors use the crowdfunding amount as an indicator for investment decisions.

Zhang Han: Different people have different standards for crowdfunding. The data on crowdfunding platforms is not as reliable as before. Now, it is more like an advertising platform. The more money a company invests, the more crowdfunding results it may get. We can't just look at this number.

We can compare companies in the same category. For example, if two peer companies both received $3 million in crowdfunding, but one invested $1 million and the other invested $500,000, we can see the difference in efficiency.

Shenzhen speed and Shenzhen stories

Caixin: The high - efficiency supply chain in Shenzhen is the foundation of this smart hardware entrepreneurship boom. How fast is Shenzhen's supply chain exactly?

Zhang Han: The most extreme example of Shenzhen speed is making boards. For example, if you want to make a basic function for an AI toy, you provide the factory with the plan and specific requirements, and the factory will deliver the board the next day at a very low cost. In other countries, it may take one or two months.

However, if you need to do some processing - related work, you still need to make a production schedule at the factory, and sometimes you have to wait for one to two weeks.

Caixin: Another obvious characteristic of entrepreneurs in Shenzhen in this round is that they all want to build brands instead of just selling products like in the past. When we interviewed entrepreneurs before, they mentioned Anker Innovations and regarded it as a representative of brand - building in Shenzhen.

Zhang Han: Yes, but this round of hardware entrepreneurship is a bit different from Anker. Anker chose a difficult path. They turned a product that anyone could make into a brand, which is their strength.

Today, many entrepreneurs are working on products that are not so easy for others to make. In the past, "big sellers" in Shenzhen did not focus on brand - building. Now, smart hardware has higher costs and higher technological content. They need to sell at a high premium, so they need a brand. More entrepreneurs have brand awareness and hope to achieve greater success in entrepreneurship rather than just doing business.

Caixin: People feel that there was not much primary - market investment in Shenzhen in the previous few years. Why is there more attention now?

Zhang Han: When I first started investing in the mobile - internet field, indeed