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By the second half 2024, the goal of becoming OpenAI will no longer be the same for large model companies. Six well-known Chinese large models companies have gradually differentiated their strategies due to a slowing of technological progress and hesitant investor.
The adjustment of 01.AI is now fairly clear: focusing primarily on consumer products and AI search applications, while also opening a business front and continuing to provide standard services through APIs and collaborating with ecosystem partner to jointly serve key scenarios, such as ecommerce live streaming and online marketing.
We have learned that 01.AI plans to spin off a company to develop AI applications, based on the large models of 01.AI. This will include gaming. The company is seeking external funding at a valuation of several tens millions of dollars.
Ma Jie, vice president and co-founder of 01.AI is the chairman of the new company after the split. The split should be completed by the year’s end. After the split, Oasis will still be owned by 01.AI.
Ma Jie was a vice-president at Baidu, and was responsible for the metaverse product of Baidu, ‘XIRANG’.
Before that, he worked at Rising Antivirus Software Company between 2000 and 2010. He developed personal antivirus software as well as enterprise-level security products.
Afterwards, Ma Jie joined Sinovation Ventures founded by Kai-Fu Lee and became one of the first Entrepreneurs-in-Residence (EIR). Ma Jie was incubated later by Sinovation Ventures and founded China’s SaaS-based Cloud Security Service Company ‘Anquanbao’. The company was acquired in 2015 by Baidu, and Ma Jie became a Baidu employee.
Ma Jie, who was responsible for cloud gaming, cloud architecture and other directions, which were originally one revenue source for 01.AI and now transferred to Oasis, will continue in 01.AI. Ma Jie’s security and compliance responsibilities will continue.
Insiders close to the issue said: “01.AI wants to focus on model and computing output.” It is in the best interest of both 01.AI and product projects to allow some applications to explore commercial and product development paths independently.
01.AI has previously tried several AI products aimed at consumers (to C), but except for a productivity-based product with cash flow all other products have been discontinued or only maintained.
Next, 01.AI will likely focus on AI search as its main product direction. Since September, 01.AI tested and launched two AI-search products.
The B2B strategy of 01.AI became clearer in the second quarter of this year. It is to provide an integrated service consisting of “infra plus large models + applications” and target three key scenarios. Third, ‘Wanshi short video solutions’ are provided for marketing scenarios.
A primary market practitioner told me that splitting up is beneficial for both parties. For 01.AI it means immediate revenue recognition without significant burden, as they do not need to invest in new businesses. For Oasis it allows them to operate independently while being able access large models at lower cost.
It’s like the ‘fast-forward’ button was pressed and the large industry is accelerating from hot financing to intense competitiveness, and then into a period where they are being questioned within the technology entrepreneurship cycle.
The first split in the large scale industry happened earlier, when the company was only two years old. YITU, one of the AI ‘four dragons’ from the previous batch, was the first to split its business. In 2016, YITU spun off its medical division, founded in 2012.
A primary market practitioner analyzed that “the remaining large-scale firms probably do not have (subsidiary split) development plans for the moment.” “For other firms, one reason could be that their division strategy is different. Another reason could be that their founders have different views about business and capital than Kai-Fu Lee.”
Kai-Fu Lee was an executive at Microsoft, Google and other companies in the early years of his career. He saw many ups anddowns in business before founding Sinovation Ventures. Li Kaifu, in May of this year, told us that from a business perspective, going public was very important for large-model companies.
He said that at the time: “Going Public isn’t about making money or cashing out. Instead, it will assess whether an organization has high-quality revenue sources and can sustain growth. Going public can bring about other financing opportunities, such as private placements.
“Nowadays, with Chinese big-model startups…forget about investing from America or Europe. Middle East countries are still watching…the VC climate in China has also changed; many companies are expensive now. Do you expect them to valued at $4-5 billion US next round?”
01.AI gives a lot of importance to financial indicators and product ROI (Return On Investment) amongst the six large model companies. Kai-Fu Lee said that large model companies will sooner or later be scrutinized by investment banks. They need to prepare in advance because otherwise this house of cards will eventually collapse.
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