(Bloomberg) – Li Zexiang grew up in rural China during the Cultural Revolution, when the capitalists were the enemy. Now the 61-year-old academic has quietly become one of the most successful angel investors in the country, backing more than 60 startups including drone giant DJI.
Most read by Bloomberg
Li was one of the first Chinese to study in the US before returning to teach at Hong Kong’s premier technology university. From there he has built a generation of entrepreneurs and built an incubation academy that funds or nurtures nearly $12 billion worth of promising players in robotics and artificial intelligence.
Intentionally or unintentionally, the robotics expert is playing an increasingly important role in the battle between the US and China for dominance in defining technologies. As Washington prepares to extend lockdowns against its rival’s chip and AI sectors, Li’s talent for ferreting out scientific breakthroughs will likely prove more important than ever.
“In crisis, opportunities arise,” he told Bloomberg News on the sidelines of a conference in Hong Kong. “In the past, Chinese companies and their technology were second choice even for local companies. But now they have a chance to overcome that.”
It’s a typically optimistic perspective from Li, a member of a select club of esteemed intellectual-turned-financiers that includes Turing Prize-winner Andrew Chi-Chih Yao. Like his peers, robotics expert Li has been at the forefront of some of the most important Chinese innovations of the past decade – following the country’s evolution from factory of the world to hothouse for tech giants.
Li would not elaborate on Washington’s efforts to stem China’s rise — a sensitive issue as relations between the two countries are heading for their strained in decades.
“No matter how intense the conflict between the US and China becomes, no matter how decoupling progresses, the fact is that it is equivalent to losing 800 soldiers for every 1,000 dead,” he said.
But it’s clear that the pendulum has swung in his favor as Beijing ramps up its efforts to replace US hardware and circuitry and cracks down on a decade of free-wheeling expansion by internet giants. Li, who acts privately and has no ties to the government, nevertheless has good official contacts. He was among about 40 honorees selected by the Shenzhen government in 2020 for their role in transforming the once sleepy fishing village into a Southern economic powerhouse.
While social media and retail internet pioneers ByteDance Ltd. to Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Once in the spotlight, more and more capital is now flowing into hardcore tech activities like semiconductors, robotics and AI. Xi Jinping again this month urged China to speed up the development of such technologies in the interest of national security.
Read more: How a 75-year-old Harvard graduate is driving China’s AI ambitions
This is where Li comes in.
He studied in the United States in the 1970s and 1980s and, along with fellow academic Yao, joined the early waves of Chinese students. It was a life-changing experience for a native of the same landlocked, agricultural province of Hunan where Mao Zedong was born.
While awaiting admission to college, Li worked at a school-run factory making electric insect traps. He was one of the lucky ones – he won a place at a local school before discovering the joys of academic rigor abroad.
After earning his PhD in electrical engineering and computer science from the University of California, Berkeley, he became a research scientist at the Massachusetts Institute of Technology and then joined the robotics laboratory at New York University.
“Going to college in the US was a big turning point for me,” Li said, adding that he benefited from the liberal mindset at Berkeley.
In 1992 he finally went home to study at the Hong Kong University of Science and Technology.
In the Asian financial hub, he developed a passion for cultivating startups. In almost three decades he has been there, he has supported numerous startups through his incubation platform Xbotpark. According to Li, their total market value now exceeds 80 billion yuan (US$11.5 billion).
Some are leaders in their respective fields, while others have attracted global financiers, including Sequoia China and Hillhouse Capital. None is better known than SZ DJI Technology Co.
Li is credited with saving the startup when it hit rock bottom and still serves as chairman. Many employees, disillusioned with the prospects, had resigned. Some even began copying and selling their products. Founder Wang Tao needed $100,000 to keep his year-long startup afloat — so he turned to his college mentor Li.
The professor kept his protégé waiting in front of his lecture hall for two hours, but finally agreed to the capital injection. Crucially, the MIT-educated academic brought many of his other students on board. That was in 2007. Today, DJI is valued at $15 billion and commands three quarters of the consumer drone market.
“DJI was China’s version of the American Dream,” Li told Bloomberg News last month. “It was a student-led vision that became a reality without a bit of military or government resources — just the markets at work.”
A pattern emerged in which Li pushed beyond academic endeavors into real-world outcomes, to the extent that he would often gamble some money on his most promising students to help them get started.
The founders of ePropulsion in 2012, for example, were torn between focusing on the technology and commercializing it, until Li stepped in and advised them to launch a more popular, low-power electric motor first. That saved the company, recalled co-founder and CEO Tao Shizheng.
“Talk is cheap, show me your code. Paper is cheap, show me your project,” said Zhang Di, the founder of Direct Drive Tech, reciting one of Li’s favorite mantras. Ironically, Zhang Li’s master’s program dropped out shortly after his teacher raised 300,000 yuan to found his drive motor. His company is now also backed by 5Y Capital.
DJI’s Wang, also known as Frank, is probably the most famous of Li’s students. After Wang’s encounter with piracy, the professor advised the model airplane enthusiast to first focus overseas and then expand into industrial drones. Wang’s company even developed a powertrain system for a car with SGMW, a joint venture between SAIC Motor Corp., General Motors Co. and Liuzhou Wuling Motors Co., which launched in August.
DJI’s success laid the foundation for Xbotpark, Li’s current passion. The professor sold part of his stake in the drone giant in 2014 to fund the incubation platform with two professors in Dongguan, less than two hours from manufacturers and shipping terminals in Shenzhen, Guangzhou and Hong Kong.
It had a couple of notable hits. Hai Robotics, a provider of robotic systems to Philips and SF Express, received over $100 million in funding in June at a valuation of nearly $2 billion. The Narwal robot vacuum cleaner was the first project to be incubated in Li’s Xbotpark and is now cleaning one million homes worldwide, valued at more than 10 billion yuan. Sequoia China and Hillhouse Capital-backed EcoFlow, the battery unicorn founded by a former DJI employee that won Beijing’s coveted “Little Giant” label in 2021, is preparing for a domestic IPO.
Not all of Li’s bets paid off. Of the dozens of ideas he has funded or supported over the years, only a handful have grown into unicorns or global names. Most of the time, however, his protégés benefit from his contacts in finance and technology. “Professor Li’s personal brand is very influential in the industry,” Zhang said.
It helps that Li’s efforts align with Beijing’s vision. In robotics alone, the Ministry of Industry and Information Technology is aiming for compound annual sales growth of more than 20% by 2025 in a five-year plan presented in December.
In recent years, Li opened satellite XbotPark sites across the country from Ningbo to Chongqing. He also set up a mutual fund with Sequoia and Hillhouse to fund members directly, including Zhang’s Direct Drive Tech, though he declined to give details of his capital.
He envisions Xbotpark becoming one of several birthplaces for unicorns as Beijing diverts more capital into semiconductors, AI, cleantech and cars. But it’s a bit like setting out to scale the world’s highest peaks, Li admits.
“These politicians can only see the giant corporations,” he said. “What they don’t realize is the fundamental technology movement, but the companies that emerge from it represent our future hopes and dreams.”
Most Read by Bloomberg Businessweek
©2022 Bloomberg LP
