Edit: Interview with Xuhui Shao, Partner at Foothill Ventures and Early Investor in WeRide, Otter.AI, D-matrix, Bubble
Hear about the upcoming IPO of WeRide, Xuhui's investment philosophy, deep tech portfolio, AI and more.
Xuhui Shao's Background
Experience: Managing Partner at Foothill Ventures, a $250M VC fund focused on early-stage deep tech investment
Portfolio: spanning software (AI, enterprise software), deep tech (energy, semiconductor), and life science (neuroscience, digital health).
Among the 100+ portfolio companies, some names you might know: Weride.AI (autonomous driving), Ascend Elements (Lithium battery recycling), D-matrix (gen AI inference chip), Hayden.AI (computer vision for smart cities), Bubble (no-code web app).
Expertise: Before becoming an investor, Xuhui had a successful career in engineering & analytics, being a VP at Yahoo, CTO at Turn exited to Singapore Telecom, and VP at ID Analytics which exited to SAP.
Focus on Deep Tech Founders with Moats
Xuhui focuses on startups with strong technical moats
Break down AI investments into three types:
Platform
Infrastructure
Application
WeRide’s Upcoming IPO
WeRide (Foothill invested Seed Round) is preparing for its upcoming IPO, marking a significant milestone in autonomous driving’s journey through the challenges posed by COVID-19 and other hurdles.
Founding and Leadership: Tony Han, WeRide’s current CEO, was known to Xuhui Shao from his Baidu days. Xuhui invested in WeRide due to Han’s expertise in AI and autonomous driving, along with the strength of the founding team.
China's Market Potential: The investment thesis focused on China's population distribution, supportive local government policies, and a less ingrained driving culture, which made it a favorable environment for autonomous driving technology.
To learn more about the story behind WeRide, listen to the full episode here on YouTube: Link
Current AI Market Trends
AI Deal Surge: significant increase in AI-related VC funding rounds, reaching the highest level in two years. This comes after a downward trend in overall VC funding since 2021.
FOMO and Thematic Investment: The Fear Of Missing Out (FOMO) and the ease of tagging investments with AI or ML labels have contributed to a herd mentality among VCs.
Deep Tech Focus: Foothill’s fund avoids shallow AI applications or "AI wrappers" and focuses on startups with a strong technical moat, particularly in deep tech areas (emphasis on PhD).
Investment Framework: The investment strategy is broken down into three areas: platform, infrastructure, and applications, each differentiated by algorithms, compute, or high-quality proprietary data. This framework helps in identifying promising AI startups.
To hear two investment stories from Xuhui’s investment portfolio this year, tune in our full episode here: Link
85% of the companies Xuhui’s fund invests in are immigrant-led, with 75% being PhD-led, especially in deep tech sectors. This highlights the significant role that advanced degrees play in high-tech innovation.
Risk Management & Portfolio Balance
Risk Management Strategy: The portfolio is designed to include around 50 investments per fund, aiming for relatively independent bets to manage risk effectively. The focus is on binary outcomes—either a company becomes highly successful or it doesn’t meet the threshold of significance.
Statistical Modeling: The fund leverages historical data from previous investments to calibrate its statistical model, allowing for more informed risk-taking on individual investments.
Industry Focus and Exclusions: The fund avoids consumer products, investments outside of North America, and late-stage companies, as these areas fall outside its expertise. Instead, the focus is on early-stage U.S.-based startups.
Targeted Sectors: The current fund emphasizes AI (both infrastructure and vertical applications), energy transition, and neuroscience, chosen for their potential for disruptive innovations and large-scale impact, backed by the technical expertise of the partners.
Joining & Investing Startup as First-Generation Immigrant
Seizing opportunities despite the initial risk aversion that many first-generation immigrants face.
Advantages of Startup Experience: Xuhui highlights that working in startups offers accelerated learning, holistic problem-solving, and direct exposure to the market and customers, which are often missed in larger companies.
Advice to Immigrants and Young Entrepreneurs: He encourages new-generation immigrants to take risks, noting that survival concerns are less pressing today. The learning and growth opportunities in startups outweigh the risks.
How to decide which startup to join?
Joining a startup is like making a VC investment, where one should rigorously evaluate the company’s vision, the founders, and the market potential. He advises thinking like an investor and conducting thorough due diligence, including talking to investors, board members, and understanding the company’s strategic direction and cultural fit.
Investing in PhD
Importance of Independent Thinking: Xuhui emphasizes that while PhD research might not directly translate into startup success, the process of independent thinking cultivated during a PhD is invaluable.
PhD and Commercialization of Research: For many PhD founders, their startup journey often begins with the commercialization of years of research. This makes the PhD a natural fit for those looking to bring deep tech innovations to market. (e.g. Ascend Elements, AM Batteries)
🔥 Links to learn more
Learn more about Xuhui & Foothill Ventures: https://www.foothill.ventures/
Watch the full episode:
Listen to the story during your commute:
Any update?