The recent arbitration controversy surrounding "Lunar's Dark Side," a prominent player in the AI large model sector, has stirred a considerable commotion in the investment worldYang Zhilin, a key figure in this saga, has stepped forward to clarify the events, defending Zhang Yutong, who finds herself embroiled in the ensuing controversy, and clarifying the complexities of the situation.

A crucial point of contention has been the issue surrounding undisclosed shareholdingsThis has been widely acknowledged as a procedural flawHowever, it's pivotal to note that the shares held by the founding company, Cyclic Intelligence, and its existing shareholders in Lunar's Dark Side were predetermined from the outsetThe separation occurred first, followed by Zhang Yutong's share allocation, which Yang Zhilin described as “mutually independent.” Regardless of Zhang Yutong's subsequent participation in shareholding, it did not impact the interests of Cyclic Intelligence and the other shareholders.

This turbulence, ignited by a Hong Kong arbitration case, not only pertains to the future trajectory of Lunar's Dark Side but could also mark a significant milestone in the history of technology investment.

originating from the success of Kimi

The landscape of AI large models is highly competitive, and although Lunar's Dark Side was not the pioneer in this field, it has emerged as a formidable contender

Prior to the emergence of OpenAI and other international counterparts, various domestic enterprises had already initiated their own large model products, with major tech companies gearing up for what was termed a “competition of a hundred models.”

Despite not having a robust background or an established reputation during its inception, Kimi—part of Lunar's Dark Side—has now amassed a significant following, standing out as one of the most prominent players in the domestic large model scene.

As of November, data from AI product rankings indicated that Kimi's website witnessed over 32 million visits, positioning it as the leading product in its category within China.

The official October figures announced that Kimi's active user base exceeded 36 million, and shortly after celebrating its first anniversary, Kimi unveiled a new generation mathematics reasoning model that directly competes with OpenAI's o1 series.

In the eyes of the public, using Kimi has primarily been a phenomenon of 2023. However, prior to this widespread usage, Kimi and Lunar's Dark Side had already caught the eye of investors.

In February 2024, Lunar's Dark Side completed a financing round exceeding $1 billion, led by Alibaba and with participation from Sequoia China, Meituan, Xiaohongshu, and others, with a post-investment valuation of $2.5 billion (approximately 18 billion RMB).

This influx of capital positioned Lunar's Dark Side as the highest-valued “unicorn” in the domestic large model arena, eclipsing earlier entrants like Zhipu AI and Minimax, whose valuations had surpassed $1.6 billion.

Before this round of financing, Kimi was in a precarious competitive stance, facing potential elimination from the race

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However, with Alibaba's entry, Tencent quickly followed suit, boosting Kimi's financial capabilities and enabling it to expand its influence.

Yet, as Kimi rose to prominence, troubles began to emerge.

missing a crucial month

Looking at the timeline, prior to March 2023, the AI large model industry had already been gaining momentum, primarily fueled by the launch of ChatGPT, prompting various players to rush to enter the market.

In the first half of 2023, Lunar's Dark Side secured over $200 million in angel financing, valuing the company at $300 millionBy June and July, further investments were raised, with notable backing from Meituan Dragon Ball and BlueRun Ventures.

By October 2023, Lunar's Dark Side rolled out the world's first intelligent assistant product capable of processing 200,000 Chinese characters, marking a significant milestone in the company's journey and capturing the attention of major investors like Alibaba.

The rapid development rhythm of Lunar's Dark Side underscores the fleeting opportunity window in the AI large model sector

Yang Zhilin, in an interview, remarked, “We started our first financing in February 2023. Delaying to April would have meant missing the opportunity altogether, whereas attempting this in December 2022 or January 2023 would have also been misguided due to the pandemicThe available window for action was essentially one month.”

Missing that crucial month could signify losing an entire era.

The line between success and failure is often razor-thinUnder such circumstances, it is nearly unavoidable for some procedural shortcomings to ariseCurrently, public opinion reflects the consequences the entrepreneurs must face, but if given another chance, they would likely prioritize solidifying the company before addressing these issues.

The ideal progression would involve completing the shareholders' meeting for existing investors and ensuring all corporate governance procedures are fulfilled before launching new projects, allowing key personnel to focus entirely on execution.

This scenario illustrates the challenge of seizing opportunities, as delays in formal processes could lead to lost prospects

Furthermore, the criticism directed toward Zhang Yutong played a pivotal role in how older shareholders who missed the chance to invest capitalized on their grievances.

It is crucial to clarify that the separation arrangement between Cyclic Intelligence and Lunar's Dark Side was established prior to any share allocationsRegardless of Zhang Yutong’s share count, it would not alter the financial stakes of the existing stakeholders.

While acknowledging that there was indeed a lack of disclosure, Zhang Yutong has been instrumental in financing, strategic planning, and business development within Lunar's Dark SideHer shares were not granted all at once; rather, they were intended as compensation for her ongoing contributions over the forthcoming years.

Striking a balance between ideal scenarios and real-world situations can be challenging, as illustrated by a fellow investor's perspective highlighted in a social media discussion:

“Essentially, all shareholders were in agreement, and Yutong's vote was not determinative

Yang Zhilin had no intention of ‘bribing’ herThe 14% stake offered to Yutong reflects not her role at the firm but the potential value she can bring to Lunar in the coming years, which will need to be proven and gradually allocated over four yearsIf we must label it as suspicious, let’s be honest: how many people can avoid ‘riding a donkey while looking for a horse’ when scouting for their next opportunity? Moreover, as the overseeing partner at Jingshan River, it was practically inevitable for Yutong to become enmeshed in this situation.”

Ultimately, the meteoric rise of Lunar's Dark Side and Kimi is the crux of this conflict.

As another investor noted, “The core issue centers on the steep rise in Lunar's valuation while several organizations failed to participate.” This situation often necessitates answers when limited partners inquire about these discrepancies.

This insight could explain why the older stakeholders, particularly those represented by Jingshan River Ventures, opted for arbitration over conventional court proceedings

The arbitration process allows for more room to negotiate than standard court litigation, paving the way for a likely amicable resolution resulting in mutual compensation or equity agreements.

resolving disputes and focusing on the future

When examining the dynamic between Cyclic Intelligence and Lunar's Dark Side, it becomes apparent that attributing blame is a complex matter.

In February 2023, Yang Zhilin and former Cyclic Intelligence CEO Chen Qicong reached an agreement that established Lunar's Dark Side as a standalone entity while Cyclic Intelligence received a certain percentage of shares without cost.

The following month, a significant event unfolded in U.Sbanking as Silicon Valley Bank collapsed, which heavily impacted Cyclic Intelligence, triggering a cash flow crisis due to most of its funds being tied up in the failing institutionYang Zhilin promptly connected with three potential investors interested in buying older shares of the company during this challenging time, permitting Cyclic Intelligence to alleviate its financial distress by selling millions in equity.

Yang Zhilin's timely help during a crisis is commendable, illustrating not merely a business transaction but a considerable act of goodwill

Ironically, the arbitration lodged by the older shareholders against Lunar's Dark Side leveraged this financial interconnection.

Despite the turbulence, Yang Zhilin has opted against excessive grumblingHis focal point remains the rapidly fleeting opportunities presented by the AI era, underscoring the cutthroat nature of competition where every misstep could prove fatal.

“While we’re deliberating on this matter, teams across the ocean are announcing their latest AI developments,” he remarked towards the end of his commentary.

The urgency is palpable.

On December 5th, OpenAI announced it would execute twelve press events within the next twelve days to showcase its latest technological advancements, including the launch of ChatGPT o1 and o1-Pro, the latter being priced at $200 per month, making it one of the most expensive subscription services available for individual users in the AI domain.

What further innovations are brewing at OpenAI? This uncertainty has pervaded the AI industry, sparking nearly universal anxiety among all tech firms.

Yang Zhilin emphasized the paramount importance of focusing on enhancing Kimi’s technology and product offerings, pledging that the team would work tirelessly in pursuit of excellence.

It is imperative not to let short-term conflicts derail aspirations for the future, particularly for an AI “unicorn” filled with promise.