DeepSeek, the Chinese artificial intelligence (AI) startup, is seeking a valuation of more than $20 billion as it begins raising external funding for the first time since its launch. The funding round is not primarily driven by urgent financing needs. Instead, DeepSeek will reportedly use the capital to strengthen employee retention and stabilize staff incentives. The development comes as more workers at the company are being poached by rivals in the AI sector.
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New trading tool for NVDA bearsDeepSeek Loses Key Researchers to Rivals
DeepSeek is in talks with a small group of strategic investors on its fundraising plans. The private company generates less free cash flow than larger rivals, but it has not faced any pressing or major requirement to raise outside funding, people familiar with the discussions said.
Instead, the fundraising effort is primarily aimed at reassuring researchers by giving them stock options, an important part of their salary, with a clear market value, so they are not lured away by higher-paid offers at rival firms. Notably, key researchers have reportedly left the startup in the past few months.
Guo Daya, a lead author of DeepSeek’s R1 model paper, joined TikTok’s parent ByteDance, while Wang Bingxuan, a veteran of the firm’s model training team, moved to Tencent (TCEHY). Meanwhile, DeepSeek founder Liang Wenfeng is also considering other options if fundraising terms are not reached. These include share buybacks and performance-based valuation methods.
Valuation Gap Puts DeepSeek at a Disadvantage
DeepSeek gained global attention last year after releasing its R1 model, which it said matched U.S. AI models such as ChatGPT but at a significantly lower cost. Despite this, Liang rejected outside investors, prioritizing research over commercial growth and continuing to fund the company through his quantitative trading business.
However, sources said financial institutions are put off by the firm’s lack of a clear business model, while strategic investors note that Liang shares only minimal financial details. One person cited DeepSeek’s cash pay as competitive, but an unclear valuation puts it at a disadvantage against larger tech firms like Alibaba (BABA).
They added that valuation gaps with startup rivals, such as Moonshot AI, MiniMax Group, and Zhipu AI, all valued in the billions, have intensified pressure by strengthening their ability to attract talent. Even so, a source said investors with strong cloud and computing capabilities, or state-backed funds without performance pressure, would be best suited to support DeepSeek’s computing needs.
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