Recently, the incident involving the founders of Dark Side of the Moon Yang Zhilin and Zhang Yutao being brought for arbitration in Hong Kong by some investors of Loop Intelligence has continued to ferment. Zhu Xiaohu, managing partner of Jinshajiang Venture Capital, gave a detailed response to this incident. In his response, Zhu Xiaohu clarified the ins and outs of the incident and pointed out the conflicts of interest and irregularities in the incident, which aroused widespread concern in the industry. This article will sort out and analyze the incident, and delve into the complexity behind it, as well as the implications it brings to Chinese startups in terms of spin-offs and shareholder rights and responsibilities.
On December 5, Zhu Xiaohu, managing partner of Jinshajiang Venture Capital, responded to the arbitration incident recently filed in Hong Kong by Dark Side of the Moon founder Yang Zhilin and co-founder and CTO Zhang Yutao by some investors of Loop Intelligence.
He said that Dark Side of the Moon was originally a project developed internally by Loop Intelligence for two years, but it has not yet received a formal resolution from Loop Intelligence shareholders. Zhu Xiaohu further clarified that this dispute is not only about the exemption letter, but also involves delays in board resolutions and conflicts of interest.
It is understood that Moonshot AI was established in March 2023, and launched its star product Kimi in October of the same year, which quickly gained market attention and once surpassed Wen Xinyiyan and became the focus of heated discussions in the industry. However, Yang Zhilin and Zhang Yutao initiated financing and established Dark Side of the Moon without obtaining a waiver of consent from Circular Intelligence investors. This behavior triggered a strong reaction from investors.
Zhu Xiaohu clearly pointed out in his post on Moments that Dark Side of the Moon is not a sudden new project, but a technology that has been developed internally by Circular Intelligence for two years. Despite the long-standing spin-off, Circular Intelligence’s shareholder resolution has not been signed until January this year. However, one of the directors involved (Zhang Yutong) concealed a conflict of interest, and this resolution was also considered to be invalid.
In addition, Zhu Xiaohu also revealed Zhang Yutong's behavior within Circular Intelligence. He deliberately concealed the large number of shares he obtained in the newly spun-off company (9 million shares, accounting for approximately 14% of the initial shares). This behavior violated the requirements for fund partnerships. The fiduciary responsibilities of people and shareholders ultimately led to his dismissal from Jinshajiang.
The core dispute in this arbitration turmoil centered on the fact that Yang Zhilin and Zhang Yutao initiated financing and founded Dark Side of the Moon without obtaining a consent waiver from Circular Intelligence investors. Although Dark Side of the Moon has entrusted a lawyer to handle the matter, and the attorney stated that he will defend himself in accordance with the law, this incident has also revealed the complexity of spin-offs and shareholder rights and responsibilities of Chinese startups, and has become a classic case in the history of venture capital. .
As a company that started very fast, Dark Side of the Moon once reached a valuation of US$3.3 billion thanks to a series of financing and technological breakthroughs. However, behind this capital feast, some "old shareholders" who failed to make profits expressed dissatisfaction with the share ratio arrangement of Circular Intelligence and Dark Side of the Moon, which eventually led to the outbreak of this investment dispute.
This arbitration incident not only exposed the problems of Dark Side of the Moon in the corporate governance and financing process, but also sounded the alarm for Chinese startups, reminding them that they should pay attention to corporate governance, shareholder rights protection, and legal risk prevention during their development process. The development of subsequent events deserves continued attention.