Liu Yuan on Succession, Investing, and Growing a Young ZhenFund Team

Zhang Xiaojun interviews ZhenFund partner Liu Yuan about Xu Xiaoping stepping back, Anna Fang taking greater responsibility, and younger investors’ development. The episode says it was recorded in 2022; its image is dated November 16, 2023.

Liu says he likes writing long letters: carefully expressing ideas and feelings can help build relationships with founders and colleagues.

He recalls writing to investors while job-hunting, sometimes receiving a reply without getting the opportunity he wanted. Looking back, he sees that recipients respond to different styles.

While working for a fund of funds in the US, he contacted Chinese investors, met Xu Xiaoping through a business introduction, and was later introduced to Anna Fang.

He recalls an early conversation in which Xu asked about overseas funds and suggested he meet Fang.

After meeting Fang, Liu continued interacting with the ZhenFund team and attending events over more than a year while considering a return to China.

He says he had other job opportunities but ultimately chose ZhenFund partly because of Fang’s persistent outreach and the value he felt she placed on him. This is his personal recollection.

He also describes frustrations when writing to founders and says persistence and respect for their time both matter.

On succession, Liu sees Fang’s 2019 recognition as a founding partner as a symbolic milestone. In his account, the transfer of responsibilities happened gradually.

He recalls turning to Xu for difficult decisions and later consciously deciding more independently. For him, succession also meant changing a relationship of reliance.

Liu describes Xu’s past anxiety about the fund’s competitive position and missed opportunities. This is his recollection of working together, not a complete account of Xu’s views.

Using the missed RELX investment as an example, he recalls contacting the founder, follow-up, and regret over the deal. He acknowledges he cannot know whether different actions would have changed the result.

The experience prompted him to reflect on omissions as well as mistakes: which opportunities deserved more careful follow-up but did not receive it.

Inside the team, he describes Fang’s communication and relationships with colleagues and the entrepreneurial experience brought by other partners.

He describes promotion metrics and discussions at different levels of the fund, saying transparent rules help teams understand expectations while partner selection also involves collective decisions.

Liu says the team studied overseas funds’ structures and meetings to learn how different firms share judgment among partners.

He describes investment-committee discussions in which reasons for strong support and opposition should both be heard; the outcome depends on the reasoning and strength of views, not just a vote count.

On founders, he describes classification frameworks the team used to compare entrepreneurial experience, potential, and project stage. He says those frameworks change with experience.

He recalls ZhenFund placing greater weight on zero-to-one experience, while emphasizing that this is an investment preference and does not mean large-company veterans cannot found successful businesses.

He values experience from repeat founders, including reflection after failure, but says the fund sometimes missed such teams because of price or lack of contact.

He describes studying missed opportunities to learn how to meet founders earlier and follow up promptly, not just reviewing investments already made.

When assessing founders, he looks at how they explain failure, respond to challenges, and understand competitors. These are his judgment methods, not a formula for success.

He reflects on not engaging fully in a colleague’s investment discussion, arguing that people should take responsibility for collective decisions even when each has a personal portfolio.

He compares early investing to a mystery box and discusses preferences regarding founders’ age and experience. This screening view reflects the fund’s thinking at the time and does not establish that age determines ability.

He reflects on favoring some founders because of his own interests and later realizing that investment judgment should be separated from personal preference and tested against performance.

Xu asked team members what they genuinely enjoyed and encouraged them to connect interests with work. Liu uses his interest in content as an example while acknowledging that focus means passing on other opportunities.

He describes building long-term relationships with founders and meeting new teams through referrals. A network can help source opportunities but does not guarantee investment outcomes.

In his description, each investor owns their projects while the team shares experience and discusses decisions together. Individual development is also part of succession.

Liu recalls Xu showing patience toward a founder seeking investment, drawing a lesson that even when declining, investors should respect the person’s time and make the conversation worthwhile.

Looking at the challenges after succession, he says the team must continue building its reputation, developing the next generation, and forming its own judgments without direct intervention from the founder’s personal influence.

He recounts a younger colleague asking Xu to help win a deal and Xu encouraging her to handle it independently. For Liu, succession brings both the pressure of losing a familiar source of support and an opportunity to grow.