DeekSeek Resists Bringing on Investors

Summary

WSJ Tech News Briefing: Detailed Summary of "DeepSeek Resists Bringing on Investors"

Release Date: March 17, 2025
Host: Shara Tipkin
Publisher: The Wall Street Journal

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Overview

In this episode of the WSJ Tech News Briefing, host Shara Tipkin delves into two significant topics shaping the tech and bioscience landscapes: the impact of federal funding cuts on U.S. bioscience and drug development, and the cautious stance of Chinese AI startup DeepSeek towards external investments despite its burgeoning popularity. The episode features insightful discussions with The Wall Street Journal’s Enterprise Technology Group bureau chief Stephen Rosenbush and reporter Rebecca Fung, providing listeners with a comprehensive understanding of these critical issues.

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1. Federal Funding Cuts Threaten U.S. Bioscience and Drug Development

a. Context of Funding Cuts

The episode opens with an examination of the Trump administration's initiative to reduce federal spending, which includes significant cuts to bioscience funding. These cuts are primarily affecting grants that universities depend on for conducting vital research.

b. Insights from Stephen Rosenbush

Stephen Rosenbush provides an in-depth analysis of how these funding reductions are reshaping the bioscience sector:

• Funding Mechanism and Dependency: "One of their chief investigators, David Baker, won a Nobel Prize for his work last year designing proteins not found in nature. This group relies on the government for around 90% of its funding." (01:30)

• Impact on Universities: "They are cutting back. The uncertainty in funding has led to a significant reduction in the number of graduate students that the University of Washington is admitting in biochemistry and elsewhere." (02:12)

• Administrative Responses: Universities are implementing broad-based hiring freezes and reducing faculty positions to cope with the uncertain financial landscape.

c. Broader Implications

Rosenbush highlights the long-term risks associated with sustained funding uncertainty:

• Economic and Scientific Consequences: "The concern that David Baker in particular has is that there really isn't that much actual cost savings to be found in terms of hard dollars. But the cost of those savings could be very, very significant to the US over time." (03:32)

• Global Competitiveness: "We could end up buying more of these products and drugs from China, which has invested very, very heavily in this scientific work over the last 15 years and which also critically has a really stable funding base." (04:21)

d. Government Response

When questioned about the administration's stance, Rosenbush notes a lack of direct communication: "I did reach out to the National Institutes of Health and to the White House. I haven't heard anything back." (02:57)

Summary of Section 1

The federal funding cuts initiated by the Trump administration are creating significant uncertainty within the U.S. bioscience community. This financial strain is leading to reduced graduate admissions, hiring freezes, and potential long-term setbacks in drug development and scientific innovation, potentially ceding leadership to countries like China with more stable funding environments.

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2. DeepSeek's Popularity vs. Reluctance to Accept Investments

a. Rise of DeepSeek

DeepSeek, a Chinese AI startup, has garnered substantial attention for its advanced and cost-effective chatbot. Despite its success and the influx of investor interest, the company remains hesitant to secure external funding.

b. Interview with Rebecca Fung

Reporter Rebecca Fung provides a comprehensive look into DeepSeek's strategic decisions:

• Founder’s Reluctance: "What we've known is that the founder has basically told his associates that he's really not in a hurry to get any investment, partially because he’s slightly afraid that outsiders like external investors would basically interfere with Deep Seek's decisions." (06:16)

• Desire for Autonomy: The founder, Liang Wenfeng, prefers to maintain control within the top tiers of the company to preserve its strategic direction and global aspirations.

• Funding History: "Deepseek has an interesting starting story. Basically it started as a Quant Fund in 2015... they're basically using the quant fund's revenue to fund their AI ambition." (07:37)

c. Potential Investors and Partnerships

Despite reluctance, various entities show interest in DeepSeek:

• Investment Groups: Venture capital and private equity funds are keen to invest, alongside state-linked funds.

• Tech Giants Partnerships: Executives from Tencent and Alibaba have engaged with DeepSeek to integrate its AI capabilities into their platforms. For example, Tencent is testing DeepSeek's chatbot on its WeChat app without incurring licensing fees, leveraging DeepSeek's open-source algorithms. (08:30)

• Public Acknowledgment: Collaborations with major tech firms like Tencent and Alibaba are openly discussed, boosting DeepSeek's market presence. (09:40)

d. Challenges Facing DeepSeek

Despite its popularity, DeepSeek encounters several obstacles:

• Technical Strain: "Deepseek's chatbot itself is a bit overwhelmed... it's overwhelmed by millions of users because its computing power is proven at the moment not to be enough." (10:26)

• Regulatory Pressures: Global authorities are imposing restrictions on DeepSeek's chatbot usage due to data security concerns, complicating its expansion and operational stability.

e. Future Prospects

The company's future hinges on its decision to monetize:

• Monetization Dilemma: "It's really up to Deepseek whether they want to stay in almost like a nonprofit form and open source or they want to monetize it." (10:59)

• Investor Hesitation: Without a clear monetization strategy, potential investors remain hesitant, questioning the return on investment. (10:56)

Summary of Section 2

DeepSeek stands at a crossroads between maintaining autonomy and pursuing growth through external investments. While partnerships with tech giants like Tencent and Alibaba highlight its industry significance, technical challenges and regulatory pressures pose significant hurdles. The founder's preference to keep control within the company limits investor interest, creating a delicate balance between sustaining innovation and scaling operations.

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Conclusion

This episode of the WSJ Tech News Briefing underscores critical developments in both the bioscience and artificial intelligence sectors. The U.S. faces potential setbacks in bioscience due to federal funding cuts, threatening its global leadership in drug development. Concurrently, DeepSeek's strategic resistance to external investments amidst rapid growth and operational challenges highlights the complex dynamics between innovation, autonomy, and financial support in the tech industry. These discussions illuminate the broader implications for policy, global competitiveness, and the future trajectory of cutting-edge technologies.

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Notable Quotes

• Stephen Rosenbush (01:30): "One of their chief investigators, David Baker, won a Nobel Prize for his work last year designing proteins not found in nature. This group relies on the government for around 90% of its funding."

• Stephen Rosenbush (03:32): "The concern that David Baker in particular has is that there really isn't that much actual cost savings to be found in terms of hard dollars. But the cost of those savings could be very, very significant to the US over time."

• Rebecca Fung (06:16): "The founder has basically told his associates that he's really not in a hurry to get any investment, partially because he’s slightly afraid that outsiders like external investors would basically interfere with Deep Seek's decisions."

• Rebecca Fung (10:59): "It's really up to Deepseek whether they want to stay in almost like a nonprofit form and open source or they want to monetize it."

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Produced by Julie Chang, Supervising Producer Kathryn Milsock.

Transcript

[Shara Tipkin]

At kpmg, we make the difference by creating value, like developing strategic insights that help drive M and a success, or embedding AI solutions into your business to sustain competitive advantage. KPMG make the Difference. Learn more at www.kpmg. uS insights. Welcome to Tech News Briefing. It's Monday, March 17th. I'm Shara Tipkin for the Wall Street Journal. Federal funding cuts are putting the bio at risk. What do these cutbacks mean for the future of drug development in the us? Then Deepseek shook up the world of artificial intelligence when it introduced its chatbot, but that doesn't mean it's ready to take on investors. Our reporter Rebecca Fung explains why the Chinese startup isn't in a hurry to get outside investment. But first, the bioscience industry is facing federal funding cuts as part of the Trump administration's efforts to save money. It's freezing grants that universities count on to fund their research. Courts have blocked the cuts, but it's still causing uncertainty in the bioscience industry, and that uncertainty could threaten drug development and the US's leadership in the fields. Stephen Rosenbush, bureau chief of the Journal's Enterprise Technology Group, joins us now with more. Stephen, how does funding usually work?

[Stephen Rosenbush]

I spoke to researchers at the University of Washington in the biochemistry department, which includes the Institute for Protein Design. One of their chief investigators, David Baker, won a Nobel Prize for his work last year designing proteins not found in nature. This group relies on the government for around 90% of its funding. Typically these grants are paid to support research projects that can go on for four or five years, then they may conclude or they may renew for another four or five years.

[Shara Tipkin]

So these programs are functioning now, but there's a lot of uncertainty. How are universities adapting?

[Stephen Rosenbush]

They are cutting back. The uncertainty in funding has led to a significant reduction in the number of graduate students that the University of Washington is admitting in biochemistry and elsewhere. Where one of the deans there told me that throughout the school, which now actually has a very broad based hiring freeze in place, that even prior to that broad based university wide hiring freeze that graduate admissions were down somewhere in the range of 25 to 50%, the hiring of postdocs is either slowed or may slow and the number of faculty positions is is being reduced as well.

[Shara Tipkin]

What has the Trump administration said about the funding?

[Stephen Rosenbush]

I did reach out to the National Institutes of Health and to the White House. I haven't heard anything back.

[Shara Tipkin]

Are these cutbacks all part of the Doge effort or what's driving the funding cuts?

[Stephen Rosenbush]

Yes, it's part of a much broader based effort to pause, cut back, reassess federal funding, generally shrink the size of the federal government, cut back on its budget, and maybe in a larger sense reduce its overall role in the economy.

[Shara Tipkin]

Is there any sort of sense how big these federal funding cuts are? Do we have any sort of figures?

[Stephen Rosenbush]

It's hard to know exactly what's been paused or what's still on pause. But the overall sense that I have is that the cuts themselves, the funding themselves, isn't an enormous number, especially relative to the size of the US budget, let alone the US Economy. The concern that David Baker in particular has is that there really isn't that much actual cost savings to be found in terms of hard dollars. But the cost of those savings could be very, very significant to the US over time. When it comes to the ability to develop drugs that depend on this bioscience research and other products, what impact could.

[Shara Tipkin]

Funding cuts have over the long term?

[Stephen Rosenbush]

Over time, there's risk that if these cuts or that uncertainty continues, that the capacity of the US to produce these drugs will be at risk and that, in David's words, we could end up buying more of these products and drugs from China, which has invested very, very heavily in this scientific work over the last 15 years and which also critically has a really stable funding base.

[Shara Tipkin]

That was our Enterprise Technology bureau chief, Stephen Rosenbush. Coming up, Deepseek is hugely popular with users and investors want in, but the Chinese startup isn't so sure. We'll find out why after the break. Your data is like gold to hackers. They're selling your passwords, bank details and private messages. McAfee helps stop them. Secure VPN keeps your online activity private. AI powered text scam detector spots phishing attempts instantly. And with award winning antivirus, you get top tier hacker protection. Plus you'll get up to $2 million in identity theft coverage, all for just $39.99 for your first year. Visit McAfee.com, cancel anytime terms apply. Deep Seq has been attracting tons of attention and users with its AI chatbot that's smart, but was cheap to build. Now investors want a piece of the Chinese company, but Deepseek doesn't want the hassle. WSJ reporter Rebecca Fung joins us from Hong Kong to talk about the latest developments. Rebecca, we've seen OpenAI, Anthropic and other AI companies raise literally billions of dollars to fund their operations. Why is Deepseek so resistant?

[Rebecca Fung]

What we've known is that the founder has basically told his associates that he's really not in a hurry to get any investment, partially because he. He's slightly afraid that outsiders like external investors would basically interfere with Deep Seek's decisions. So far it's been pretty much concentrated at the top few people. And this is from people familiar with the matter. And then the founder is also quite cautious about getting government linked money because he still wants Deepseek to have like global adoption. And getting Chinese government backed money might impact that ambition.

[Shara Tipkin]

What can you tell us about Deepseek's founder?

[Rebecca Fung]

Actually not that much is known about him. His name is Liang Wenfeng. He was born in 1985. He is like a math geek basically. We had this interesting anecdote about Deep Seek's founder and how his love for the name Deepseek is telling. Deep Sikh's name is actually in Chinese is Huanfang. It basically alludes to this ancient Han dynasty diagram with like a magic square. It's basically like this peculiarity where the rows, columns and diagonals of the squares all add up to the same number. And then Liang, the founder is super proud of it that it's the Chinese that discovered this concept long before the West.

[Shara Tipkin]

How has he funded the company so far?

[Rebecca Fung]

Deepseek has an interesting starting story. Basically it started as a Quant Fund in 2015. The Quant Fund is called High Flyer. This may be slightly different from other AI companies, but starting as a quant fund it earned a lot of money from 2015 to about 2020 because it was charging pretty hefty fees, usually as other US hedge funds. And at its peak the quant fund had about US$14 billion. So you could calculate that's like quite a lot of annual income. And basically that's how Deepseek, which is this AI company born out of High Flyer, funded its chip purchasing, like hiring AI engineers. Yeah, they're basically using the quant funds revenue to fund their AI ambition. Until now essentially.

[Shara Tipkin]

So who is wanting to invest in Deepseek or partner with the company?

[Rebecca Fung]

A lot of people want to share of Deepseek, but there are two group of companies, there are the investors, basically the venture capital funds, the private equity funds who all want to invest and some of the state link funds all want to invest in Deepseek. Basically fund Deepseek's operation. And then there are another group of company, basically the massive technology giants like Tencent Alibaba. So what we know is like in recent weeks Deep Deepseek founder Leung did meet with executives from Tencent and Alibaba basically to discuss potential Corporation. And right now, how they're, I guess you could use the word partnering with Deepseek is that these tech giants are testing Deepseek to power features on their own apps. For example, Tencent is testing Deepseek on its own messaging and payment app, WeChat. Since DeepSeek's algorithms, it is open source, so Tencent actually doesn't need to pay Deepseek to do so. And Tencent users can basically opt for chatbot that is powered by Deepseek but uses Tencent's own computer network. That's roughly how they're partnering with Deepseek.

[Shara Tipkin]

Can you talk a little bit about how we know that there's this interest? Is this based on your reporting? Has the company or these potential partners talked about it?

[Rebecca Fung]

So Tencent and Alibaba very, very openly talked about it because of Deep Seq's rising popularity in mainland China. Like, anything that has anything to do with Deep Seek, basically, like, their share price would jump and they would become popular. So Tencent, Alibaba very openly talked about that collaboration. The investors is just. We talked to contacts and sources, and we knew that the potential investors, some of the funds met up with Deep Seeking.

[Shara Tipkin]

As you said, Deepseek is really popular right now. People are paying a lot of attention to it. What sort of problems are facing the company?

[Rebecca Fung]

Right now? Deepsea's chatbot itself is a bit overwhelmed because after January, it's shot up in fame. It's overwhelmed by millions of users because its computing power is proven at the moment not to be enough. So its chatbot has frequent service hiccups. And it's also facing kind of external pressure from authorities around the world that they're basically restricting the use of Deep Seq's Chatbot over data security concerns.

[Shara Tipkin]

So where does the company go from here? What's up next?

[Rebecca Fung]

We actually really don't know. And that's up to Deepseek to decide whether they want to monetize this chatbot or not, because right now they're not monetizing it. And that's what's been keeping investors at bay. Because investors are like, well, if you don't want to monetize it, why would I invest in this? So it's really up to deepseek whether they want to stay in almost like a nonprofit form and open source or they want to monetize it. And that we don't know.

[Shara Tipkin]

That was our reporter, Rebecca Fung. And that's it for Tech News Briefing. Today's show was produced by Julie Chang, with supervising producer Kathryn Milsock. I'm Shara Tipkin for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.