DeepSeek Screens Out Some LPs in Second Funding Round, Including State-Owned and Individual Investors

Some investors initially thought their participation was a sure thing. But DeepSeek has begun screening its limited partners (LPs) more rigorously.

As the second-round funding approaches its final stages, multiple sources close to the deal have told us that DeepSeek recently turned down a number of prospective investors, including LPs with state-owned capital backgrounds, non-listed companies, and individual investors.

This level of scrutiny is understandable. Everyone wants in on DeepSeek, but founder Liang Wenfeng is determined to prevent equity from ultimately flowing into unidentified entities or triggering other potential risks.

"News about DeepSeek's second-round funding has gone quiet across all channels in recent days," said some deal participants. For now, they can only wait. Reports indicate that DeepSeek recently held a highly confidential investor meeting, with Liang joining remotely.

The second-round funding is expected to close soon.

LPs Scramble for DeepSeek Allocation

Gao Qiang (a pseudonym), a financial professional with over a decade of experience, says he has never seen a project this hot.

Recently, multiple LPs seeking DeepSeek allocation have submitted bank-certified proof of funds to him, with some accounts showing balances of over 4 billion RMB. "I've become numb to seeing billions sitting in accounts. It almost feels normal now."

The sheer volume of LP inquiries has become overwhelming — a situation previously unimaginable.

In the traditional venture capital ecosystem, LPs, as capital providers, typically hold the upper hand, especially during market downturns. But with DeepSeek, LPs have largely lowered their expectations. They just want in.

Rumors of DeepSeek's second-round funding closing first surfaced in late August. But multiple sources close to the deal now say it has yet to fully close — and the round is significantly oversubscribed.

Gao cited an example: a Zhejiang-based institution participating in the second round reportedly secured nearly 4 billion RMB in allocation and was required to sign and fund its fund before the Mid-Autumn Festival. Based on the deal's pace, he estimates that funds will complete capital raising before National Day, with capital delivery in October.

The delay, sources say, is largely due to LP vetting.

"Many LPs submitted for approval were rejected by DeepSeek," one source said. This means some allocation has opened up, reigniting hope among investors who had previously missed out.

DeepSeek's Strict LP Screening

DeepSeek is known for its rigorous LP screening. In the first round, Liang required identity verification for all participating LPs. That same scrutiny continues in the second round, with state-owned capital, small individual investors, and non-listed company LPs all potentially being filtered out.

Some GPs, worried their LPs might not pass muster, have submitted their entire LP rosters as backups.

Opportunities are fleeting. Gao noted that he recently connected with nearly 10 well-known GPs, and even those who secured allocation often saw it quickly snatched away.

New Faces and Market Noise

Between hype and desperation, chaos abounds. But for a project of this scale and popularity, high attention naturally brings high noise.

For comparison, U.S. AI giant Anthropic completed a $65 billion funding round in May at a $965 billion post-money valuation. OpenAI raised $122 billion in March at an $852 billion post-money valuation. In both cases, secondary market misinformation, SPV layering risks, and extreme time pressure on capital calls were rampant. In May, both companies issued public warnings disavowing any unauthorized stock sales or transfers.

Many are now waiting to see the final size of DeepSeek's second round. "It could easily be multiples oversubscribed," one deal participant predicted. Earlier reports indicated DeepSeek planned to raise 50 billion RMB at a 500 billion RMB valuation.

A preliminary list of second-round investors has circulated: returning investors from the first round, plus new entrants including Shixi Capital, SMIC JuYuan, Boyu Capital, CPE Yuanfeng, and Hefei state-owned investment platforms. Shixi Capital and SMIC JuYuan are backed by industry giants such as GigaDevice and SMIC, respectively.

Some of these prospective investors have already begun preparing fund vehicles.

For example, on August 31, Hangzhou Shixi GigaDevice No. 1 Venture Capital Partnership (Limited Partnership) was established with a registered capital of 2.785 billion RMB. Investors include Hefei state-owned capital, Xinhua Metallurgical Group, Jinhua state-owned capital, Giant Network, Zhejiang Securities, and Orient Securities, as well as Lv Dalong, founding partner of Tsinghua Holdings, who contributed 120 million RMB.

Earlier, in April, Shanghai Shixi GigaDevice Zhixin Venture Capital Partnership (Limited Partnership) was established, with GigaDevice contributing 400 million RMB, alongside Dongguan Trust, Shanghai Guotou Xian Dao, and Lv Dalong.

If these funds are linked to DeepSeek's financing, they offer a glimpse into the evolving LP lineup.

IPO Timeline and Market Expectations

DeepSeek is accelerating its timeline for a STAR Market listing, with plans to file as early as year-end and target a 2027 IPO. One Shanghai-based CVC source said he has already heard speculative chatter in offline discussions, with some projecting DeepSeek's first-day market cap at 4.5 trillion RMB.

Such wild expectations have investors excited to bet even at a 500 billion RMB valuation. But many seem to selectively ignore a key fact: the more fully the valuation is realized pre-IPO, the thinner the safety margin in the secondary market — especially with lock-up periods in place.

This is not a risk-free game.