The Fusion Fund founder explains why this is a breakout moment for early-stage startups.
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Show Notes:
In this Mission Matters episode, Adam Torres interviews Lu Zhang, Founder and Managing Partner at Fusion Fund. They discuss AI innovation, revenue acceleration in early-stage companies, and how repeat founders are capitalizing on today’s unique market dynamics.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres and if you’d like to apply to be a guest in the show, just head on over to mission matters.com and click on be our Guest to Apply. Alright, so today I have on the on the line Lu Zhang and she is the founder and managing partner over at Fusion Fund.
Lu, welcome to the show. Thank you for having me, Adam. All right, so for everybody listening, just so you know, this is part of our Milken Global Conference coverage series where we bring on participants and guests and attendees, and also panelists and speakers that have participated in the event.
And so first thing, first, Lu, I understand you’ve been going to the conference for, quite some time now, and you’ve even been on panels for a bit. So maybe just start with telling us a little bit more about your experience. Yeah, so I’ve been speaking with muan for a couple years and I was engaged with interesting panel discussion, ran from technology innovation to the investment market outlook.
Especially, you know, this year we’re facing lots of the short term, near term mortality and uncertainty across the market. So we had a really dynamic discussion. I shared this. Stage together was Robert Rubin, the former Secretary of the States for the Bill Clinton administration, and also a couple other investor, fund manager.
We were really talking through you know, the dynamic situation and the challenge opportunity across the private and public market. So it was a very engaging discussion we had in kin and also kin. I think it’s a amazing gathering, be able to get together the business leader, political leader, technology leader across the world, not only United States.
And moreover, I really like they have this combined structure of a public panel, which I was speaking on, and also some closed-door round table discussion. Then you’re able to have different perspective and in different setting. And I also got tons of one-on-one meetings. I probably have 23, 24 meetings in two days, was super efficient.
The people reach out to me through the platform, quickly, set up 30 minutes meeting and outside the two panel in two days with 24 meetings. It, it was super productive. If you know me, you’re gonna understand why I like it so much. I’m a super efficiency driven. Oh my gosh. You did? Uh, I was, I thought that I had a busy couple of days of schedules.
But your schedule sounds like it was pretty busy though. Yeah. Oh, so looking at, I, I want to go further , into your background and what you do as well. So maybe just talk a little bit more about how you got into finance. Before we get into, I wanna know, of course, about Fusion Fund, but maybe just start with your background, how you got started.
Of course. And if you remember, I’m actually an immigrant. I came to United States in 2010 when I was 20 years old. Before that, I was originally from a place called I Mongolian and I also have Mongolian and came to United States for my graduate school. So I initially was doing mature science research.
Stanford working on my graduate school degree and later start a company when I was 21. Sold my company when I was 24 and it’s a AI healthcare company. And later in 2015, that’s when I start fusion Fund. So this year is actually my tenure anniversary of starting this firm, and we’ve been focusing on early stage investment across enterprise ai, healthcare and industry automation in the past 10 years.
So now we have over half a billion dollar under management. Have a close to 100 company, mainly based in United States and a living in Canada. Hmm. So what kind of trends in AI are you following? Obviously you were a founder of an ai based company and , that you exited and then now you’re investing in other companies.
Like what kind of trends are you following? You know, it’s a very interesting question because we were investing AI when AI was called machine learning. Mm-hmm. When AI was not a bad word, when AI was not a sexy term. Right. Uh, So so I think for most of people they recognize the value of the AI during the tragedy BT moment.
But we’ve been looking at, you know, AI as a super powerful tool to really accelerating digital transformation since back in 2016, 2017. So, initially I was very passionate about AI and healthcare. Healthcare is an industry, you know, market side 20%, US GDP. If you look at another thing, it is the most it’s an industry with the most riches.
The data we have, you know, across human society. Over 30% of the data we have are healthcare related, but only 5% of this. Data, we actually been utilized so far, so it’s like Golden Mind and we haven’t been able to leverage it so much. But now with AI, even back in the days to be able to do more personalization and a digital solution for digital diagnostic digital therapeutics.
And digital biology across cancer, heart disease, and mental disease. So that’s definitely one of the major area we’ve been focusing on. I’ve been personally passionate about. Meanwhile, I’m also pretty interested in, you know, technology within AI infrastructure. I know lots of the discussion is around the AI application layer.
Of course that’s important. We invest a lot of AI application as well. I don’t know whether you ever use a application called auto ai ottr ai. It’s one of my popular company. I heard it’s very popular within the, you know, journalist community. Yeah. So we have company like that, but we also have company focused on AI infrastructure, essentially building Cloud info solution to make AI application cheaper.
Reduce the GPU conception, reduce the energy conception. You know, energy conception of AI is a big problem right now. And solve the data privacy issue with AI governance, data encryption, network security, and the last thing, edge computing. Be able to reduce the latency issue and enable the future application on the edge devices.
That you can run ai, integrate AI application in all different type of sensor. So that’s the type of company we’ll also be investing. We got couple exit this year with much acquisition from major tech corporate, and most of the much acquisition exit we have this year is for AI infrastructure company.
I think the future of AI competition is not necessarily only the competition of the model, it’s really the competition of the cost, which AI solution. Will be cost efficient and also have a reasonable margin to make it a sustainable business model. Mm-hmm. Yeah, I I think it’s interesting.
And I, wanna, and another unique vantage point that you have is just working within that early stage startup community. Like , what are you seeing? Like what does the early stage startup scene look like? Early, say, startup. I would say now it’s really one of the best timing to launch a startup. Mm-hmm.
And we’re saying, I always tell the team, you know, I was a former entrepreneur and all my team members the team we put together is a group of technologists and a former entrepreneur operator. Mm-hmm. So we truly believe. You should follow the founders because founder are the one actually makes things happen.
It’s not VC gonna predict the future. We’re just collecting data, try to do the protection based on the data, but the who are contributing to all these high quality data points is the founders. So we think keep close track of the high quality founder and we found something really fascinating. I’m happy to share with you.
Mm-hmm. First compare was 10 years ago, you know, 10 years ago for early stage startup. It made. Take them, for example, two to three years to grow the revenue from zero to one to $2 million. Now we’re seeing company be able to generate revenue within half year a year, go up to three $5 million. We got a company grow revenue from zero to $20 million in one year.
Another one grow revenue from half a million to over 50 million within a year. So the growth. Yeah, the growth of the revenue is quite fascinating, including the company I mentioned to you, other ai. Mm-hmm. If you are a pay user, thank you for your contribution. They already still have hundred million, hundred million dollars revenue this year, and they haven’t raised any new money since 2021.
Wow. So that’s come to the second point. It’s not only the revenue grow is much faster, it’s also the efficiency of the capital. Instead of used to be you have to raise couple hundred million dollars to generating, you know, 20, 30 or a hundred million revenue. Now fund can generating, much more revenue with limited resources and capital and also limited headcount.
Mm-hmm. Not necessarily to build up a big team. They can just have a founder with some senior engineer and youth. You know, just a cursor all this different type of GitHub solution, be able to write in code to write codes and also be able to leverage AI agent and also the AI application for lots of automation.
So that’s another fascinating point we have. And then when we look at our, across our portfolio last year for the company we invested with in the past one year or so. More than two. Third of them have 20 to 40 x revenue growth within a year. We’re investing early stage. That’s a company in the pre CCC stage.
So that’s really the beauty of the momentum here. Another thing I found interesting want to share with you is the profile of the founder. You know, there’s two type of founder. One type is first time founder, never did it before. Another group is repeating success of founder Silicon Valley is an interesting ecosystem that is a lot of, repeating, successful founder who already get financial return, financial freedom from the previous exit, but they are not satisfied. They wanted to launch a bigger one, but they’re also very picky on the timing and opportunity. The opportunity need to be big enough, the asset potential need to be super attractive for them too.
Yeah, I was joking. Going back to this miserable founder life and we’re seeing, we’re seeing a growing number of the repeating successful founder. Launched their second and third startup right now. Mm-hmm. They’re fascinating by the technology engagement. They’re truly. Inspired and also excited by the current technology trend.
Yeah, so we’re seeing a growing number of the repeating success of founder jump back to the game. So that’s all very positive signal for us right now. That’s the reason I told you early on. It’s also great time to start a company. The last point I want to highlight is the, acceleration of the sales cycle.
You know, for us, we only do enterprise focused solution, no consumer. So we’re more familiar with how long does it take for a founder to sell a solution to our enterprise customer, even to the Fortune per hundred. Mm-hmm. The good news is not only tech company, even the traditional like insurance company, some tobacco company, they’re onboarding C-I-O-C-T-O.
Be able to have dedicated budget to give contract and partnership to smaller startup. Mm-hmm. So instead of you have to engage with them for like a year or half a year to get a couple million dollar contract, you potentially can get a couple million dollar contract within one or two months. We also have our own CXO network with the 45 CTO from Global 1000 company lead by my partner Shane, who is the former CTO of hp.
And we’re able to, have this quarterly webinar to connecting all this decision maker, CTO, from large corporate to our fund. And the, speed of the matching and engaging and closing the deal is really fascinating. Mm-hmm. So I hope this is our useful data points for you and also for your audience.
Of course, in general, it’s still a difficult fundraising market because of the uncertainty on the Yeah. Micro economy and the lack of liquidity. We’re hoping more IPO can happen this year, but it’s not happening so far. But if you look at purely on the innovation early they side, it’s an exciting time.
Fantastic. Wow, that’s, it is interesting and, and it’s really, really I like that you bring up the point about like founders that maybe didn’t need to start a new company but are thinking about doing something bigger and better, whatever, just different than what they did in the past and they’re excited about technology.
I kind of look at it, and this is just my personal belief. I kind of look at it like they’re sitting on the sideline and then they hear those stories that some of ’em, like you were mentioning, like growing the revenue to 50 million in like a very short amount of time, or 10 million or 5 million with very little resources or one raise.
And I feel like some of those really talented individuals are out there and it kind of like the competitiveness, a little bit of the competitiveness is like, well wait a minute, hold on. When I was doing something, it took this and this. do you get that feeling at all? I know. I mean, you’re on the insider.
Am I just wrong? I could be wrong. Sorry, I missed you for like five seconds. What was the question? Oh, I said, I said do you feel like some of those some of those fir, those founders that are getting out of the, off the sidelines that have been, you know, kind of waiting and, and don’t necessarily need to start another company?
That they’re kind of getting off the sidelines because some of the competitiveness, like they, they see how maybe some of the newer, some of the other founders, and with the new technology that’s available, how fast some of these things are moving and they’re like, well, wait a minute. Like, and they, and they kind of wanna get back into the game.
Do you, do you feel that at all? Exactly. Yeah, I definitely feel that way. I remember one of the founder friends she’d been like working on the clothes with me for many years. She already take a, you know, pretty high position executive position in a large tech company. She’s like, I’m down with like a startup company.
She did two company in the past until a year ago. She’s like, Lu, I’m like a cat. Seeing such a fat rat in front of me and there’s a fat mouth and I cannot help to catch it. I have to do something, and she just resigned from the large tech company and start a new company. Of course, I invest in her first round.
So I think on one side is the community, of course, peer pressure, looking at other people, doing something fascinating. Another thing is this is the entrepreneur spirit. This is the beauty of entrepreneur spirit, especially now I know there are lots of uncertainty in the market, but on the other side, because of uncertainty is further pushing the entrepreneur.
Mm-hmm. What is the difference between entrepreneur versus the other people? When you see a big challenge and big problem, typical, the first reaction people would have is that, oh my God, what can I do? What should we do for this big problem? Oh my God. All these consequences. But when entrepreneurs saw a big problem, they’re like.
Amazing. That’s a huge market opportunity I can potentially address to and also resolve. Resolve it, and also build a strong company on top of it. Mm-hmm. So that’s the difference. So I think when there’s a very dynamic market with lot of uncertainty’s, even better market timing for entrepreneurs, smaller startup versus was a large corporate.
Because when there’s the uncertainty, it brings lots of anxiety. When there anxiety, there’s tons of pressure for large company have to make changes when they have to make changes. That’s when they have appetite to take more risk to work with the smaller startup. So yeah, this is an interesting dynamic where we are very, we’re very passionate, we’re very excited.
We’re also very cautious to help our founder to navigate this market situation. But meanwhile, we also launch our new fund early this year in January. So we have also dry powder ready to deploy. So we’re also actively investing new company right now. Amazing Lu. If somebody’s listening to this and if they wanna follow up, they wanna learn more about the fund or follow your work, how do they do that?
Well. Yeah. So if you want feel free to reach out to me at linking. So if you want to connect me on LinkedIn, that would be the best way. If you want to send your company to me, feel free to do so. We also have approach on our website that you can directly send your company details to us.
That that could be another channel. Another thing is we are hosting our quarterly office hours, so we really want to have this channel for fund to come to talk to us. Regardless whether you’re raising, regardless of whether you have questions related to fundraising or not, we want to offer ourselves other resources to fund for them to be able to reach out to, and also help them to navigate the very vulnerable stage of early stage.
Fantastic. And for everybody listening, just so you know, we’ll definitely put the links in the show notes so that you can connect with Lu. And speaking of the audience, if this is your first time with Mission Matters and you haven’t done it yet, hit that subscriber follow button. This is a daily show.
Each and every day we’re bringing you new content, new ideas, and hopefully new inspiration to help you along the way on your journey as well. So again, hit that subscribe or follow button. And Luke, thanks again for coming on the show. Great, thank you.
