China's leading AI startups: ‘six dragons’, Hangzhou, adoption of AI in fashion designing and DeepSeek mythbusters
Introducing Hangzhou, "paradise on earth," home to DeepSeek and its burgeoning AI ecosystem
Hello again. As AI Proem serves a diverse audience—from seasoned investors to passionate tech enthusiasts. I try to find a balanced mix of analytical deep-dives and engaging feature stories… today, is a feature piece.
As I wrote last week, Chinese companies are upping up their games in this AI application race. While value creation is now shifting from the model infrastructure layer to the application end, businesses are finding more creative ways to implement AI into application use cases. Now, largely driven by the success of DeepSeek, the Chinese AI industry is garnering a lot of international attention - people are trying to learn more about promising Chinese AI startups. So that leads me to Hangzhou, the home to Unitree Robotics, DeepSeek, and other household names that have been put on the international map.
Citing SCMP, “[Innovation] relies on a trifecta – fundamental research, applied technology, and financial support – all of which are essential,” Zheng Yongnian, dean of the School of Public Policy at the Chinese University of Hong Kong (Shenzhen), adding that “Hangzhou is excelling in this regard.”
When comparing innovation hubs in China and the U.S., Zheng noted that the U.S. has two key regions —one stretching from Silicon Valley to Texas and another from Boston to New York. China, similarly, has two main clusters: the Yangtze River Delta region (Hangzhou at the center) and the Greater Bay Area (Shenzhen at the center, which I’ve written about before).
Today, we dive into Hangzhou, which is home to the widely talked about - “six AI dragons.”
Hangzhou- “Paradise on Earth”（人间天堂）
Most of you probably have only heard of Hangzhou (deemed as a second-tier city by China standards, has 12 million people inhabiting it, and ranks 9th in GDP in China) because it is home to Alibaba, NetEase, and Geely (some of China’s largest publicly listed companies). Now, the city is quietly cultivating a whole generation of leading AI firms.
The city actually has a few nicknames in Chinese: “Paradise on Earth”（人间天堂）, “Home of Tea”（茶叶之乡）, “City of Silk”（丝绸之城), or “Eastern Venice” (东方威尼斯）. You can visualize it. It is a culturally rich and GDP-rich city.
The historically culturally rich city of West Lake has always been a center for scholars, artists, and thinkers, contributing to advancements in literature, philosophy, and the arts. It is also known for its craftsmanship in premium silk and china, and it was largely the epicenter of Chinese artistic work exported to the West.
In more recent days, it’s cultivated mega-heavy weights like Alibaba and Geely. Thus, by nature, it has a robust e-commerce and retail ecosystem boasting a series of local DTC cosmetics and fashion brands. Some say it’s the most fashion-forward city in the country now, as well as having one of the most advanced manufacturing industries. In this juxtaposition, it is an industrial-heavy, manufacturing-strong, and creative hub with strong ancient art and architecture as the foundation.
That ends my tangent on Hangzhou. I truly enjoyed my ~ nine-month stint there, which was originally intended to be a three-week work trip to Alibaba’s XiXi campus during the peak of China’s COVID restrictions (the quarantines were brutal, but freedom tasted better than anything when let out free). It gave me an opportunity to explore this city that, frankly, otherwise I might have never visited.
Hangzhou’s AI “Six Little Dragons”
There are six AI and robotics firms headquartered in Hangzhou that are drawing investor and industry professionals' attention right now. Together, they’re nicknamed the “six little dragons.” (I feel like China’s AI space is making a 10-season series of Crouching Tiger, Hidden Dragon these days with all the “Four Tigers” see here for an article on the apps backed by the four LLM startups and the “Six Dragons).
Closer look at them…
You may ask, what makes Hangzhou so special? Or was it all a coincidence?
TL;DR
1) Strong government support; 2) Strong talent pool; 3) Entrepreneur and hustle culture; 4) Strong tech and manufacturing ecosystem; 5) Proximity to Shanghai and distance to Beijing
Just a week ago, the Hangzhou government announced that it would further support AI and robotics firms by providing a financial “boost.” The municipal fiscal fund increased from 49 billion yuan last year to 50.2 billion yuan. More support is given to future industries, such as general artificial intelligence and humanoid robots, with the hope of cultivating more innovative enterprises similar to DeepSeek and Unitree Robotics.
Beyond the government’s active support for cultivating the AI ecosystem in Hangzhou, as mentioned above, Hangzhou has a business-friendly nature to it. It is far enough from the regulators in Beijing, but it is close enough to the consumers and capital in Shanghai. It distinguishes itself by nurturing businesses of all sizes, not just industry leaders. The city implements a "responsive yet non-intrusive" governance approach, allowing companies to focus on technological innovation and have access to a mature market for go-to-market trials without bureaucratic hindrances.
Alibaba’s founder, Jack Ma, once notoriously said it is a blessing for young talent even to have the opportunity to work for a company that has such tremendous growth potential that “996 (working 9-9, 6 days a week) is a luxury. With that ingrained in the talent pool locally, the city boasts a vibrant entrepreneurial culture - characterized by the sleep-is-for-the-weak mentality and dedication to innovation (for better or worse, it takes that hunger sometimes to build something amazing). I had my fair share of 9-11-6 during my Alibaba days.
Hangzhou has truly benefited from the presence of internet giants like Alibaba and NetEase. These tech giants have brought in some of the country’s best talents and built up an ecosystem in the city over the last two decades and drove the housing market up to one of the most expensive second-tier cities. Coupled with manufacturing leaders such as Hikvision in the city and many family-led manufacturing businesses in the nearby area, the city has created unique opportunities for cross-sector collaboration. (In that way, it’s smilar to Shenzhen, as it has factories nearby all around the city, it has a natural advantage in manufacturing - though SZ more in industrial parts and HZ more for textiles.)
Last but not least, many people are now saying that the role of Zhejiang University in Hangzhou's AI ecosystem is particularly noteworthy, with three of the "Six Dragons" founded by its alumni. In the West, you’ve probably only heard of Peking University and Tsinghua University, but Zhejiang University is probably just trailing after the two in international rankings.
The university has a strong entrepreneurial spirit and is the alma mater of many household names, including Huang Zheng, founder of Pinduoduo (PDD), Liang Wenfeng of DeepSeek, Zhu Qiuguo of YunShen Technology, and Han Bicheng of BrainCo.
See a full list of Hangzhou-based AI companies.
Fashion meets AI
Given all the context, you now know Hangzhou has a huge pool of high-caliber talents in tech, manufacturing, and even fashion. Thus, I want to focus on Style3D, a company at the intersection of these three fields.
Many have argued that AI can replace humans in tedious and monotonous chores (hooray!)., but what makes humans unique is their originality and creativity. However, that doesn't mean AI cannot be integrated into the creative space and increase efficiency for design houses and brands.
Style3D, headquartered in Hangzhou, China, has emerged as a global leader in integrating artificial intelligence (AI) and 3D technologies to transform the fashion industry. Founded in 2015 by Eric Liu, the company has established itself as a pioneer in digital fashion infrastructure, offering end-to-end solutions that streamline design, production, and marketing processes. By leveraging its proprietary physics-based simulation engine and generative AI models, Style3D empowers brands, manufacturers, and fabric mills to achieve unprecedented efficiency, sustainability, and creativity. As we delve into the company’s technological innovations, client base, and strategic acquisitions, we can get a clearer sense of how Style3D is making an impact on the industry and is positioning itself at the forefront of the digital fashion revolution.
Jumping on the AI bandwagon
I met with their global marketing and partnerships lead this past week and was impressed by their impressive pivot from 3D software to quickly adopting AI—call it opportunistic or future-thinking. I was also impressed that they were very aware that if they don’t become the best AI tool for the vertical, they will be replaced. So, instead of rejecting AI, they are leveraging their decades of data, experience, and expertise to capture the 2B market in the fashion business.
“Think of our AI tool like the mid-journey for fashion designing, but it’s much more sophisticated and tailored” - Christian Hu, Head of Global Marketing and Partnership at Style3D.
The company offers a variety of products, but its core is a 3D design tool widely adopted by industry leaders to help with the design and manufacturing of 3D models. This means it has had 10 years to accumulate the data points, patterns, and know-how of how material, texture, colors, buttons, zippers, and accessories all work together. With over 2,000 clients worldwide, its clients include international brands such as Anta Sports, Shein, YKK, and many other household brands/ accessories names.
Style3D’s core technology is a smart system that turns flat clothing patterns into realistic 3D digital garments. It mimics how fabrics naturally drape, stretch, and interact with virtual models in real-time, considering factors like thickness and stretchiness. A key breakthrough, revealed at a 2024 tech conference, automatically converts 2D sewing patterns into perfectly fitted 3D designs without glitches—a task that previously frustrated designers. By blending AI and advanced math, this tool cuts designers’ workload by nearly half, making the process faster and less error-prone.
Now, being AI-empowered, the company also harnesses powerful graphics processors (GPUs) to create ultra-fast, detailed simulations of clothing movement—something that once required supercomputers. Designers can now see how sportswear stretches on a running avatar or how yoga pants compress during workouts, all with pinpoint accuracy. This tech, showcased at a 2024 textile expo, helps brands ensure consistent fit across sizes and test fabrics digitally before production, saving time and reducing physical samples.
Style3D’s AI+3D+AI Value Chain represents a paradigm shift in fashion design. The company’s self-developed generative AI model, trained on vast datasets of clothing, fabrics, and avatars, enables designers to generate high-fidelity designs through text, sketches, or existing patterns.
This is an example of how experts in specific verticals are adopting AI for their unique use cases. Style3D has built its application on top of Alibaba’s Qwen support and recently integrated DeepSeek into it. With the support from Qwen’s open-source LLM infrastructure, coupled with its own database and tweaks by the technical team to ensure the agent understands every aspect of the fashion industry, it has become a leading choice for AI assistance for fashion designers.
According to case studies from its LinkedIn Newsletter, fashion retailers and design houses use Style3D Cloud to manage digital collections, reducing sample production by 85%. Manufacturer OEMs can utilize 3D/2D connections to synchronize patterns with virtual samples, cutting development cycles from 6 weeks to 10 days. Fabric Mills, like Italian mill Marzotto, employ Style3D Fabric to digitize 20,000+ annual fabric designs, enabling clients to visualize materials on aviators before ordering.
These modules support text-to-design, sketch-to-design, and AI-powered editing, enabling designers to modify specific garment areas (e.g., collars and sleeves) while maintaining structural integrity. For instance, a designer can input “bohemian summer dress,” and its proprietary tool, iCreate, generates multiple 3D renditions with adjustable textures and colors, slashing conceptualization time by 70%. iWish can help generate campaign-ready tools using existing avatar models in 2D and 3D for brands, cutting costs and dependency on photoshoots.
International Ambitions
Chinese AI companies are also quickly snatching up international firms with synergy to complement their international expansion goals. Especially for Style3D, Christian Hu said their products are increasingly popular in APAC, U.S., and Europe. In 2023, Style3D acquired Assyst, a Munich-based leader in the field. This was largely to adhere to data sovereignty requirements for their European clients, as well as for 2D-3D combined solutions and an overall strategic business decision. Due to GDPR-compliant Cloud requirements, Style3D Cloud hosts data in Europe for its European clients.
Style3D’s fusion of AI and 3D technologies has redefined every stage of fashion creation, from ideation to consumer engagement. By digitizing workflows, slashing waste, and democratizing high-end design tools, the company addresses the industry’s urgent needs for sustainability and agility. Strategic acquisitions like Assyst have fortified its global presence, while R&D investments in GPU simulation and generative AI ensure continued leadership. As Style3D pioneers 3D textiles and blockchain-enabled supply chains, it stands poised to lead the industry into an era where digital and physical fashion coexist seamlessly, empowering brands to create responsibly and consumers to experience garments beyond the limits of imagination。
This is just the beginning for many of these AI startups that looking to go global. In the Unitree piece, we explored how Chinese robotics companies are leading in global sales. Following Manycore, the first of the six dragons to go public, quite a few of these mainland AI companies are being courted to establish corporate headquarters in Hong Kong - a neutral pitstop for them to access the rest of the world.
DeepSeek Myth Busters
As we speak of Hangzhou, let’s take a look at its pride and joy again. Last month, DeepSeek's fundraising caused a media frenzy. We will quickly wrap up what is happening with DeepSeek now as the dust has settled.
Rumors about Alibaba’s investment in DeepSeek circulated a few weeks ago, which the tech behemoth quickly rebutted. Baidu VC's arm claimed that it tried to invest in DeepSeek but was rejected because it was not fundraising.
There have been rumors that the company has been looking to raise funds for a while now, but The Information just confirmed this.
There are rumors that the company will start investing in R&D on chips themselves – not confirmed
The reason founder Liang Wenfeng bought a ton of GPUs wasn’t because he’s some AI “prophet,” which is what some of the narratives have been pushing. He bought a ton of GPUs because he had a big $$ year and wanted to use the chips for his quant trading and his hobby in training LLMs then. As he realized quant investing required very few GPUs, he quickly pivoted, doubling down on LLMs. (specifically 10,000 Nvidia A100s in 2021)
There’s been a lot of interest in the talent behind DeepSeek’s R1. Some argue that China is experiencing a brain drain. In contrast, others say that Chinese talent is not seeking to pursue higher STEM degrees in the West anymore, especially given the geopolitical tensions in recent years. His team is indeed mostly young, China-trained engineers. As Liang said, China may not have the top 50 AI engineers, but it can easily find the top 500. These hungry young engineers are willing to work and honestly believe that non-hierarchal is the most efficient way to achieve scientific breakthroughs. Many reports have shown that Liang gets his hands dirty and does the coding himself.
See the download comparison of DeepSeek and its US peers.
According to Quest Mobile (similar to Sensor Tower), within nearly a month of its launch, the DeepSeek mobile app has accumulated 32.9 million daily active users (DAU) in China. It surpassed Doubao (ByteDance) within 15 days post-launch and now has twice the DAU of Doubao. With 32 million DAU, DeepSeek ranks 51st among apps in China currently, for reference (slightly trailing behind WeChat Enterprise and above Meituan Dianping).
Since the advent of the AI era in 2016, the AI industry has undergone several rounds of reshuffling. With rounds and rounds of iteration and evolution, we witnessed the rise of the “four tigers” and now the era of the “six dragons.” DeepSeek’s R1 breakthrough has also changed the Chinese AI ecosystem in a seismic way. It seems that, among the ten, only Moonshot AI, Zhipu AI, and StepfunAI are purely focused on large - model technological innovation and the pursuit of AGI.
Full disclaimer: Style3D is a sponsor of AI Proem. All editorial decisions are promised to be made independently. However, during my engagements with various companies, I make sure their business and vision align with AI Proem’s and thus naturally sometimes find their business and innovation as inspirations for stories. All views are of AI Proem’s.