A big thank you to Emily Sheperd for helping me follow GAMA’s story, which ultimately led her to being banned on X. You can find her new account here
To see the map of Jesse Lyu’s relationships - scroll down.
“So you know Jesse Lyu, right”?
We were at the Taikoo Ku Li in Chengdu, Sichuan, a giant outdoor mall blending the old 大慈寺 temple grounds with the trappings of the Uber-luxury, at the moody but popular Beijing bar 元古云境 . On one side of me was an underground rapper in the Chengdu scene that you could be confused with for the local yakuza. The other side was a veteran of the Chinese startup scene, previously a CEO of a Western social media company in Beijing and a key member of other Western startups in China.
It’s our 2nd round of drinks now. Gin-based cocktails, with some Chinese ingredients and spices. Generally ok, though a bit bland and light on the alcohol for me.
I generally like my drinks strong.
We were talking about the general Chinese startup scene previously, with the monumental changes coming from the private VCs that were now outside China, and only the government stepping in as LPs. But not anymore. We had seemed to hone in on the meat of the conversation.
“Uh”, I replied, “yeah?”
Up to that point, I only knew him as the CEO of Rabbit, the internet darling that sold 60,000 units at CES. As if he came from nowhere.
But obviously he didn’t come from nowhere. There must be a story. There always is.
This is a story I’ve pieced together.
Jesse Lyu is a three/four time CEO after he graduated from the University of Liverpool with a degree in financial mathematics and marketing. His first startup, timeet, supposedly went nowhere. His second and third, for a Liverpool Football Club fan and self styled semi professional car driver, had comparatively more success.
His second startup was Raven Tech, a Chinese Siri or Alexa. Super ambitious.
He went through YCombinator’s winter 2015 batch, and subsequently received $18 million investment from Chinese fund powerhouses Matrix Partners, DCM, and Zhenfund, one of if not the most active seed investor in China.
The accolades rained in from heaven. He was inducted into Forbes 30 under 30, first under the 2015 Forbes China 30 under 30, then 2016 Forbes Asia 30 under 30 under the Consumer Tech category.
And then the Cinderella story ran complete - with an acquisition by Baidu, the Google of China, and its newly minted COO Lu Qi, an AI computer scientist who was a senior executive in Microsoft US, and who later was tapped to build Y Combinator China. My source says they had apparently met in Silicon Valley and Lu Qi really liked Jesse. Enough to make Raven Tech the first acquisition under his reign.
The acquisition was likely just an acquihire. Somewhere in the range of $10 million USD, my source says, just enough to keep the venture capital investors happy.
But all was not good under the hood. Raven Tech’s product Flow never broke the top 700 ranking in the App Store. According to two of my sources, some investors in the Chinese ecosystem had been warned not to work with him. He had Raven Tech’s office in the same building as the first Tesla store in China in Beijing Parkview Green, a super premium mall, signalling more interest in marketing than product development.
After a period of working for Baidu with his earn-out, Jesse resigned and worked on his third startup, RCT Studio, a new Pixar for interactive movies. He went through YCombinator again now winter batch 2018, and closed $10mn in funding from gaming fund Makers Fund and Sky Saga Capital, and then a further $10mn with Yuanyuzhou Ventures and Springwind Ventures. The team also received the Forbes 30 under 30 - Asia- Media, Marketing & Advertising 2020 award.
Eerily similar playbook.
But then something happened, and Jesse Lyu decided to break paths and restart with a new company, Cyber Manufacture Co.
I could not verify with my sources or publicly available information what was the very nature of the split, but it appears weird. RCT and Cyber Manufacture were essentially doing very similar things. In the metaverse. And RCT was exceptionally funded, which makes no sense why Jesse would depart. And many of the references about RCT now contain no mention of Jesse whatsoever.
Perhaps it was a founder split. These things happen.
But depart he did, and he made a new team and incorporated as Cyber Manufacture. And raised $6mn in funding.
But the ball-dropping seemed to continue.
As revealed by Emily Sheperd, the main project at Cyber Manufacture Co was GAMA, a gaming virtual metaverse. GAMA would be backed by ground-breaking AI called the Quantum Engine, which would power the game’s NPCs.
A few months later, GAMA announced that they were to open source the entire GAMA game, but they had not revealed something.
They were going to take the Quantum Engine. And turn that into its own thing. Unbeknownst to many of GAMA’s NFT holders on its own Discord channel.
Ed Zitron has also done some great work on analyzing GAMA by going through Jesse’s Clubhouse sessions, which can be read here.
The team then changed the name of Cyber Manufacture into Rabbit, with his team members Sharon Zhang, Justin Oren, and others joining him. And this is where we get to Jesse’s latest and fourth incarnation.
Rabbit had all the trappings of an interesting but mysterious startup. Of seemingly come out of nowhere, selling 60K units for $200 each, raising over $10mn in pre orders at CES. Of raising over $20 million USD from Khosla Ventures, Synergis Capital, and strategic partner Kakao Investment. Of the sexy Large Action Models (LAMs) and an even sexier hardware unit.
After much fanfare, his delivery seems to be, well, rabbit poo poo.
MBHK has called it barely reviewable. It can be used on Android devices, disregarding the need for the actual hardware device. Even the design from Teenage Engineering, the vaunted Swedish design firm that he is a board member of, came from a similar looking device called Play.date with a $200 USD price tag that seemed to be conveniently taken off from the firm’s website now.
Sounding familiar?
There are patterns in life, as in startups and most certainly in founders. People say they’ll change, but mostly won’t nor can’t. Jesse is no different.
There seems to be one side of things that Jesse is extremely brilliant at the marketing side of things. Being able to get into YCombinator. Being able to raise from Zhenfund and Matrix Partners. Then being acquired by Baidu.
But in terms of the delivery of the product, there seems to be a deficiency. In dropping the ball on Raven and GAMA. In not communicating to the Discord members of GAMA to let them know that the team has moved on, even if they said they hadn’t. And at least somewhat dismissive that it was a real project borne during Covid.
Overpromise, but under deliver.
Some have called him a grifter, especially after the Rabbit debacle.
I suppose some of it is because he went from crypto to AI. On the outside, from trend to trend.
To his credit, Jesse has seemed to be working on AI for a while. Ever since his Raven Tech days. Even through crypto, he was working on the AI engine for GAMA.
Back during Covid, some of the smartest founders did work on crypto. It seemed to be the hottest thing. And for a while, during those two years, it seemed like maybe crypto would be THE thing.
Crypto just seemed to attract people like that.
But you can’t argue that he’s a grifter simply because he was from crypto. I know many that made that switch, experimenting with different things. I did as well, working on a crypto fund investing in DeFi and NFTs.
But it does seem like he has a bit of overpromising and under delivering. Or perhaps, a different phrase.
For chasing the hype.
Chasing the hype by entering into YCombinator as a Chinese founder, an exceptional feat that allowed him to raise from other name brand investors in China. Then for engineering an exit to Baidu. Then pivoting to crypto to chase the hype with the metaverse. And then now to Rabbit to leverage the unity of AI and hardware.
But can you fault someone for chasing the hype?
There’s a poignant conversation on X that struck me. An AI/ML advocate by the name of Andy Parackal went on a X thread about Rabbit to Aaron Li, the person in charge of the technical stack at GAMA, and now friendly, I suppose, but not associated with Rabbit.
After a bit of back and forth on why Jesse is a grifter, Aaron replies “I still don’t understand what you are trying to say”.
And I think this speaks to the heart of the issue. Core assumptions.
Andy assumes that because Jesse came from nowhere and had rugpulled his last project which is in the crypto space, then he must be a crypto bro that saw the AI hype and wanted a piece of the action. He didn’t know, because it’s not obviously apparent, that Jesse’s AI work come from RavenTech.
Aaron assumes that this is a non-issue, because the crypto project failed or at least didn’t over-deliver, and at least its holders got a cool NFT to go with it. Further, they legally may not have further obligations to their NFT holders. The only expectation and legal obligation that Cyber Manufacture Co and now Rabbit has is to their existing equity holders, which remain on their cap table.
And I think that’s where we stand.
The Chinese, and by extension, Chinese founders, can be seen as morally absent. That they will do anything for a buck. Anything to get ahead. Even cut corners.
And that’s not untrue. Because that’s how it is in China as a domestic market. But it’s not moral absenteeism, it’s the competitive capitalist laws of the jungle they were raised in.
The competition is fierce in China. Anytime there’s an idea that works, there’s another 1000 companies waiting to copy the business model and get ahead.
If you succeed in China, if you’re the market leader, it means you’ve beaten down that competition. That there are graveyards of other founders with sometimes owing massive amounts of debt because of you.
You’re the top dog, mate. The one that when he’s hungry, he eats, as Matthew McConaughey is keen to remind us in The Gentlemen.
If you’re one of the ones that don’t win, you dust yourself off, and try again. And again and again until you do.
And I can see that reflection in Jesse. He’s just a product of his ultra-competitive jungle.
It does remain to see what Jesse and Rabbit can finally build off of the R1. Of what he can deliver, obviously not this time, but the next and the next.
His stakes have never been higher.
Why you ask? Why won’t he just cut and run, and on to the next startup like he did before?
Well, first, this is his 4th startup, and there’s enough information about him now in the public domain. And hopefully this article serves one small part of that to piece things together.
This should serve as a citizen journalist type of buffer, a soft power and PR type of bulwark.
Already this is happening. Emily Sheperd, who had surfaced Rabbit’s dismal security features and contributed to this article, drew a lot of attention from her criticism and review on X.
Unfortunately, Emily was blocked on X. A conjecture, and mine only, is that she was reported by either Rabbit or Jesse, and a threshold was met to effectively ban her.
Blocking critics won’t work in the long term. Better to make a friend, or take the opportunity to, than to create an enemy and be perceived for making enemies.
Case in point - see her new article and criticism of the LAM. And now the famed YouTuber who and investigative journalist Coffeezilla who pursued many crypto scammers is on the case
Second, now that he is in the US with name brand venture investors, his ability to cut and run becomes slightly harder with the more transparent nature of the US commercial system, the litigious nature of the US legal system, and the likely guardrails he has with his American investors.
There are hard red lines that he cannot cross. Afterall, he’s raised almost $50 million USD in capital.
Third, the bar is now that much higher. GPT4o just came out, and most of the things that Rabbit claimed to do, it can do. And do now.
As some people have claimed, this doesn’t bode well for Rabbit. Already people are asking for refunds.
So as much as Alice follows the White Rabbit to lead her down the path of adventure to the chasing Queen of Hearts, only to wake up from her dreams, will we rub our weary eyes shortly, with Jesse’s Rabbit just a distant and partial memory from the massive shadow that OpenAI and Sam Altman has just now cast?
Time can only tell.