YZi Labs places long bets on unbuilt technologies

Speaking about the firm’s strategy, managing partner Ella Zhang says YZi Labs is guided less by market cycles and more by what she calls “first principles thinking” — a focus on fundamental technological shifts that could define the next decade. The portfolio spans artificial intelligence, biotechnology and Web3 infrastructure, areas that Zhang argues are converging in ways still poorly understood by mainstream investors.

The firm’s approach stands apart in a funding climate marked by caution. Venture capital flows into technology startups have moderated from the highs seen during the pandemic-era boom, with investors demanding clearer paths to revenue and profitability. Against that backdrop, YZi Labs is explicitly targeting ventures at the earliest conceptual stages, including decentralised financial systems built around stablecoins, AI-driven research tools and next-generation biotech platforms.

Zhang contends that transformative returns rarely emerge from incremental innovation. Instead, she says, they are generated when entrepreneurs tackle foundational constraints in computing, biology or financial infrastructure. That philosophy has led the firm to explore projects such as programmable stablecoin ecosystems designed to support cross-border payments, AI models tailored for scientific discovery, and biotech ventures seeking to redesign drug development pipelines.

Artificial intelligence remains a central theme. Industry spending on generative AI and large language models has surged, with global investment running into tens of billions of dollars annually. Yet Zhang argues that the next phase of AI will extend beyond chatbots and content generation. She points to opportunities in AI agents capable of autonomous decision-making, specialised models trained on proprietary scientific data, and infrastructure layers that allow enterprises to deploy AI systems securely.

Such ambitions align with broader trends. Analysts forecast sustained growth in enterprise AI adoption, particularly in sectors such as healthcare, logistics and finance. However, competition is intensifying, with established technology giants and well-funded startups vying for dominance. YZi Labs, according to Zhang, seeks to identify founders who can build differentiated systems rather than replicate existing models.

Biotechnology represents another pillar of the firm’s strategy. Advances in gene editing, protein design and computational biology have drawn significant capital over the past decade. Companies leveraging machine learning to accelerate drug discovery have secured substantial funding rounds, reflecting investor belief that AI can compress development timelines and reduce costs. Zhang suggests that biology is becoming an information science, where data and algorithms can unlock insights once limited by laboratory constraints.

Still, biotech investments carry extended timelines and regulatory risks. Clinical trials can take years, and failure rates remain high. Zhang acknowledges those challenges but argues that disciplined portfolio construction and collaboration with scientific advisers can mitigate downside exposure. She emphasises that YZi Labs does not seek quick exits; instead, it prioritises conviction in long-term scientific progress.

Web3 infrastructure, particularly stablecoins and decentralised finance, forms the third strand of the firm’s focus. Stablecoins have grown into a multi-hundred-billion-dollar segment of the crypto ecosystem, serving as a bridge between digital assets and traditional currencies. Policymakers in major economies are debating regulatory frameworks that could shape the sector’s trajectory. Zhang believes that properly designed stablecoin networks can underpin more efficient global payment systems, especially in regions with limited access to conventional banking.

Critics of Web3 point to volatility, governance failures and security breaches that have eroded trust. High-profile collapses within the crypto industry have prompted tighter scrutiny from regulators and institutional investors alike. Zhang responds that the turbulence has forced builders to prioritise transparency and resilience. She frames the downturn as a filtering mechanism, leaving behind teams focused on robust architecture rather than speculative hype.

Across these domains, YZi Labs aims to back founders at the idea stage, often before a product is fully formed. Zhang describes the firm’s role as a partner in shaping vision and strategy, not merely a provider of capital. That hands-on model echoes earlier venture capital eras when investors played an active role in guiding technological breakthroughs.