Chinese AI startup Butterfly Effect seeks $500 million valuation in new funding round, targeting US market

Chinese AI startup Butterfly Effect seeks $500 million valuation in new funding round, targeting US marketMarch 28 Chinese startup Butterfly Effect, the developer of the AI agent Manus, is actively in talks with US venture capital firms and other potential investors for a new funding round targeting a valuation of at least $500 million, a roughly fivefold increase from its previous valuation, according to multiple sources familiar with the matter. This move underscores the continued interest of US investors in Chinese AI technology and the significant progress Butterfly Effect has made in the AI application field

Chinese AI startup Butterfly Effect seeks $500 million valuation in new funding round, targeting US market

March 28 Chinese startup Butterfly Effect, the developer of the AI agent Manus, is actively in talks with US venture capital firms and other potential investors for a new funding round targeting a valuation of at least $500 million, a roughly fivefold increase from its previous valuation, according to multiple sources familiar with the matter. This move underscores the continued interest of US investors in Chinese AI technology and the significant progress Butterfly Effect has made in the AI application field.

Manus is a powerful AI agent capable of proficiently operating computers, browsing multiple websites, and executing complex tasks such as travel booking and stock analysis. Its powerful functionality and user-friendly experience generated significant buzz on social media platforms like X (formerly Twitter) within days of its launch, attracting the attention of numerous tech executives and AI developers. This surge in popularity is not coincidental; it's closely related to the growing interest in Chinese-made AI products in the US market, a trend further solidified by the success of DeepSeek. DeepSeek, a branch of a Chinese quantitative hedge fund, launched an AI inference model earlier this year that matched the performance of OpenAI's comparable products but at a significantly lower development cost, sending shockwaves through Silicon Valley and opening doors for other Chinese AI companies to enter the US market.

Butterfly Effect, primarily based in Beijing, is actively engaging with US investors through both online and offline channels. Despite the intensifying US-China tech competition in recent years and increasingly stringent US scrutiny of investments in Chinese AI, including new regulations enacted in January restricting US investment in some Chinese AI companies, Butterfly Effect remains determined to secure backing from US venture capital firms. Some venture capitalists believe that Butterfly Effect's focus on developing AI applications like Manus, rather than training underlying large language models, makes it less likely to be subject to investment restrictions. This application-focused strategy may be a key factor attracting US investment.

Sources indicate that the current funding round could raise tens of millions of dollars. Late last year, the company completed a funding round at a valuation of approximately $100 million (including funds raised), led by Chinese tech giants Tencent and Sequoia Capital China, with ZhenFund, an early backer since the company's founding in 2023, participating. This successful round laid a solid foundation for Butterfly Effect's pursuit of a significantly higher valuation this time.

Butterfly Effect positions Manus as a product for global users, particularly targeting the US market. However, due to a high number of Chinese users applying for access, the company recently announced a partnership with Alibaba Group to offer Manus services in China using domestic AI models and computing platforms, demonstrating its strategic vision for domestic market expansion. Besides Manus, Butterfly Effect also operates Monica.im, a product integrating multiple models from OpenAI, Anthropic, Google, and DeepSeek, capable of generating text, images, and videos, further showcasing the company's comprehensive capabilities in AI technology.

The new funding round will provide strong momentum for the further development of Manus. Currently, the company's capacity to meet product demand is limited by server capacity and operational costs. Reportedly, Manus uses tools such as Anthropic's Claude AI model, incurring an average cost of $2 per task to Anthropic. A LinkedIn post by Parker Lyman, the company's office manager, earlier this week revealed that despite implementing usage limits, Manus spent over $1 million on the Claude model in its first two weeks, with over 2.6 million users on the waitlist for an invitation code. This demonstrates both the enormous market potential of Manus and the company's urgent need to scale to meet demand.

In addition to boosting server capacity and reducing operational costs, the funding will also play a crucial role in team expansion. Sources reveal that the startup, currently employing fewer than 80 people, is planning to open its first overseas office in Tokyo, viewing Japan as a key market after the US. This indicates that Butterfly Effect is not only focusing on the US market but is also actively expanding globally, demonstrating its ambitious growth strategy.

A Butterfly Effect spokesperson declined to comment on the funding rumors. However, all signs point to the Chinese AI startup being in a critical period of rapid development. Its active pursuit of funding and expansion into overseas markets demonstrates strong growth potential and confidence in the future. The success of this funding round will not only have a profound impact on Butterfly Effect's own development but will also play an important role in promoting the globalization of China's AI industry. As more Chinese AI companies take to the global stage, the future AI landscape will become more diversified and competitive. Butterfly Effect's success could serve as a significant example for other Chinese AI companies venturing into the world. Its strategic focus on AI application development rather than foundational models offers valuable experience and lessons for other Chinese AI enterprises.