Transcend Fund's Lirui Ding: survival readiness is the underwriting gap in games M&A
Summary
Lirui Ding, Principal at Transcend Fund, argues acquirable traits and survival traits rarely overlap - and most investors only underwrite the exit.
Transcend backs AI embedded in gameplay as the core experience, not AI as a production cost-cutter, and led welevel's $8.5M Series A on that thesis.
In China, pure equity is giving way to revenue-share, recoupable structures, publishing advances, and strategic minority stakes.
"Capital was never the scarce thing. Stop asking what you'd pay to get in and start asking what you bring that the capital already in this market can't."
01
Survival readiness is the most under-priced risk in the asset class
Traits that make a studio acquirable are almost never the traits that keep it alive long enough to be acquired.
Most investors underwrite the exit story, not the survival story - leaving first-time execution risk systematically mispriced.
Deal outcomes are rarely decided by numbers: "Almost always culture, ego and expectations that were never grounded" - Lirui Ding, Principal, Transcend Fund.
The best acquirers protect studios rather than absorb them - a dynamic invisible in any pitch deck.
02
AI in games, not AI for games, is where Transcend Fund writes conviction cheques
AI for games (cheaper content, faster validation) is real but cost-out, and every studio is chasing it.
AI in games - responsive worlds, characters with memory, systems generating new experiences each playthrough - is where category-defining outcomes sit.
Transcend led AI-native studio welevel's $8.5M Series A in June 2026 as a concrete placement of that thesis.
Ding values teams operating at the agent layer - AI actually doing the work - which most studios refuse to touch.
Generative AI as a standalone moat is explicitly overhyped: it commoditises production rather than protecting it.
03
What earns conviction at Transcend Fund - and what triggers a pass
Conviction requires a moat a well-funded incumbent can't copy, paired with demonstrated discipline to ship.
The moat can come from taste ("fun is the moat"), community, distribution, live ops, or AI-native gameplay.
Green flag: founders who describe their first hundred players as real people and share retention data unprompted.
Hard pass: decks whose moat is "we move fast," or teams with no shipping track record and no de-risking plan.
04
China's capital hasn't dried up - it moved into different instruments
Western investors hunting clean priced equity rounds conclude the market is frozen; the money moved to different pipes.
Pure equity is giving way to revenue-share, recoupable structures, publishing advances, and strategic minority stakes.
Many of China's strongest studios are already profitable or strategically backed and don't need outside equity at all.
Asian strategic capital is globalising deliberately, with knowable entry points: publishing partnerships, minority stakes, LP positions.
"In live-service design, monetisation, and how AI-forward the talent is, the innovation flows the other way"
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Games
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China
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