Chinese artificial intelligence start-up DeepSeek has begun raising external capital for the first time, but is keeping its initial fundraising round deliberately small to limit equity dilution while retaining key talent, according to people familiar with the matter.

The Hangzhou-based company, a spin-off from hedge fund High-Flyer, is seeking to sell no more than 3 per cent of its equity, said three investors with direct knowledge of the plans, who requested anonymity as the information is private.

DeepSeek is not in urgent need of outside capital. Instead, the round was intended to establish a market benchmark for its valuation, giving employees greater clarity on the worth of their stock options – a move aimed at stemming departures amid aggressive poaching by well-funded rivals, the Hangzhou and Beijing-based investors said.

DeepSeek did not immediately respond to a request for comment on Wednesday.

Large state-backed funds were expected to participate, for example, the AI-focused affiliates of China’s so-called “Big Fund III”, one of the investors said, adding that DeepSeek’s estimated valuation could, in fact, exceed US$100 billion.

DeepSeek’s fundraising was first reported by The Information, which said the company was seeking to raise at least US$300 million at a valuation of at least US$10 billion.

The company is being highly selective in the round, according to another investor based in Hangzhou, adding that DeepSeek is prioritising state-backed and industrial investors – including local government guidance funds and affiliated platforms – favouring those that can provide strategic resources such as AI infrastructure over purely financial capital, the investor said.