Rouyu's Founders: Stanford-Educated Scientists Seeking Rescue Amid IPO Setbacks and Cash Crunch

Frankly speaking, my first reaction to such news was surprise, as this type of “distress signal” is not common in China, particularly for Royole Corporation, which was already in the pre-IPO stage and was included among the “Top 10 Unicorns in China” in 2018.

It is worth noting that since producing the world’s thinnest and lightest flexible display in 2014, Royole Corporation has remained a favored investment target in the eyes of investors. According to publicly available information, since its establishment in 2012, Royole has completed 13 rounds of financing, backed by top-tier domestic and international investment institutions.

It is not without reason that Royole has attracted such intense investor interest. After all, even Xu Xiaoping, founder of ZhenFund, has expressed deep regret for missing the opportunity to invest in the company. “Every time I see positive news about Royole, it cuts me to the heart. The pride I take as an angel investor has been utterly crushed.”

In fact, Royole Corporation has faced significant challenges over the past two years. From a corporate perspective, its IPO applications were rejected twice, and it has not secured any financing for two years. From a market perspective, the prospectus reveals that Royole Corporation incurred a net loss of RMB 3.195 billion from 2017 to the first half of 2021. Finally, from an internal operational standpoint, the company experienced a sharp decline in employee headcount, and production was temporarily halted.
So, why has Royole Corporation, once a shining star, ended up in its current predicament?

In the article “Saving Royole,” Liu Shuwei pointed out that “the three founders of Royole Technology all graduated from Tsinghua University and earned their Ph.D. degrees or conducted postdoctoral research at Stanford University in the United States. While they possess internationally leading flexible electronics technology, they lack experience in market development, generating sufficient operating cash flow, and ensuring the company’s sustainable operations.”
This is not merely a pain point for the three founders of Royole Corporation; for the vast majority of scientist-entrepreneurs in China today, although their specific hardships vary, their core demands are similar.

Focusing on the healthcare sector, we are currently entering the “Era of Scientist Entrepreneurship.”

This is not mere sloganeering; it is backed by hard data. According to statistics from VBInsight, among the 56 healthcare companies that completed early-stage financing in the first quarter of this year, over 90% of the founders have a scientific background, with most hailing from top-tier research institutions in China or abroad.

This is certainly not without reason. On one hand, under the direct guidance of policy, domestic research institutions and universities have been vigorously encouraging scientists to embark on entrepreneurial ventures in recent years, which has, to some extent, propelled a cohort of scientists from the laboratory to the startup arena. On the other hand, investors are currently shifting their focus toward earlier-stage investments and providing comprehensive support for scientist-led startups, making entrepreneurship an increasingly attractive option for scientists.

But this is no easy feat, as there is still a long road ahead in transitioning from a scientist to an entrepreneur.

The primary issue to address is mindset. There is a fundamental difference in thinking patterns between scientists and entrepreneurs. Scientists can, to some extent, be rational or even idealistic, whereas entrepreneurs must focus on practical implementation. Taking R&D as an example, scientists may pursue technical breakthroughs independently of market considerations, but entrepreneurs must conduct R&D with the market as their benchmark. Without market demand, even the most technically advanced innovations are unlikely to sustain a business in the long run.

The next challenge to address is technological. Currently, China’s healthcare sector has moved beyond the entrepreneurial era dominated by “domestic substitution” under traditional business models. Future opportunities will increasingly favor innovative enterprises that possess genuine original technologies and can meet clinical needs.

Therefore, in such a market environment, scientists who wish to carve out a share through entrepreneurship must possess key technologies capable of breaking industry monopolies or driving industrial transformation. These technologies must genuinely address clinical needs, exhibit irreplaceability, and offer a sufficiently large market potential.

The next challenge to address is the integration and application of market resources. Entrepreneurship is inherently market-oriented; therefore, navigating the market often becomes a major hurdle for scientists on their entrepreneurial journey.

This issue needs to be examined from three perspectives. The first perspective is connectivity, namely how scientists can access market resources. For the vast majority of scientists in China, direct engagement with market resources is difficult due to their long-term immersion in a closed system centered around research institutes.

The second level is screening, i.e., how scientists identify the most suitable resources from a market rife with mixed-quality offerings through evaluation; the third level is application, i.e., how scientists fully leverage the screened market resources to drive their startups, making them the core engine for venture development.

The final challenge to address is corporate operations. This requires consideration from multiple dimensions: first, the team—specifically, how to recruit suitable talent and maximize their value; second, pacing—namely, how to leverage market analysis to seize critical milestones in corporate development; and third, capital—focusing on how to maintain a stable cash flow and ensure the efficient utilization of funds.

Certainly, in addition to the scientists themselves, the external market environment also has certain limitations at this stage.

The first point is policy. According to statistics from VCBeat’s Orange Fruit Bureau, China issued a total of 49 policies in the field of scientific and technological achievement transformation in 2021, yet their actual effectiveness was far from satisfactory. This is primarily due to two reasons: first, “imprecise regulation,” meaning the policies failed to genuinely address the challenges scientists face in entrepreneurship; second, “excessive regulation,” whereby certain policies detached from market realities imposed controls on scientists, ultimately becoming “obstacles” on their path forward.

The second point is talent, which primarily refers to technology transfer professionals. Long-term research conducted by VCBeat’s Chengguo Bureau has revealed that, compared with top-tier scientific researchers, professional technology transfer professionals are in shorter supply in China. This shortage is evident not only in absolute numbers but also in the quality of talent; specifically, there is a significant gap in the professional competencies of technology transfer professionals between China and developed countries in Europe and the United States.

The third point is the platform. Scientists embarking on entrepreneurial ventures invariably require a vehicle, which may be an innovation center within their own research institution or an externally led incubator. However, given the current market landscape, the vast majority of technology transfer offices in China can currently only address administrative issues. In the deeper stages of actual commercialization, such as project evaluation and resource linkage, research institutions are still unable to provide adequate support to scientists.

The fourth point is the system. The translation of innovations in the medical field is actually a flexible and diverse process, so government bodies, research institutions, investment firms, enterprises, and other innovation stakeholders need to be deeply involved and form an interlinked synergistic effect. However, at present, due to the incomplete innovation system, the channels linking these innovation stakeholders have not been opened up, and most operate in silos.

Since the problem already exists, how should we address it?

First, in terms of policy, it is essential to achieve precision while also learning to “deregulate.”

First, regarding precision, relevant functional agencies should thoroughly analyze market demands before formulating policies, and develop corresponding policies based on actual needs. Second, concerning “deregulation,” policy makers should adopt a targeted approach in supporting scientists’ entrepreneurial ventures, granting them sufficient autonomy.

Secondly, at the level of research institutions and universities, it is essential to both streamline the “industry-academia-research” chain and enhance market-oriented operational capabilities.

As the “first stop” for scientists embarking on entrepreneurial ventures, research institutions should first fully tap into scientists’ innovative potential. This is mainly reflected in two aspects: on the “software” side, by providing technical support; and on the “hardware” side, by offering state-of-the-art laboratories.

To unleash the innovative potential of scientists, research institutions should proactively introduce more market-oriented elements. On one hand, they must continuously enhance their technology transfer teams’ market operation capabilities; on the other hand, they should establish proprietary “market resource pools” and engage in targeted collaborations with investment firms or enterprises in the market, thereby providing scientists with precise market resources.

Then, on the side of investment institutions, it is necessary to maintain “rationality” while also learning to embrace “sensibility.”

In a sense, early-stage investment institutions currently stand in the same position as scientists, adopting the role of entrepreneurs. Therefore, in the highly competitive and high-risk early-stage investment market, these institutions must maintain “rationality” while also learning to embrace “empathy.”

“Rationality” primarily refers to the ability of investment institutions to effectively evaluate scientist-led projects. Unlike mid- to late-stage investments, which typically involve relatively mature projects that have been validated by the market, early-stage healthcare projects are characterized by high uncertainty. Consequently, the evaluation criteria are more numerous and complex, requiring investors to possess more diversified capabilities in project screening and due diligence.

“Emotional intelligence” primarily refers to investment institutions’ empathy toward scientists and their commitment to delivering high-quality post-investment services. On one hand, rather than focusing solely on “controlling” scientists, investors should fully adopt the scientists’ perspective and collaboratively negotiate and resolve issues. On the other hand, investors should provide the market resources scientists need, such as team building, product development, and commercialization—support that holds greater value than mere capital.

Finally, scientists themselves must continuously reconstruct their own capabilities while thoroughly deconstructing the market.

A senior investor told VCBeat’s Orange Fruit Bureau that when selecting early-stage projects for investment, the decision hinges less on the scientists themselves and more on the technology or product. This is because many characteristics of scientists do not manifest in the early stages, making it difficult to predict their future development. Moreover, any “shortcomings” a scientist may have are not cause for alarm, as these can be gradually addressed and improved over time.

Therefore, scientists should consciously make certain changes during the entrepreneurial process. First, let us discuss “self-reinvention,” which means that scientists must continuously learn to address their shortcomings in entrepreneurship. This is primarily reflected in enhancing their awareness and cognition of business management, as well as developing their multidisciplinary capabilities.

Furthermore, regarding the "structural market" concept—where scientists must consistently adopt a market-oriented perspective to drive corporate development—this approach can be broadly divided into three levels: First, in product research and development, efforts should be grounded in actual market demands. Second, in resource allocation, resources should be reasonably introduced or phased out based on the company’s current stage of development. Third, in strategic planning, one must closely monitor market dynamics, guide the team to respond appropriately, and accurately seize market opportunities.

On the arduous journey of entrepreneurship, the identity of a scientist certainly adds a luster to their profile. However, what truly determines success or failure is the timing of the venture, the choice of sector, the innovativeness of the technology, the team’s collaborative capabilities, and the founder’s own cognition and personal growth.

This is undoubtedly a difficult process, and also a rather complex one.

Therefore, whether scientists are already engaged in entrepreneurship or preparing to enter the entrepreneurial arena, they should devote themselves to learning and consistently persist in doing what is difficult yet right.