Zhou Jian, Xbot Space Founder and CEO

AsianFin -- Shanghai-based AI startup Xbot Space, which focuses on enterprise-level AI Agent platforms, is on the brink of collapse amid piling up financial difficulties, unpaid salaries, employee layoffs, and a halt in the company’s social media account posts.

The company's struggles have been revealed through social media posts from former employees in recent days.

Xbot Space, founded in 2023, has failed to pay employees their salaries, social security, and housing benefits for over three months, with some workers citing non-payment dating back to October 2024.

In early January 2025, the company laid off around 50 employees, handing them contract termination notices, which cited "significant changes in the company's external circumstances" as the reason for the decision.

Employees' posts on social media show that the firm has been inactive since late October, with the company’s official public account going silent after October 28, 2024.

Many employees have taken to public protests in Shanghai, demanding payment of their overdue wages and social security contributions. On February 1, a group of employees gathered outside the West Bund Intelligence Tower in Xuhui, holding banners and voicing grievances. They have initiated legal proceedings and are seeking mediation.

One employee posted, "The company has actually shut down, and the amount owed to employees, including salaries, social security, and housing benefits, runs into several million yuan in arrears. Despite announcements of recruitment, it seems there is no one left to maintain the operation."

In response to the unfolding crisis, Zhou Jian, the CEO and founder of Xbot Space, addressed the issue in an exclusive interview with AsianFin on Sunday, confirming that the company had downsized during the Chinese New Year period, which resulted in the layoffs.

He emphasized that compensation was being arranged, and two-thirds of the owed funds had already been paid. Zhou clarified that not all 50 employees had been laid off, with around 20 employees remaining with the company. However, he acknowledged that the main issue at hand was the company's ongoing struggle with financing.

"We are seeking financing to save the company," Zhou explained, adding that he had borrowed money and even sold his own house to cover employee salaries. He also mentioned that the company was in talks with potential buyers as part of efforts to recover financially.

Xbot Space, known for its AI platform "AskXBOT," which connects people with systems, had raised multi-million yuan in Series A funding in August 2023 from investors including IDG Capital, Lianxin Capital, and Atom Capital.

Zhou, who graduated from Shanghai Jiao Tong University with a degree in computer science, previously worked at Google, Alibaba Cloud, Yitu Technology, and Hongji RPA Company. Xbot Space was one of the 20 major projects supported by the Xuhui District Government in Shanghai and was seen as a promising player in the AI sector.

However, despite early success and high-profile backing, the company’s financial struggles point to a broader trend affecting AI startups in China. Zhou had previously noted the challenges faced by emerging tech companies, especially with increasing demands from investors for both positive cash flow and competition with major players like OpenAI. He highlighted that while many large models were emerging, the AI industry was still in its early stages and not suitable for large-scale investment.

While Xbot Space's AI Agent platform initially garnered attention for its advanced capabilities in enterprise-level solutions, employees have attributed the company's downfall to internal management issues. A former employee stated, “While the company's AI Agent concepts were groundbreaking, the internal management was chaotic, leading to operational failure.”

Zhou admitted to some missteps in management and acknowledged the operational issues that contributed to the company's current situation. According to legal documents, in November 2024, a former employee filed a lawsuit against Xbot Space for a labor contract dispute, further adding to the company’s mounting problems.

The difficulties faced by Xbot Space are part of a larger trend of challenges in the AI sector in China. Recently, the collapse of Shanghai-based Zongmu Technology, a leading AI autonomous driving company, has garnered attention. Zongmu Technology’s founder, Tang Rui, is reportedly missing, and more than 700 employees have not been paid, with several executives allegedly absconding with company funds.

Industry data shows that the number of AI-related companies in China that were newly registered but are now facing cancellation, revocation, or abnormal business status has reached nearly 80,000, accounting for 8.9% of the total number of newly registered companies during the same period. Meanwhile, in terms of venture capital and private equity funding, the investment scale in the first three quarters of 2024 decreased by over 37% compared to the previous year.

Zhou's challenges are further compounded by the current state of the financing environment, where many AI companies are facing difficulties securing investment. According to data from Rongzhong, the total investment scale of VC/PE in China’s tech sector saw a significant drop in the first three quarters of 2024, reflecting broader economic pressures on startups.

Industry experts such as Zhang Ying, the founding partner of Matrix Partners China, have pointed out the importance of continuous fundraising and maintaining investor relationships to ensure the survival of startups. He warned that tech entrepreneurs should be mindful of their personal finances and avoid putting everything on the line when facing business challenges.

Despite the grim outlook for Xbot Space, Zhou remains hopeful, and keeps seeking acquisition opportunities in a bid to recover the business and protect the livelihoods of his remaining employees.