With five venture capital firms confirming their intention to invest in Yike’s Series A round, the most important thing has been resolved.
About the amount of shares to be released and the standards for company valuation, these are all confrontations and discussions on small details and cannot be determined one by one, but they are not the main contradiction.
After angel round and PreA round financing, Yike’s shareholding structure is Fang Zhuo 57.5%, Yu Suzhou’s top executives hold 12.5% in total, institutions are IDG Huaxia 13%, Capital Today 9%, and Shenxin Technology 8%.
Fang Zhuo’s original plan for this round was to release 20%, while IDG America stated before that it would release 30%. The two parties had quite different opinions.
Now with the launch of the software iMusic, the initial praise from users, and the true practice of software and hardware integration, IDG America has made concessions. Otherwise, the newly introduced company Xiangjiang Huanyu alone will not be able to capture the market share and provide sufficient supply.
financial.
According to the financing of most companies, the A-round situation generally requires verification of the business model and profit method, but Yike's situation is special. There are no competitors either domestically or abroad for the time being, which means that its hardware products have entered the profit stage.
However, the digital new media proposed by Fang Zhuo is a new business model, which requires accumulating users to obtain copyright authorization and then verify it. This is more in line with the conventional Series A financing.
In other words, Yike now means something between A and B.
“Actually, if we were not working on the software ecosystem, we would have sufficient funds. The money raised in this round would be mainly used to deal with music companies.”
“You should also know that copyright cooperation with music companies is difficult to sign year by year.”
“I don’t want money, and I don’t want to cash out.”
“This is because Yike needs money. It needs money to solve the problems it faces at this stage. If the money is not enough to solve the problem, what is the point of asking for money?”
President Yike expressed his views on the use of funds, while five institutions were involved in some debates on how to value the company, whether to use P or PB to judge the value of Yike.
As of the PreA round of financing, the market value of Yike was estimated to be around US$30 million. However, with the sales of the M1, Sony made a purchase price of US$50 million.
Now, the sales volume and channels of music players are much stronger than at that time. As well as the feedback from the launch of iMusic, the price is no longer the same.
One meeting did not resolve the issue of VCs’ valuation of Yike.
Two meetings and still no resolution.
But Fang Zhuo is not worried about this. As he said, as long as the funds can cover the copyright authorization of the company and the music company, the temporary amount is not the most important issue.
Two more meetings were held, and the venture capital firm asked President Yike who had not expressed much opinion on valuation.
“Doubling it is a bit too little, and you won’t be happy with quadrupling it.”
“Everyone is optimistic about the development of Yike. It just so happens that Mr. Miller understands Chinese culture. Let me give you a number and everyone will study it, whether it is valuation according to your procedures or whatever.”
“88.88 million, just for good luck, how about it?”
Fang Zhuo did not give his long speech at the first meeting. He simply gave his opinion. Doubling it would be twice 60 million, quadrupling it would be 88.88 million, which is basically three times the middle number.
Except for Miller, everyone else looked at each other in confusion.
In Miller's opinion, this is a kind of quasi-belief of Eastern people. He thinks it is an acceptable value. After four days of discussion and debate, both sides should compromise. It just so happens that the number mentioned by the founder contains a certain kind of value.
Oriental mystery.
He said directly: "This number is slightly higher than the valuation of the EV/S indicator, but it is still within my acceptable range. Bear, I think it is okay. What do you think?"
The person who insists on high valuation most fiercely these days is not Xiangjiang Huanyu, but Xiong Xiaoge of IDG China, because he already holds 13% of the shares.
Xiong Xiaoge did not give an immediate answer. He discussed with his team for a while before agreeing to the valuation figure.
The two most controversial IDGs have reached a consensus, and this step of work can proceed.
Soon, the investment amount and equity distribution plan will be fully released.
IDG America invested US$16 million to hold 18% of the shares, while Xiangjiang Huanyu invested US$5 million to hold 5.3% of the shares.
IDG Huaxia’s follow-up investment of US$1.7 million was reduced from 13% to 11%, Today’s Capital’s follow-up investment of US$800,000 was reduced from 9% to 7.3%, and Shenxing Venture Capital’s follow-up investment of US$500,000 was reduced from 8% to 6.4%.
Fang Zhuo’s shareholdings were reduced to 3.85% each for Yu Hong and Su Wei, and to 1.05% for Zhou Xin.
In addition, an additional 3% option pool will be established.
In other words, IDG America suddenly became the second largest shareholder of Yike Company.
Considering that even if the two IDGs collectively hold only 29% of the shares, which does not reach the minimum line of one-vote veto, Fang Zhuo is quite satisfied, and this round of external financing totaling US$24 million will also make Yike full of strength. forward momentum.
“Fang, in the next 12 months, we will face various challenges, how likely do you think we are to fail?” Miller mentioned the issue of risk expectations after the investment body completed only the details.
"I think in the next 12 months, what we need to think about is success or more success," Fangzhuo said, both to Miller and to everyone present.
Miller smiled. He likes confident founders.
Xiong Xiaoge and Fang Zhuo have known each other for a long time, and they are already somewhat immune to his aura of grace, so they reluctantly twitched their lips to save face.
Pan Ben is the one who admires the boss the most among the group of people, not only because he went to the warehouse to carry the goods in sweat, but also because he followed Fang Zhuo all the way to watch his operations.
Hearing this, he judged that the atmosphere was appropriate and took the lead in applauding.
Applause immediately broke out in the conference room, and those present were those who hoped that the company would be more successful.
In this way, Shencheng Yike Technology completed its Series A financing on April 5, 2002, with 5 domestic and overseas investment institutions claiming 27% of the equity for a total of US$24 million.
In other words, Yike completed the company valuation increase from US$30 million in the Pre-A round to US$88.88 million in the A-round.
At the end of the third round of financing, there was no champagne and no celebration party.
The contract needs to be reviewed and approved in accordance with the law, because Shencheng Yike actually adopts a VIE structure for shareholding, and professionals must study it repeatedly when it comes to compliance with the legal provisions of both countries to avoid any mistakes.
In the evening after the fifth financing meeting, Fang Zhuo invited IDG Huaxia and Xiangjiang Huanyu to have a meal before they returned to China.
During the dinner, he no longer talked about the iMusic digital new media that he had talked about so much before, nor did he talk about music copyright licensing. The whole process was about reducing the cost of hardware and building channels.
Liang Qihua from Xiangjiang Huanyu listened happily at first, but later he became a little puzzled and asked: "Mr. Fang, what are your recent plans for iMusic?"
“Oh, don’t worry about that.” Fang Zhuo drank half a glass of beer and said lightly.
Liang Qihua was anxious: "Why don't we be anxious? Isn't this always said in meetings?"
Fang Zhuo nodded: "Yes, foreigners love to hear this."
Liang Qihua was about to have an attack when he suddenly saw that Xiong Xiaoge was very calm and turned to see what he meant.
Xiong Xiaoge’s summary: “Hardware is now, iMusic is the future. If the hardware is not good, why talk about iMusic? Mr. Fang’s focus is fine.”
Liang Qihua's mood relaxed a little.
Fang Zhuo corrected: "iMusic is not the future. The combination of hardware and iMusic is the future. The profits of hardware products are very considerable. Mr. Liang, don't follow the advice of foreigners. He may not know as much as you do."
Liang Qihua: “……”
Mr. Fang seems to be praising himself, right? That should be the case, right?
He caught a glimpse of Xiong Xiaoge, the old god, and wondered if this person had communicated with Fang Zhuo in private or if he really had a sharp eye.
“Don’t worry, Mr. Liang, I am the person in the world who wants to do a good job in Yike most, and I know it well.” Fang Zhuo said with a smile.
Xiong Xiaoge raised the wine glass in his hand and said loudly: "Come, let's drink to Mr. Fang's heart."
Liang Qihua raised his glass, but felt that it was a little strange to include a gun and a stick in this toast.
Fang Zhuohun drank a toast nonchalantly, and then waited until everyone's glasses were filled again and shouted loudly: "Come on, let's drink to changing the world!"
Liang Qihua raised his glass again, feeling a little funny in his heart. Is it okay to change the world?
However, this time the toast was more comfortable.
After the meal, Xiangjiang Huanyu went back home, while Xiong Xiaoge stayed in New York for one more day. He spent half a day briefly visiting the Kroger supermarket in this international metropolis, and spent another half day chatting with Fang Zhuo.
Had an in-depth business discussion.
Xiong Xiaoge also found the strategy of channel sinking quite new, and from Fang Zhuo, the analysis he heard was even more profound.
“Channel sinking is not a short-term strategy, but a mid- to long-term strategy.”
“It’s already April, and I heard that Apple will hold a product launch event early next month. If the expectations are good, they will definitely support Microsoft Windows this time, and the M1 will not be so comfortable by then.”
“However, regardless of iTunes or iMusic, music licensing is not easy to achieve in the short term. Music companies will not easily waver until they see the accumulated number of users. This is a process.”
“What Yike and Apple have to do is continue to increase their stakes in the market. From this point of view, the two companies can be said to be each other’s horns.”
Although Xiong Xiaoge is dissatisfied with some of Fang Zhuo's behaviors, he always appreciates his industry-integrated views and is always impressed by them.
We chatted very late that day and finally saw off the president of IDG China. It was already half past eleven when Fang Zhuo looked at his phone. He leaned on the bed and recalled the negotiations over the past few days. He reviewed the exchange of opinions for a while, and then used
The phone called the sleepy Kong Yu over.
“You don’t have to follow Mr. Yu these days, I will take over your work.”
Hong Yu was half asleep, thinking about his boss's arrangements.
“You have recently secretly searched for a bank in the United States that can pledge equity, and pledged all the equity I hold in Yike.”
At this time, Kong Yu was completely sleepless. He was confused for a while and asked: "Fang, Mr. Fang, are you going to pledge all the funds that have just been raised?"
"Yes, all of them, the price is negotiable." Fang Zhuo said calmly, "This money can be used to operate Sina's shares, one money can be used for two purposes, and the use can be maximized."
There is no impassionedness and no gnashing of teeth.
But Kong Yu immediately sensed the boss’s determination and murderous intent towards Sina’s hostile takeover.
He couldn't help but swallow, and his five points of suspicion that the boss was going to cash out and leave was reduced to one point.
Hong Yu thought about it for a while and reminded: "Mr. Fang, because Yike has not yet been listed, the liquidity of the equity is not high, and it has just completed the A round of financing, so the price may be lower than the general equity pledge."
Normally speaking, equity pledged funds can be discounted by 30 to 60% of the original value depending on the circumstances. However, the value determination of unlisted companies is not clear enough, the market transparency is not high, and there are relatively few buyers, so the price will be low.
“It’s okay to keep it low, the most important thing is to keep it secret.” Fang Zhuo glanced at Kong Yu.
Hong Yu was caught by this glance, as if gasoline had been poured on his body again, and his scalp was numb.
He knows the importance of this confidentiality. If the venture capital investors who have just invested hear about this, it will definitely be a big disturbance.
"Understood, Mr. Fang." Kong Yu took a deep breath and realized that this was a challenge in his work. Unlike in China, where he could easily find connections through the former vice president, in the United States, he must have to find a bank that can provide funds.
Avoid IDG.
This involves the confirmation of equity, as well as a small part that has been pledged domestically.
I originally thought that as one of the persons in charge of the MIGA Fund, I would help Mr. Yu with some Yike work in his spare time. Unexpectedly, a heavy burden suddenly fell on me unprepared.
The salary is really not that easy to get.
"Remember, it must be kept confidential and the price should be as high as possible. The shipment volume of our products in the market is constantly rising, and the book funds are also abundant." Fang Zhuo pondered, "You can also talk about our domestic products.
A blank market.”
Kong Yu nodded.
He briefly confirmed a few more things with his boss before getting up and leaving the room.
At the moment the door closed, Kong Yu suddenly had a thought in his mind. If this matter was leaked, would he be able to return to the country?
In the past two days, the black business association in Chinatown has come to see the boss, but because they have been busy with financing, they haven't had much conversation.
Kong Yu walked back while rubbing his face. If there are difficulties, he must face them. If there are no difficulties, he must face them even if they create difficulties. The boss has just completed the A round, and in the blink of an eye, he has prepared money to get Sina. If he didn't know the situation clearly, he would have thought that the person being
Wang Zhidong, the founder of Sina who was kicked out, is a relative of the boss.
In the early hours of the morning, Kong Yu was not sleepy at all and started thinking about the implementation of the new work.
The next morning, after Xiangjiang Huanyu left New York, the IDG China team also left the country with Xiong Xiaoge. Overseas Yike continued to work as if nothing had changed.
In the afternoon, Yike President Fang Zhuo held a video conference with overseas departments and personally described the work goals for the entire month of April.
“This month we are just building channels, stabilizing supply, and receiving feedback on the use of iMusic. There is nothing else to worry about.”
“In March, our sales in the United States were close to 50,000 units. M1 and P1 were almost evenly divided. This month, we strive to double this volume.”
“There will be team performance bonuses for different goals, so everyone should work harder.”
“In addition, there will be some new colleagues starting from this month, please take care of them.”
Fang Zhuo never talks about ecology or not when talking to employees.
At the end of the meeting, Yu Hong asked Fang Zhuo a question: "What's going on with Kong Yu? I called him and said he was sent away by you."
"Oh, he has other things to do. I'm here to take over his position. I can't just say it but don't do it. Recently, I followed Mr. Yu to see the construction work of our channels. Is that okay?" Fang Zhuo replied casually.
Yu Hong was a little surprised, nodded and said with a smile: "Okay, then I will also set the performance for the CEO."
This chapter has been completed!