Faced with the gambling conditions proposed by the SoftBank investment representative, Zhang Yida secretly said something in his heart.
From the perspective of the employer, there is nothing wrong with proposing this condition.
Huimin Mobility has more than one million bicycles placed on the roadsides in cities, weathered by wind and rain, and losing value all the time.
On the other hand, they are fighting a subsidy war with competitors such as Baimo and Xiaolan, and ride for free, which is to make a profit at a loss.
When will this kind of life without income end?
Well, if you want a valuation of US$3 billion, then you have to make a commitment to me.
Either end this war and win the final victory;
Either the revenue can be balanced and the business model can be sustained.
Is this condition too much? It's very reasonable.
Huimin Travel is no better than Ruixiang Group. It burns too much money and has no other pillar income.
The venture capitalists are all talented people, and they immediately grasped the three-inch point of Huimin's travel.
From Zhang Yida's perspective, it is difficult to achieve the two conditions set out in the bet.
Let’s talk about the first one first, occupying 80% of the industry’s market share.
There are currently no less than 3 million shared bicycles on the market, and daily orders are no less than 10 million.
Huimin Bicycle accounts for a little more than 50% in terms of the number of bicycles, and the number of orders is about the same, maintaining a level of 4-5 million orders per day.
It doesn't seem difficult to increase the market share from 50% to 80% in one year.
In fact, this is not the case. Huimin Bicycle can increase its bicycle manufacturing and marketing efforts, and its competitors can also follow suit.
To get rid of many competitors and monopolize 80% of the market is extremely difficult.
The second condition is revenue balance.
Nowadays, in order to grab users and ride orders, major bicycle companies use all kinds of marketing methods.
If it’s free for others and charged for benefiting the people, who will ride your bicycle?
The number of orders has definitely dropped off a cliff, which has given other bicycle brands a chance to breathe.
If the opponent seizes this opportunity, it will make a few turnarounds and raise several rounds of financing.
With the change of attack and defense, Huimin Bicycle was really pushed to the edge of the cliff.
"I can agree to the bet."
Before Zhang Yida could finish speaking, Xu Xiaoming pulled him under the table, and Shen Beipeng also shook his head gently at him.
Zhang Yida felt a little relieved that these two bosses still cared about themselves and could not bear to jump into the "pit of fire" themselves.
He gently nodded and smiled at the two of them, telling them to calm down, and then continued to talk to several management representatives:
"But I have a condition. In addition to the 500 million equity financing, an additional US$1 billion in debt financing will be added."
As soon as he finished speaking, the management representatives headed by SoftBank shook their heads and objected:
“1 billion in debt financing is too much!”
"Yes, what kind of mortgage? Unless, Mr. Zhang, you sign an unlimited joint and several liability guarantee."
"It's too outrageous. We at Warburg Pincus disagree!"
The representatives of several major employers do not agree with this plan, either in your words or in my words.
Zhang Yida raised his palm to signal everyone to be quiet. He continued:
“After this round of financing, I will also hold 38.85% of Huimin Bicycle’s equity, worth US$1.36 billion;
The option pool held by management still has 4.57% of the stock price, worth US$160 million.
The management and I used all the equity we hold in Yimin Travel to guarantee this debt financing."
Zhang Yida's determination moved the management representatives present.
But from the perspective of the company's interests, this is not considered insurance.
If Yimin Travel collapses, the equity will be worthless.
"Mr. Zhang, if you use all your personal property to guarantee this huge debt financing of US$1 billion, SoftBank can provide half of the debt financing share."
SoftBank investment representatives proposed a plan that they thought was insurance.
"That's right, if Mr. Zhang uses all his personal property as a guarantee, we at Warburg Pincus will provide US$200 million for this financing."
Warburg Pincus gave the SoftBank representative an appreciative look. This plan is good and he likes it.
“GIC can offer US$150 million!”
"Silver Lake Capital can offer $150 million!"
Representatives of GIC and Silver Lake Capital also expressed their respective positions.
“It’s Yimin Travel Group that raises funds, why should Yida be the one to take care of it?
Yida only occupies 45.33% of the shares of Yimin Travel Group before financing, and the company does not belong to him alone. This is unfair!"
Xu Xiaoming couldn't help it anymore. Looking at these ugly management representatives, he jumped out and "speak for justice."
"That's right, then the old shareholders of Yimin Travel Group should also bear part of the responsibility.
Fair and just, very reasonable!”
The SoftBank management representative laughed. He was laughing at the other party's overestimation of capabilities.
Isn’t it good for the founders and management team to shoulder their responsibilities? If you, a venture capital institution, want to jump in and join in the fun, then we can arrange it together.
Xu Xiaoming stopped talking. It is common for the founding management team and venture capital institutions to bet on performance.
Venture capital investors that enter early will generally not be involved in this kind of betting, because venture capital institutions are just fund managers and have to account for the investors behind them.
“Let’s see! After this round of equity financing, don’t Yida and the option pool have a total of shares worth US$1.52 billion?
Mortgage at a 50% discount and get debt financing of US$760 million!
There is no need or qualification to involve other companies in the matter of Yimin Travel Group."
Shen Beipeng wanted to help Zhang Yida find a way out, so he suggested this.
"50% off, that's a bit high! I think 30% off is more reasonable.
Mr. Zhang, why don’t you raise US$450 million? Just use the equity of Yimin Travel Group as collateral.”
The SoftBank investment representative was unmoved by Shen Beipeng's words and offered his own price.
At this point in the financing process, everyone knew that nothing could be done.
Of course, even if Zhang Yida reins in the situation, the representatives of the major employers will not push him too far.
"That's good. The share of debt financing of US$1 billion remains unchanged, of which US$450 million is guaranteed by me and the company's management with the equity of Yimin Travel;
The other US$550 million is guaranteed by my personal property."
Several management representatives thought about it and expressed their opinions one after another:
"Okay! Just follow this plan!"
"Good idea, this plan is acceptable!"
"Okay, then all of us can accept it."
Zhang Yida saw all the representatives from the major capital companies smiling, and his heart was clear: the world is bustling with people, and everyone is here for profit.
Isn't it the most vivid scene at this moment?
Most venture capital institutions provide icing on the cake, but few provide help when needed.
“Since the management and the B+ investors are betting against each other, let’s also talk about the management incentives for completing the betting!
Within one year, if the performance bet is completed, investors in this round will give half of their equity to the management as a reward for completing the performance."
Zhang Yida opened his fangs and refused to fight back when he was beaten. This was not his style.
“That’s a lot! Half that’s $250 million in equity, probably more given the rising valuation.
Equity incentives of up to $20 million.”
The people who invest in SoftBank are very smart. If Zhang Yida completes the bet, the shares will be reduced by half.
I definitely can't agree to Zhang Yida's conditions and are desperately trying to lower the price.
"Yes, US$20 million in equity incentives is quite a lot. In China, everyone can have freedom of wealth."
Warburg Pincus representatives also objected.
"Can't the employer take all the benefits? It's hard for me to do anything with this little money!
There is an old saying in China that goes: If you are reluctant to let go of your children, you will not be able to trap the wolf.
With sufficient equity incentives, I think the management team will be more motivated to achieve performance goals.
If Huimin Bicycle establishes its absolute dominance, I think it will be beneficial to everyone here."
There is nothing wrong with what Zhang Yida said. Venture capital institutions actually do not want Huimin Bicycle to fail.
If it fails, it will be of no benefit to anyone. Even the shares held by venture capital institutions will be worthless.
Debt financing is guaranteed by Zhang Yida, so it will not be wasted.
The equity financing part is miserable, there is no guarantee, you bear the risk at your own risk.
"Then add some more! $30 million!"
The SoftBank investment representative thought for a while and then increased the price.
Just this little, Zhang Yida would not agree.
Zhang Yida personally guaranteed US$550 million in debt financing for the company's development.
If Huimin does not develop smoothly in the future and fails to repay the loan, Zhang Yida will be responsible for the loan.
"Then let's just raise US$450 million in debt financing, and I won't personally guarantee the company."
The benefits are not proportional to the effort, so Zhang Yida is ready to make a move to make progress by retreating.
"How can that be done? Mr. Zhang, didn't we say it right? US$1 billion in debt financing.
Why are you backing out now? No, no, you can’t be a man without keeping your word.”
Such a large amount of funds is enough to defeat all opponents.
Of course SoftBank is happy to see the results, but what if it loses US$550 million and the business is not completed?
SoftBank neither wants to suffer losses from the bet, but also wants Zhang Yida to successfully complete the bet.
"Then if you increase the equity incentive, I want US$240 million."
Zhang Yida also took a step back and asked for US$10 million less.
Several parties argued for a long time, one side reduced the amount and the other increased it. In the process, several major venture capital investors went to seek instructions from their superiors.
Finally, the equity incentive for completing the bet was determined - US$120 million.
Approximately 3.43% of the company’s total shares.
It is equivalent to Zhang Yida and the management completing the bet within one year. The B+ round investors must each transfer 24% of their equity to Zhang Yida and the management for free.
If the gambling conditions are not fulfilled, the founders and management team will compensate the B+ investors with equity based on the pre-investment valuation of US$2 billion in this round of financing.
Approximately 5.71% of the company’s total shares.
Regarding this point, Zhang Yida did not argue too much.
It is the uncle who pays the money. If you want absolute fairness, it is impossible.
Then several parties started a fierce debate over the interest rate and term of debt financing, and the repayment method.
“The loan term is three years, with one-time repayment of principal and interest upon maturity, and an annual interest rate of 4%.
This is my bottom line!"
Zhang Yida refused to give in, and became very knowledgeable in debt financing. An interest rate of one point is equivalent to US$10 million in interest per year.
There is also knowledge about the repayment method. The intention is to repay the loan in one lump sum when it is due, so that the capital utilization rate is the greatest.
"Equal payments of principal and interest" and "pay interest every month and repay the principal when due" will put a lot of pressure on business operations.
"We agree in principle with the three-year loan term. However, the repayment method cannot be a one-time repayment of principal and interest. It must be changed to monthly interest payments and principal repayment upon maturity.
The interest rate is too low, and the most preferential annualized interest rate for Yimin Travel is 8%.”
SoftBank's investment representative also refused to let go. The interests involved were huge and he had to be responsible for the company.
The negotiations were deadlocked for a long time, and finally each side gave in. The employer lowered the annual interest rate on the loan to 6%, and Zhang Yida agreed to the borrowing method of "paying interest monthly and repaying the principal upon maturity".
After all the agreements were drafted, several parties signed the "Yimin Travel B+ Series Equity Financing Agreement", "Yimin Travel US$1 Billion Debt Financing Agreement", "Performance Gambling Agreement", "Debt Financing Guarantee Agreement"... etc.
Waiting for more than a dozen agreements, large and small.
With this financing, Yimin Travel will receive an equity financing of US$500 million, a financing of US$1 billion, and a total of US$1.5 billion in joint equity and debt financing.
Among them, SoftBank invested US$250 million in equity investments and US$500 million in debt loans;
Warburg Pincus invested US$100 million in equity and US$200 million in debt loans;
Silver Lake Capital invested US$75 million in equity and US$150 million in debt loans;
GIC has an equity investment of US$75 million and a debt loan of US$150 million.
Equity changes to:
Zhang Yida:38.85%
Option pool:4.57%
Huayi Capital: 2.29%
Blackshirt Capital: 11.43%
Zhenke Fund:2.85%
Jinsha River Venture Capital: 5.72%
Matrix Global:5.72%
Penguin Industry Fund: 4.77%
Gaoling Capital:2.37%
Qiming Venture Partners:2.37%
GGV Capital:2.37%
Didi Chuxing: 2.37%
SoftBank Investment: 7.14%
Warburg Pincus:2.86%
Silver Lake Capital: 2.14%
GIC Sovereign Wealth Fund: 2.14%
Because Zhang Yida holds all B shares, and each share has 10 voting rights, he still controls 86.2% of the company's voting rights.