Reborn, back to a small county town to become a wealthy family

Chapter 771 Cooperation and Equity Distribution

"No, no, no"

Vic Cohen waved his hand: "Mr. Luo, your explanation just now was enough. I think we can talk about the second round of financing for your project in China. If IDG can get a share, I believe it will further facilitate our subsequent cooperation."

After listening to Luo Yang's explanation of the profit model, the old man's attitude changed immediately.

He suddenly became interested in the market in China.

They even hoped to get a share of the profits in the second round of financing at the end of August.

A good calculation.

Fortunately, Luo Yang had already reached an agreement with Shen Nanpeng, which made Sequoia Capital willing to give up 5% of its equity in this round of financing.

"Oh?"

Luo Yang couldn't just agree to it so easily.

He first expressed his doubts in a low voice, and then smiled faintly and said, "Mr. Cohen, our shared bicycle project in China is at a critical stage of development, so we welcome all capable institutions to participate in the investment. However, being capable is not limited to having sufficient funds."

Everyone understands this principle: investing in promising startups is not just about having money; it also requires strength and the ability to help the company accelerate its expansion at a certain stage.

"For example, Tencent has a significant influence in South China, and if our project wants to expand successfully in the South China market, we must choose to cooperate with them."

"For example, we chose an angel investor this time. It was because of his help that we were able to secure funding from 26 985 and 211 universities in the capital in a very short time. Moreover, he will provide certain assistance for the future development of our project in the capital and surrounding areas."

Sequoia Capital needs no introduction; their strength speaks for itself. Not to mention, they invested in a bike-sharing project in its first round of funding, even though it wasn't considered a promising venture at the time.

Luo Yang gave two examples to tell Vic Cohen that they welcome powerful investment institutions to join, but only if they are useful to them.

"Haha, Mr. Luo, I like straightforward people."

Facing Luo Yang's directness, Vic Cohen replied with a smile, "I am very interested in what you mentioned about building an ecosystem for bike-sharing, so I hope to reach a comprehensive cooperation agreement with you."

Comprehensive cooperation means no longer just collaboration when starting a new company in the United States, but also investment in markets that have already been developed in China.

“Mr. Luo, although we have only known each other for a short time, I already recognize you as a business genius.”

Vic Cohen smiled and said to Luo Yang, "Therefore I am certain of one thing: before you came to the United States, you must have reached some agreements with Mr. Shen Nanpeng of Sequoia Capital in private."

That old fox has such a keen sense of smell.

"I also believe that the partners you are seeking cooperation with are not necessarily IDG."

Before Luo Yang could say anything, Vic Cohen continued, "Mr. Luo, cooperate with us. Trust me, IDG will offer the utmost sincerity."

"Oh?"

This time, the initiative had returned to Luo Yang's hands, so he casually uttered a question, and then said, "Mr. Cohen, we also came with the utmost sincerity, otherwise we wouldn't have made your IDG our first stop. So what do you mean by the utmost sincerity?"

You can't just make empty promises, can you?

First, show some sincerity.

"First of all, we need to consider the market share of this project in China, and we hope to be included in the second round of financing."

Now that the negotiations have reached this point, let's get down to business.

Vic Cohen looked at Luo Yang seriously and said, "And obtain no less than 10% of the shares."

"10%?"

Upon hearing this number, Luo Yang shook his head repeatedly: "No, no, Mr. Cohen, we only gave up 25% of the equity in the second round of financing. We still need to share it with Sequoia Capital, Hillhouse Capital, Tencent and other investment institutions and angel investors. If IDG takes 10% at once, the others will not be able to balance it out."

In fact, Luo Yang planned to release 30% of the shares in the second round, but he will definitely lower the figure now.

At this point, the game comes down to who can hold out the longest.

"Mr. Luo, Hillhouse Capital actually overlaps with us, doesn't it?"

Vic Cohen wasn't so easily fooled. He immediately picked up where Luo Yang left off and retorted, "Just like you said, the institutions and individuals who make it into the second round of financing are all those who can help the bike-sharing project in the next expansion phase. Hillhouse Capital's resources largely overlap with Sequoia Capital's, so the reason you kept this company in the pipeline is largely because you considered it as a backup option."

Whose alternative?
The message has been made so clear that the objective is self-evident.

Hillhouse Capital is an alternative to IDG because the two investment institutions have very similar resources and functions.

They can provide sufficient funding, help Luo Yang promote the bike-sharing project in the US and Europe, and assist the company established overseas in raising funds on Wall Street. They can do most of what IDG can do.

According to Vic Cohen, since Luo Yang and IDG failed to reach an agreement, the next partner they will discuss will be Hillhouse Capital.

On this point, Luo Yang made no attempt to hide or conceal anything.

He replied directly to Vic Cohen: "Yes, Mr. Cohen, that's exactly what our company plans. If this trip to Boston doesn't go well, we'll go to Hillhouse Capital to discuss a partnership."

“Mr. Luo, please believe me, Hillhouse Capital has no chance.”

Vic Cohen smiled confidently and said, "They haven't been in contact with you, so they don't understand the potential of this project like I do. Therefore, the terms they can offer will definitely not be better than those from IDG."

The old man had guessed this as well, because if Hillhouse Capital had communicated with Luo Yang like they had just done, they would never have let Luo Yang and his group come to IDG headquarters for negotiations again. They would have already called in senior executives from headquarters to discuss cooperation with Luo Yang.

"Mr. Cohen is very confident."

Luo Yang neither said he believed him nor showed any disbelief. He simply said calmly, "We can discuss the cooperation later. What I want to tell Mr. Cohen now is that a 10% stake is impossible."

"Then 8%."

"Sequoia Capital wants to take 10%, plus your 8%, are you saying that the remaining few companies are splitting the remaining 7% of the equity?"

Luo Yang shook his head repeatedly: "The second round of financing is for shared bikes developing in the Chinese market. We will definitely prioritize the uniqueness of operating in China, so it is impossible to give you 8% equity."

"So, what does Mr. Luo mean?"

Vic Cohen used a feigned retreat to advance, instead asking Luo Yang questions in return.

"At most 5%."

Luo Yang presented the share figures that had been agreed upon long ago, and then added, "Moreover, the prerequisite for acquiring a 5% stake is that we can reach a cooperation agreement and jointly invest in the European and American markets."

Vic Cohen lowered his head in thought.

After a long while, he looked up at Luo Yang and said, "Okay, 5% it is, but when we start the company in the European and American markets, we need to hold at least 40% of the shares."

“Sequoia Capital also wants to hold at least 30% of the shares in the overseas version of the bike-sharing company. According to Mr. Cohen’s suggestion, I, as the founder, can only get 30% of the shares?” Vic Cohen frowned: “According to you, Sequoia Capital wants to take 30% of the shares?”

"Yes."

"But the same problem occurred."

Vic Cohen shrugged and said, "In the US, on Wall Street, IDG's influence is no less than Hillhouse Capital's. Besides, I have the upper hand. If I lose to them under these circumstances, I might as well quit this business."

Vic Cohen's statement wasn't meant to be provocative; rather, it was a statement of the truth.

For the first time, Luo Yang fell into deep thought.

“Mr. Luo, I think IDG needs to show you its sincerity first.”

Seeing Luo Yang hesitate, Vic Cohen immediately added, "For the second round of financing for Shared Bike China, IDG will raise the valuation. Didn't I just shout out a value of 1 million at the conference room door? Then let's raise the valuation of Shared Bike China to 1 million US dollars!"

Wow, he managed to smooth things over; that's impressive.

However, Luo Yang was genuinely tempted.

According to the original estimate, the valuation of this second round of financing should be in the range of 3 million to 3.5 million yuan. Even if Luo Yang presents some good data, including information about conducting pilot projects in Yangshi in advance, the valuation can only reach 4 million yuan at most.

Now Vic Cohen tells him that the valuation could be reported as 1 million US dollars, which, at the current exchange rate, is about 6.7 million US dollars.

If it really succeeds, the information will make headlines in financial news, and the shared bicycle project will definitely become a hot news topic.

But
Is overvaluation really a good thing?
In that instant of inspiration, Luo Yang thought of the other shortlisted companies.

Whether it's Sequoia Capital, Tencent, or Han Dongming, they all find it hard to accept this valuation that has almost doubled.

If they don't acknowledge it, are we supposed to give all 30% of the shares that were released this time to IDG?

What about expanding the market for shared bikes in South China and the capital?
To reiterate: money is important in startup funding, but it's not the only indicator. Sometimes, resources are even more important than money and can be the top priority.

“Mr. Cohen, if the valuation reaches 1 million US dollars, the premium is too high, and it is not a good thing to make things difficult for other institutions.”

After understanding the rationale, Luo Yang frankly stated, "Actually, our internal valuation expectation is only around 4 million RMB, and most institutions, including Sequoia Capital, agree with this figure."

"Hahaha"

Vic Cohen burst into laughter, and after a moment continued, "Mr. Luo, you're too honest. If this were in the United States, let alone a 60% or 70% increase in valuation, even a doubling or tripling would be acceptable to investment institutions as long as the project's prospects are promising enough."

Ha ha
Luo Yang could only sneer inwardly.

Can greedy capital be so generous?

Venture capitalists, in particular, are focused on return on investment. Inflating valuations in the second round of funding does them no good.

In the United States, not suppressing them would be considered a good thing.

"Since you insist, how about this, I'll suggest something else."

Vic Cohen probably knew that Luo Yang wouldn't accept the first suggestion, so he had already prepared a second plan.

He looked at Luo Yang and said, "The shared bike company in China will proceed with the normal financing process. The valuation will be whatever it is. As long as IDG acquires at least 5% of the equity, the investment money will come from this 1 million US dollars. The rest of the money will be used in the US and European markets."

After hearing this suggestion, Luo Yang was really tempted.

Even if this second round of financing can value the company at 4 million, only 2000 million RMB is needed to acquire 5% of the shares.

This amount of money is practically a fraction of a hundred million dollars.

"I have no objection to the way the company in China handled the situation."

Luo Yang thought about it two or three times and nodded after he felt there were no problems. Then he said to Vic Cohen, "Next, let's talk about the cooperation method in the Omega market."

"Mr. Luo, when do you plan to promote the bike-sharing model to the US market?"

Vic Cohen picked up the conversation, saying, "You should know that your project is still stuck in the Chinese market, not even outside of campuses. It will take at least one or two years to develop a complete business model. And the mobile internet wave could come up at any time. At that time, many institutions won't leave their funds sitting still waiting for our cooperation projects."

In this old fox's view, the investment in China was merely a statement made by IDG in order to facilitate cooperation.

Of course, he himself also felt that the project had a very good prospect, and IDG could have purchased more equity in the C and D rounds to enjoy more substantial returns.

However, IDG has a different idea when it comes to the US and European markets.

The company's operational control can be handed over to the co-founded company, and Luo Yang can become the CEO of this company, but the majority of the shares should be held by IDG.

"It won't take that long."

Luo Yang smiled and said, "As long as the funding keeps up, the model can be quickly replicated. In about six months, we will be able to complete the layout in major cities across the country and summarize a complete set of business operation models."

Vic Cohen; "."

"According to the planned schedule, we intend to promote the bike-sharing model to the United States as early as March or April next year."

After thinking for a moment, Luo Yang said, "Perhaps we can do it sooner, because we can learn from China's model and first promote shared bikes on American campuses."

This business thinking is perfectly sound.

Just like Facebook, it was first promoted on American campuses.

"Promoting bike-sharing projects on US campuses also requires certain resources and connections."

Vic Cohen cautioned Luo Yang: "Sequoia Capital, which has localized its operations in China, may not be of much help."

"Is Mr. Cohen reminding me about the equity distribution?"

Luo Yang knew exactly what the old man was thinking, so he smiled and asked, "Then how do you think it would be appropriate to distribute them?"

Vic Cohen stared at Luo Yang for a moment, and then said, "Sequoia Capital will hold a maximum of 15% of the shares. We need to ensure that we have no less than 50% equity. You can allocate the rest yourself."

In other words, Luo Yang can hold a maximum of 35% of the shares.

Of course, Han Dongming was also interested in the equity of this cooperative project. According to his mind, he wanted at least 5%.

If the US market is allocated this way, the European market will certainly follow the same pattern.

Luo Yang immediately fell into deep thought.

(End of this chapter)