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Chapter 561 0549 [The American version of WeChat also has shares held by Chen Guiliang]

When Twitter was raising its Series A funding, Chen Guiliang himself was in dire need of money, so he was unable to participate.

He wanted to participate in Twitter's Series B funding round, when the valuation wasn't actually high, only $2.15 million pre-money. But they wouldn't let him get involved, because too many venture capital firms were eyeing Twitter.

At the time, besides the lead investor, there were three other major investors participating, along with angel investors and Series A investors. They also needed to reserve enough shares for the founders for the next round of financing, so the number of shares available for allocation was very limited. If you weren't in that circle, even if you had money, you couldn't invest.

He missed Twitter, but Chen Guiliang didn't miss WhatsApp!

This thing, similar to WeChat in the US, wouldn't have received $800 million in venture capital from Sequoia Capital until 2011 if it had followed a normal development path. But Chen Guiliang invested directly in 2010.

Chen Guiliang wanted to invest more, but the founder refused, only accepting a $500 million investment to alleviate the pressure, and giving Chen Guiliang a 15% stake in Xiyi Capital.

Last year, as WhatsApp began to take off, Sequoia Capital immediately entered the market with US dollars, and Chen Guiliang's Xiyi Capital naturally followed suit.

Whats's current shareholding structure is: 65% for the founding team, 20% for Chen Guiliang, and 15% for Sequoia Capital.

WhatsApp is a major asset for HarmonyOS's expansion into Europe and America. As the second-largest shareholder, Chen Guiliang could easily persuade WhatsApp to develop a HarmonyOS version of the app.

However, at this point, Whats was just one of many contenders vying for supremacy.

iMessage has the most users and is deeply integrated with Apple phones, so all Apple users use iMessage by default.

WhatsApp ranks second in terms of user numbers, second only to Apple's iMessage.

Third on the list is Facebook Messenger (a Facebook product), which is deeply integrated with Facebook accounts.

In addition, there is BlackBerry Messenger (deeply integrated with BlackBerry phones) and Kik Messenger (very popular among North American teenagers).

And Google Talk (Hangouts), Viber, Line, AIM (the rapidly declining former leader)...

Then there's Skype, which is the top choice for cross-device video calls and long-distance voice calls for users in Europe and America. However, its functionality is very limited; it's purely for making calls.

……

Whats Remote Board Meetings

In addition to Chen Guiliang, the two founders of Whats and a director appointed by Sequoia Capital also participated in the meeting.

Founder Jane Koum said, "Based on Mr. Chen's development strategy and referencing WeChat's features, Whats has grown rapidly over the past year. Our registered users are approaching 100 million, surpassing many competitors. Furthermore, the rate of new user acquisition is increasing rapidly, and I expect to exceed 150 million users by the end of December. Thank you very much for Mr. Chen's advice!"

Chen Guiliang said, "We can consider making it free."

Jane Koom said, "If it's completely free, we have to do another round of funding."

A Sequoia representative suggested, "Raising funds now would be too risky. Let's wait until we reach 2 million users before considering it. By then, our valuation can increase significantly."

Chen Guiliang said, "I can provide debt financing, and at an extremely low interest rate. The condition is that Whats immediately develops a HarmonyOS version, and that this debt financing will automatically become my follow-up investment in the next round of financing. With this money, Whats can be completely free now, which will allow us to reach 2 million users at least two months ahead of schedule."

The two founders were sitting together at that moment. After discussing things privately, they quickly returned to the camera.

Jane Combe said, "We agree. What about Sequoia's opinion?"

The Sequoia representative said, "Agreed."

The second-largest WeChat-like product in Europe and America at that time had only about 30 employees, and WhatsApp was only available for Android; they hadn't even launched an Apple version yet—mainly because Apple users use iMessage by default.

With the debt financing provided by Chen Guiliang, Whats could not only announce its free launch, but also recruit more programmers to develop Apple and HarmonyOS versions of the app.

After the remote board meeting concluded, Chen Guiliang immediately dispatched personnel to the United States to negotiate and sign the agreement.

Chen Guiliang has WeChat in China, and now he's also developing a "WeChat for Europe and America." He'll make a fortune just from these two things.

Tencent is also pursuing similar expansion; the parent company of the "Korean version of WeChat" accepted Tencent's investment last year. Tencent has also invested in a similar company in the United States, but that company's growth has lagged behind and it has gradually fallen behind in the competition.

……

Just after signing the low-interest debt financing agreement, Jane Koom, the founder of Whats, initiated another video conference.

Jane Koum said excitedly, "Zuckerberg personally emailed me saying that Facebook wants to acquire our Whats."

"Don't agree!"

Chen Guiliang and the Sequoia Capital representative shouted at the same time.

Chen Guiliang added, "For the next year, do not agree to any acquisition offer, no matter who comes along!"

A representative from Sequoia Capital stated, "We can make initial contact now, but we need to be patient and take our time. The negotiations can last for more than a year."

When WhatsApp reaches 2 million users, it can then proceed with its Series C funding round, likely valuing the company at $15 billion post-money. And this is just the beginning!
If Facebook wants to acquire WhatsApp, it will definitely have to take a hefty price tag.

Chen Guiliang alone cannot stop the sale of WhatsApp, but he can profit handsomely from it and also acquire Facebook shares. Facebook simply doesn't have enough cash to acquire it; it will inevitably have to exchange Facebook stock for the shares.

In another timeline, just 15 months later, Facebook acquired WhatsApp for $190 billion!
This transaction price represented 11% of Facebook's market capitalization at the time.

Moreover, Facebook could only come up with $40 billion in cash, and the rest was paid off with Facebook stock. The founder of WhatsApp also took the opportunity to join Facebook's board of directors.

Chen Guiliang was not only able to take the opportunity to acquire Facebook stock, but also to demand that Facebook launch a HarmonyOS version during negotiations.

Such a large-scale, high-priced transaction required lengthy negotiations.

After the video conference ended, the Sequoia representative even called Chen Guiliang privately: "Mr. Chen, we need to reach a verbal agreement. Whats' Series C funding round does not accept third parties; only our two existing shareholders can participate in the follow-on investment!"

“That’s what I was thinking too,” Chen Guiliang said with a smile.

Nobody knows what Zuckerberg was thinking, but he actually emailed the founder of WhatsApp, revealing Facebook's intention to acquire WhatsApp. This move is really a bit baffling.

But that's exactly what Zuckerberg did, and he did it in another timeline as well.

With such a large buyer eyeing Whats, Chen Guiliang and Sequoia Capital are definitely not going to allow any third party to participate in the next round of financing!
During the phone call, Chen Guiliang and Sequoia Capital even tentatively agreed on their respective proportions in the next round of financing. This involved jointly investing more, acquiring more Whats shares, and incidentally raising Whats' valuation even higher.

Since they don't want third-party financing, Chen Guiliang and Sequoia Capital should begin negotiations for Whats' next round of financing.

But the two founders of Whats aren't fools. They won't accept any more investment until the debt financing provided by Chen Guiliang is almost exhausted. They will drag things out as much as possible to increase user numbers and valuation, forcing Chen Guiliang and Sequoia Capital to pay more money.

Everyone has their own plans.

Since everyone sees Facebook as a sucker, they all band together to rip off Zuckerberg.

……

Chen Guiliang sat in front of the computer, staring at the investment projects from the past two or three years.

Some were invested in by ByteDance, some by Youke, and some by Xiyi Capital, a joint venture between ByteDance and Youke.

Only foreign companies are mentioned.

Earlier this year, Xiyi Capital invested $60 in Stripe's (electronic payment) Series A funding round, acquiring a 6% stake. The round was led by PayPal founder Guiliang Chen, with participation from Sequoia Capital.

Chen Guiliang wanted to invest more, but there was nothing he could do; the founder of PayPal was blocking him. Everyone had to be mindful of his feelings, because without PayPal's support, Stripe might not have been able to succeed.

Last March, ByteDance participated in Twilio's (cloud communications) Series B funding round, investing $5 million for an 8% stake.

In February of last year, Xiyi Capital participated in Uber's Series A funding round, investing $3 million for a 6% stake.

Last May, Xiyi Capital participated in MongoDB's (database) Series B funding round, investing $10 million for a 9.5% stake.

Last June, ByteDance participated in Spotify's Series B funding round, acquiring a 5% stake.

Last October, Youke participated in Unity Technologies' Series B funding round, acquiring an 11.2% stake.

In April of this year, ByteDance invested in Airtable's seed round, acquiring a 15% stake.

In June of this year...

These are all companies that Chen Guiliang remembers, but to be honest, not all of them will necessarily succeed.

Because Chen Guiliang's investment changed the equity structure of those companies, the background resources they possessed were also different.

The most typical example is Uber. If Chen Guiliang had invested too much, other venture capitalists might have switched to similar companies. Without the support of a giant like Benchmark Capital, it's questionable whether Uber could have grown into a major player.

Chen Guiliang will only increase his investment in companies that perform well in the future.

At the end of October, although Huawei, ZTE, and Coolpad were not very keen on the idea, they still agreed to send representatives with HarmonyOS to lobby major European and American companies.

HarmonyOS Technology was the main force behind the negotiations, while the other three companies sent representatives to accompany them and made some promises during the negotiations that would not harm their own interests.

This cannot be resolved in a day or two.

Just then, the Forbes China Rich List was finally released.

Chen Guiliang topped the list with assets of 1300 billion yuan.

Excluding Chen Guiliang's assets in ByteDance and HarmonyOS, Forbes' valuation of Youke is probably less than 200 billion yuan.

Forbes has always done this.

Take this year's Hurun Rich List as an example. The Hurun Rich List estimates Lao Zong's assets at 800 billion yuan. Forbes, however, only estimates 630 billion yuan.

Another businessman named Yan Bin is even more outrageous. He primarily does business in Hong Kong and Southeast Asia (exclusively distributing Red Bull China, and also investing in sports, aviation, energy, and chemicals). Hurun's statistics show his assets at 500 billion yuan, while Forbes' figures only show 69.3 billion yuan—not even a fraction of Hurun's!
For any Chinese company not listed in the US or Hong Kong, it's not unreasonable for Forbes to value it by 10-20 billion yuan less than Hurun. In fact, a difference of 30-40 billion yuan is quite normal.

Even so, when the Forbes China Rich List was released, the staggering 1300 billion yuan in assets still shocked the entire nation.

Because the second-ranked Mr. Zong only has 630 billion on the Forbes list.

Li Yanhong, who ranks third, has a net worth of only 510 billion on the Forbes list.

Chen Guiliang's personal wealth is more than the combined wealth of the second and third place winners.

At this very moment, ByteDance Music quietly participated in Spotify's Series C funding round, investing an additional $5000 million as a Series B shareholder, thus acquiring a total of 7.2% of the shares.

HarmonyOS, on the other hand, invested in Byte Music, becoming a shareholder of Byte Music.

Spotify's Series C funding round included a commitment to develop a HarmonyOS version of its app within three months.

Spotify is a music app that has become the number one app in Europe this year and is actively expanding into the US market. Despite significant losses, it is viewed favorably by many institutions, with Series C investors including Goldman Sachs, Fidelity, and Coca-Cola.

This deal is not only for the overseas expansion of the HarmonyOS system, but more importantly for the development of ByteDance Music.

Byte Music will negotiate with the three major international record labels as a shareholder of Spotify.

With this status, the three major record labels became more proactive, willing to establish a long-term partnership with Byte Music, and made greater concessions when negotiating exclusive distribution rights in mainland China.

"Boss, CCTV's 'Dialogue' program wants to invite you to appear on their show. This is the fifth time they've invited you this year. As soon as the Forbes Rich List came out, they called for several days in a row."

"Say yes. We'll record it when I get back from Korea."

(End of this chapter)