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

Chapter 820 Why should I use my own money to make up for it again?
When Luo Yang saw the project name "Dianping.com", he suddenly felt a sense of temporal displacement.

Suddenly, the image of Maoyan Ticketing Website popped into my mind, along with the recollections of MiTuan, the company that founded Maoyan and acquired Dianping.com.

The intricate relationships between the three are quite complex.

"Dianping.com was founded in Shanghai in April 2003. Its founder, Zhang Tao, graduated from the Wharton School of the University of Pennsylvania in the United States."

Jiang Linghan began her presentation on the second project: "This website is currently one of the leading local lifestyle and consumer platforms in China, and also one of the earliest independent third-party consumer review websites established globally. It primarily provides users with various lifestyle information services, and currently has branches throughout major cities in China."

"Eh?"

Upon hearing this news, Luo Yang muttered in surprise, "It's actually an internet company founded in Shanghai? Isn't this supposed to be a wasteland for internet industry development?"

Fortunately, he only muttered it softly, otherwise such a thought would have been laughable.

Even in the desert there are oases.

The term "desert" is only relative; it does not mean that nothing grows at all.

"Since its establishment in 2003, Dianping.com has gradually emerged in the online fields of catering, group buying, and mobile applications with its continuous innovation in products and services. In 2010, Dianping launched iPhone and Android clients and established branches in Shenzhen and Tianjin in the same year, beginning its nationwide expansion."

Jiang Linghan paused for a moment after hearing Luo Yang mutter softly.

However, upon realizing that his boss was merely muttering and not intending to interrupt, Jiang Linghan continued with his report.

"With the rapid development of the mobile internet, Dianping has been very active in the past two years."

Jiang Linghan earnestly introduced Dianping.com to his superiors: "In the past two years, the website has launched mobile apps on platforms such as Windows Phone and iPad, cooperated with major telecom operators, and continuously expanded its user base, breaking through the ten million user mark. In particular, it has achieved astonishing growth in the number of mobile app users, from several million in 2010 to more than 2000 million in the first half of this year, a growth rate of more than 10 times."

In terms of product innovation, Dianping has continuously launched services such as "Nearby Quick Search" and "Dianping Group Buying," and this year launched its brand-new V5.0 client, which not only improved the user experience but also promoted the development of mobile internet business.

"Since 2011, Dianping has occupied an important position in the mobile internet field, receiving high praise from major media outlets and institutions, and becoming a leading company in the mobile internet industry. Its LBS (Location-Based Services) platform and mobile check-in function are also very popular among users."

As the presentation progressed, Luo Yang gained a deeper understanding of Dianping.com.

"Team Leader Jiang, please pause for a moment."

After listening to the company's introduction, Luo Yang interrupted the report.

He looked at Song Wan and said, "President Song, it's understandable that you wanted to acquire Damai.cn, since its main business is online ticketing, and the idea that it could be a growth engine for Guobao Films is plausible. But Dianping.com..."

There's no need to say anything more.

As Jiang Linghan mentioned earlier, although this website does well in online sectors such as catering, group buying, and mobile applications, it has absolutely nothing to do with ticketing.

MiTuan later acquired Dianping.com, not primarily for Maoyan, but for its core food delivery business.

More importantly, people are drawn to its potential on local lifestyle consumption platforms.

"Mr. Luo, we're eyeing Dianping.com, but it could also just be for investment purposes."

Song Wan smiled and said, "Actually, it's not just us who are optimistic about this internet company; many institutions are also optimistic about it."

At this point, she gestured for Jiang Linghan to continue.

"To date, Dianping.com has undergone four rounds of financing."

Jiang Linghan opened the second part of the PPT and began to report to Luo Yang: "The first round of financing was in January 2006, and the investor was Sequoia Capital."

Sequoia Capital needs no introduction; it's a long-established and well-known investment institution in China.

Now there are many collaborations with Luo Yang's businesses, and the relationship between the head of the family, Shen Nanpeng, and Luo Yang is also quite good.

"The first round of financing was 100 million yuan. Although the investment amount was not large, it was enough for Dianping.com, which was still in the accumulation stage."

Jiang Linghan, stepping away from the PowerPoint presentation, remarked, "Judging from the current results, Sequoia Capital and Dianping.com established a tacit understanding that user-generated content in Web 2.0 websites requires careful cultivation and nurturing of core users. Any short-sighted approach could directly destroy the website. Therefore, after this round of financing, Sequoia Capital has been quite lenient in its constraints on Dianping.com in all aspects."

The second group leader's thinking is like a husky; if you loosen the reins even slightly, it will run wild.

"Not only Sequoia Capital, but also Mr. Mi Qun, the Greater China Investment and M&A Director of Google who was later in charge of the investment projects, gave Dianping.com high recognition."

Jiang Linghan spoke eloquently: "He believes that Dianping.com has explored a successful operating model that relies on user-contributed content. High-quality content, highly sticky services, Dianping.com's powerful POI data operation, and an excellent and dedicated team are the most valuable assets that Google valued most when it invested in Dianping.com."

"cough cough"

Seeing her subordinates start to improvise, Song Wan quickly interrupted with a cough and reminded them, "Continue."

"Dianping.com's second round of financing was in May 2007."

Jiang Linghan quickly suppressed his exclamation and continued his report: "The investor is Google, and the funding amount is 400 million US dollars."

"Wait a moment!"

Luo Yang interrupted the report again: "How many shares did Dianping.com release in the first two rounds, and what were the valuations in the first two rounds? I don't recall mentioning this in the report just now, did I?"

"Chairman, Dianping.com has not released any information about this."

Jiang Linghan immediately replied: "Moreover, regarding the valuation during the first round of financing, due to time constraints, we cannot find relevant reference data at the moment. However, based on the information released after the second round of financing, we estimate that the valuation at that time was around 2000 million US dollars."

"2000 million US dollars?"

Luo Yang stroked his chin thoughtfully and said, "The second round of financing was 400 million US dollars. According to this calculation, wouldn't Google have taken about 20% of the equity?"

"Isn't this normal?" Song Wan explained, "In the past few years, internet startups have always offered no less than 20% equity in each of their first three rounds of financing. If it's less than that, investment institutions won't be as interested."

After recalling his own shared bicycle project, which was similar, Luo Yang stopped asking questions and gestured for Jiang Linghan to continue.

The third round of financing began in April 2011.

Jiang Linghan was interrupted several times during his report, and this time he spoke much slower: "The investors are Trustbridge Partners, Sequoia Capital, Qiming Venture Partners, and Lightspeed Venture Partners. The four venture capital firms have jointly invested more than $1 million, which is the largest financing in the domestic group-buying industry to date."

When she finished her report, she added, "Lightspeed Venture Partners was able to get involved this time because of Mi Qun, the managing director of the firm. He had previously invested in Dianping.com when he was at Google, so he had a good relationship with the founder, Zhang Tao."

"Wow, the third round of financing has reached 1 million US dollars."

Luo Yang couldn't help but click his tongue and say, "Even if we calculate based on releasing 25% of the equity, Dianping.com's valuation reached 400 million US dollars last year, which would be more than 2 billion RMB in local currency, wouldn't it?"

There are some special reasons behind this.

Song Wan picked up where Luo Yang left off, saying, "Last year coincided with the fierce competition among thousands of group-buying platforms in the domestic market. It was a time when the capital market was frantically pouring into this trend. Everyone was burning money like crazy, because if they didn't, they would die. So I reckon that Dianping.com offered more than 25% of its equity at this critical moment, and the valuation seems a bit inflated now."

"I've heard about last year's group-buying war."

After listening to Song Wan's explanation, Luo Yang nodded and said, "During that period, capital really went crazy. Look at how many group-buying websites are left on the market now?"

"Since the launch of the first group-buying website in China in early 2010, the number of group-buying websites in China has exceeded 5000 by August 2011. Among them are major portal websites as well as newly established group-buying websites. Platform-based Internet companies such as Sina, Tencent, Kaixin.com, and Renren.com have also entered the group-buying field one after another. Group buying has almost become a standard feature of Internet companies."

Song Wan followed up with her comment: "At that time, the entire internet industry was expecting the high-profit myth created by Groupon to be replicated in China, so the capital world was also very crazy. That's why I said that Dianping's valuation last year was very inflated. If we squeeze it out, it will be reduced by more than half!"

Once this topic was brought up, others in the meeting room also chimed in, sharing their own opinions.

At that time, in order to compete for the domestic group-buying market, various group-buying websites began to compete in disguised ways.

Lashou, Meituan, Wowo, 24juan, Manzuotuan, Gaopeng.com and other well-known domestic group-buying websites have started round after round of financing competitions. Advertising wars, tug-of-wars and positional battles have spread to the daily lives of the general public.

The low entry barriers have undoubtedly accelerated the development of the group-buying industry, but at the same time, they have inevitably led to vicious competition and rapid reshuffling in the industry.

Initially, group-buying websites needed a large number of sales staff to educate merchants about group-buying. Soon after, almost every merchant was receiving sales staff from several or dozens of group-buying websites.

Merchants quickly reversed their position by using websites to promote themselves and began to weigh which group-buying website would be more advantageous for them. In order to compete for customers, some group-buying websites had to lower their bottom line for merchants again and again.

In this game, both sides must ensure their own profit margins. As a result, consumers become the ultimate payers in this profit struggle. However, consumers who are dissatisfied with their single-purchase experience may never buy into the group-buying model again.

As a result, the industry's development reached a bottleneck, venture capital began to shift its focus to other areas, and the consequences of a broken capital chain are self-evident.

Of the more than 5000 group-buying websites that emerged before the "Group Buying War," only a fraction survived. Even those that did survive were severely weakened and ineffective.

Ultimately, only four or five companies will survive and thrive.
"So we'll have to wait and see what happens with Dianping's fourth round of financing."

Seeing that everyone was getting into the conversation, Song Wan quickly steered the discussion back on track and said to Jiang Linghan, "Report the fourth round of financing to President Luo. This will reveal the irregularities that occurred during the third round of financing."

"Dianping.com completed its fourth round of financing in the first half of this year, raising a total of $6000 million."

As Jiang Linghan flipped through the presentation slides, he said, "This round of investment was led by Sequoia Capital and several other institutions. Dianping.com stated that it has secured over $6000 million in investment at a valuation no lower than the previous round. This funding will continue to be used for mobile internet, group-buying business, and new business expansion. This is Dianping.com's fourth round of financing."

Perhaps it was due to his personality, or perhaps it was the need of the situation, but when he got to this point, the group leader of the second group added another point.

"The website's own statement is already quite modest. After the fourth round of financing, Google even claimed that Dianping.com's valuation could reach 10 billion US dollars."

Jiang Linghan said jokingly, "It's only been a year since the last round of financing of 100 million US dollars, and they're already impatiently raising another 60 million US dollars. Sequoia Capital hasn't even said anything, but Google is jumping in. They're afraid that the shares they hold will shrink!"

"President Song, what should we do about this situation?"

Since Dianping.com completed its fourth round of financing in the first half of this year, raising 6000 million yuan, this money should last for some time, barring any special events like the group-buying war.

In other words, they will not be seeking external financing in the short term.

"I want to try to buy a stake in Dianping from Google."

Song Wan told Luo Yang about the plan she had already come up with: "They invested 400 million US dollars in the second round, holding at least 20% of the shares. However, the collapse of the group-buying market last year and the hasty exit of capital gave us a glimmer of hope. As long as Google is willing to leave, we may be able to acquire all or part of Dianping's shares from them at a relatively low cost."

"Your relatively low price can't be too low, can it?"

Luo Yang started to worry about his own pockets again: "You know, they only raised 6000 million US dollars this year, so the corresponding shares they released shouldn't exceed 20%, right?"

"The fourth round of financing of 6000 million US dollars is too obvious."

Song Wan pursed her lips and said, "Everyone can see that Sequoia Capital doesn't want their previous investments to go down the drain, so they asked me to come and see. Google's willingness to leave should be quite high now. We can acquire their equity for around 2000 to 3000 million US dollars."

"So, in the end, you still have faith in Dianping.com, right?"

Luo Yang smiled and said, "Or are you thinking that after investing in Dianping.com, you'll use that platform to create a ticketing platform to serve your Guobao Films?"

Although he was joking with Song Wan, he knew in his heart that the market value of Dianping.com would indeed skyrocket in a few years.

Investing 20 to 30 million US dollars now will yield at least ten times the return in two or three years.

But why?
These unplanned funds will all be used from his personal account.

Even if you make a profit, it ends up in the company's account.

Luo Yang isn't without other investment channels.

(End of this chapter)