Those Years When I Was Forced to Top the Forbes List

Chapter 295 From Series A to Series C

Before one sound had faded, another one arose.

In a large hall, with nearly 20 pairs of eyes, the ever-changing chess game kept everyone on their toes.

Some people even wanted to take out their voice recorders to record it and study it carefully.

Xu Xin glanced at Lei Jun with some surprise, but hadn't said anything yet.

Chen Xuebing raised his eyebrows.

"What, you're coming again? You think I won't include you when I'm betting small? Ten million at the table, you think?"

Lei Jun sold Joyo.com and made a little money. He also has many valuable shares, but he hasn't cashed them out. His cash holdings are definitely less than 100 million yuan.

Lei Jun frowned. A good opportunity was right in front of him, and he didn't want to back down.

"I'm an advisor to Lenovo Capital. I'll ask Lenovo to help me raise the funds, okay?"

"Oh?"

Chen Xuebing was unaware of his identity. After thinking for a moment, he nodded and said, "Okay, but this matter needs to be resolved today. Have Zhu Linan come in person."

Zhu Linan was in charge of the specific affairs of Lenovo's investment and was Liu Chuan's assistant in promoting Lenovo's transformation from IT manufacturing to investment. Liu Chuan called him his chief of staff.

Legend Capital, later renamed Legend Capital, focuses on early-stage venture capital and is wholly controlled by Legend Holdings.

Currently managing approximately 20 billion.

Legend Holdings also has another firm, Hony Capital, which operates in the late-stage private equity sector. It has brought in international institutions such as Temasek and Goldman Sachs. Legend Holdings holds a 40% stake in Hony Capital, and its head is Zhao Linghuan.

Managing 55 billion.

Lenovo Holdings' capital strength should not be underestimated. Although Liu Chuan does not hold a large share, he has very strong control. Both management teams were directly appointed by Liu Chuan.

When Xu Xin heard that Lenovo was coming, he stopped talking and smiled at Lei Jun.

Many hands make light work. Since she no longer has the advantage of being the first to act, it's better for everyone to suffer the loss together than for her to suffer it alone.

Lei Jun was a little embarrassed, unsure how to immediately call Zhu Linan over.

Chen Xuebing smiled.

"Never mind, I'll call it."

He raised his hand and dialed Liu Chuan's number. When the call connected, Liu's voice was still a little hoarse.

"Brother Chen?"

"President Liu is still sleeping."

Chen Xuebing finished speaking with a smile, which surprised everyone present.

Godfather Liu?
Did he know Godfather Liu?

While I was surprised, it didn't seem so strange.

This is one of the most profitable investors in the Chinese stock market.

No matter how large the management scale, the key is that they don't earn as much as others.

At that moment, Lei Jun realized that his investment partner's circle was far superior to his own, and he couldn't help but clench his fist.

"Here's the thing, Mr. Xu from Capital Today, Mr. Lei from Kingsoft, and I are planning to jointly launch an e-commerce company. You have vacancies in your two funding sources, right? This is a great opportunity to throw money around. Are you in?"

"Make money? Of course we should make money. With you here, small profits will turn into big profits."

"How much we'll earn depends on how well you work together; we might even earn some tomorrow."

"Yes, it's that amazing."

"Zhongguancun, I'll send you my location via text message."

In the mysterious atmosphere, everyone was very patient.

Another hour passed, and before eleven o'clock, hearty laughter entered the hall.

"Brother Chen!"

Liu Chuan, dressed in a black Zhongshan suit, led two middle-aged men in suits in. Everyone was polite and took the initiative to shake hands with him.

Chen Xuebing recognized the heads of the two capital companies behind him and smiled.

"Now that everyone is here, let's go inside and talk."

The group moved to the chairman's office.

Liu Chuan laughed and said, "I don't understand these things, I'm just here to watch the fun! You guys talk!"

Despite the laughter, he wasn't modest and sat on a sofa by himself.

Chen Xuebing sat down opposite him.

There was only one long sofa left. Xu Xin leaned against Chen Xuebing's side, and on the other side, there was only enough space for two people. Zhao Linghuan and Zhu Linan sat down.

Lei Jun pulled a chair from behind his desk, thought for a moment, and leaned against Chen Xuebing.

Chen Xuebing then realized that the person in question hadn't arrived.

"Hey you, where's General Manager Liu? Let him in!"

"Here! Here!" Dongzi heard the call, ran forward, and went inside.

"Mr. Liu, you need to reiterate your plan now. This time, you should talk about going public."

Chen Xuebing delivered the opening remarks:

"You also need to answer the question again: If you were to raise $100 million, what would you do?"

Liu Qiangdong was stunned.

Zhao Linghuan and Zhu Linan both frowned.

One hundred million dollars? Where did it come from?
Are you trying to scam us out of our money?

But neither of them spoke, waiting to hear a sound.

"Uh..." Liu Qiangdong gathered his thoughts, quickly went out to ask an employee for a notebook for recording finances, and brought it back. Based on some scattered data in it, he began to speak:

"Currently, China has more than 1.3 million internet users, of which the online shopping penetration rate is about 22%, 2900 million people consume online, and the average quarterly online shopping amount per person is 572 yuan, an increase of 109% compared to 2005, and the figure continues to increase."

“Our current turnover has reached 8000 million yuan, with an average monthly growth rate of 10%. We do not advertise and mainly rely on word-of-mouth in Zhongguancun to acquire customers, which has solved the pain point of counterfeit goods in Zhongguancun. However, in order to expand to all categories of home appliances, we still need funds to expand our self-operated warehouses.”

Xu Xin suddenly interrupted: "The clients we interviewed all said that your prices are 15% lower than those in Zhongguancun, but the suppliers reported that your order volume is only one-tenth of that of your competitors each time. Where does the profit margin come from?"

She said she was observing, and she wasn't joking; she had sent people to do a lot of research during this period.

Liu Qiangdong immediately replied, "High frequency! Inventory turnover rate is 9.2 days, and capital turnover is 37 times per year. We make money through speed, not by markup. Shorter payment terms make suppliers more willing to offer discounts. Mr. Xu, haven't you investigated our purchase price? Isn't it lower than our competitors?"

Xu Xin stopped talking and took out a notebook to take notes.

"When we transitioned to e-commerce in 2004, we implemented a combination of 'genuine products + invoices + low prices.' The low prices were not achieved through tax evasion or smuggled goods, but through reducing operating costs through economies of scale. When inventory turnover reached 9.2 days, capital efficiency became our best competitive advantage."

Liu Qiangdong then described his advantages in cash flow management before turning to the issue of solving pain points.

"When the idea of ​​entering the home appliance industry came about, we conducted research. Gome and Suning, the two major retailers, have a markup (gross profit) rate of over 17% in their offline chain channels, with a net profit margin of 6%-6.5%. Meanwhile, the net profit margin of home appliance brands is less than 2%. Brands are only taking one-third of the retailers' profits. Is this reasonable? I think this is a profit inversion! And what about us? We can achieve a markup rate of 8%. So I think that if I were to create a vertical e-commerce platform for home appliances, I could get the support of all the brands."

"Mr. Chen just mentioned one hundred million US dollars. If we had that much money, I'd go into all categories and do logistics!" Liu Qiangdong's pent-up ideas finally burst forth:

"I'm building first-tier warehouses in Beijing, Shanghai, and Guangzhou, aiming to deliver to North and East China within 48 hours!"

This was exactly Chen Xuebing's ideal answer.

But when asked this, both Xu Xin and Lei Jun shook their heads.

"The investment is too large."

Chen Xuebing also shook his head.

Dongzi was getting anxious: "But it can solve both the cash flow problem and the client's urgent needs!"

Zhao Linghuan, who had been silent all along, suddenly asked, "What if Taobao has the same idea as you?"

“They absolutely wouldn’t dare!” Liu Qiangdong said confidently. “Their model isn’t self-operated; they’re building a trading platform. Even if they did, it wouldn’t provide them with any profit. They wouldn’t even dare to touch such a capital-intensive platform!”

This statement shows that Dongzi has been thinking about Taobao and warehousing logistics for a long time, and Chen Xuebing is now at ease.

"Taobao offers all categories of products. If they use a low-price strategy to seize the market, how will you respond?" Zhao Linghuan continued to ask, staring at Taobao.

Liu Qiangdong answered more and more fluently: "They solve the problem of having or not having, we solve the problem of good or bad. In five years, China will have 200 million middle-class people. This group of people is willing to pay 10% more for genuine products and timely delivery."

As soon as he finished speaking, Chen Xuebing chuckled and became even more direct.

"All categories? Mr. Zhao, you dare to buy home appliances on Taobao?"

"Those small individual sellers that Taobao connects with—Taobao itself only dares to call them 'C-ends'—are these C-ends actually brand owners? More like pirates. Taobao currently offers no benefit to genuine brand owners; on the contrary, it's squeezing out the sales space for authentic products."

"Therefore, the market needs a player like JD.com."

After Chen Xuebing finished speaking, Liu Chuan suddenly laughed.

"Mr. Chen, aren't you and Jack Ma talking about a collaboration? If you talk about Mr. Ma like this now, I'll have to say bad things about you."

Upon hearing this, Liu Qiangdong's expression changed.

enemy?!
Xu Xin's eyes also looked unreadable.

Go all in, or control your opponent?

Lei Jun: Damn it, he doesn't just play the early game, he plays the mature game too! "Hehe." Chen Xuebing chuckled, easily picking up the conversation:
"I only talked to Mr. Ma about payment issues, about opening up the mobile network payment environment to make online shopping more convenient. Of course, if he wants to invite me to be an investor in Taobao, I would be happy to do so. As I just said, the market needs different roles. Brands need to make a profit, and some users also have a demand for inexpensive goods. These are not contradictory."

"The premise for the coexistence of both is a sufficiently large and diversified market."

As he spoke, he crossed his legs, adopting a condescending posture.

"Mr. Liu knows I'm working on 3G. Actually, the data Mr. Liu just mentioned is far from enough. The Ministry of Information Industry, China Mobile, and I all share a consensus: the number of Chinese internet users is still far from sufficient. Our goal in building 3G is to expand the internet user base simultaneously on both computers and mobile devices. We and China Mobile will jointly promote mobile devices, and China Mobile, having obtained a fixed-line license, will desperately seek out new fixed-line users not covered by China Telecom. China Telecom, feeling the pressure, will also desperately lower internet fees. In the next few years, internet users will account for more than half, or even more than half, of the total population. This 4-5 fold increase in the market will create a large number of internet billionaires."

"Let me put it this way: the future Chinese market can accommodate at least twenty listed e-commerce companies and five or six giant e-commerce companies. As long as you choose the right direction and invest in scale, you can turn even a handful of shit into gold. JD.com, if managed properly, I think has the opportunity to become one of the giants."

That's a complete game-changer.

He can even communicate with China Mobile and the Ministry of Information Industry?
Driven by cooperation?

Who the hell can withstand this?
Liu Chuan was also taken aback for a moment, then sighed deeply after deep thought: "So President Chen had this in mind when he planned to develop 3G."

Two Lenovo executives seemed confused by Chen Xuebing's talk about 3G, so they huddled together and whispered something to Liu Chuan.

Xu Xin and Lei Jun are also deep in thought.

Chen Xuebing lowered his head and chuckled softly.

The initial planning is complete, and now is not the time to hide his strengths. He must make investors realize this and invest heavily to build up the mobile internet ecosystem for him.

We need to leverage the resources of these top-tier domestic investment institutions to influence those at the bottom.

Any app that grows up in China provides nourishment for the Kunlun system.

Therefore, he can still expand this situation significantly.

"Mr. Chen, what are your plans?" After learning some information, Zhao Linghuan became even more respectful towards Chen Xuebing.

Chen Xuebing leaned forward and tapped on the coffee table in front of everyone.

"Let's allocate the time and resources for JD.com's IPO and financing process now."

Everyone perked up and sat up straight.

“I’ve already invested in the Series A round.” Chen Xuebing pointed to himself: “I took 30%.”

Everyone: Huh?

Xu Xin couldn't hold back any longer: "President Chen, aren't you planning to contribute some? How are we going to raise the funds?"

“Don’t rush.” Chen Xuebing shook his head: “I’ll treat this as the Series A round, with $5 million for 30%. JD.com’s valuation is now $1666 million. Next, there’s the Series B round. We’ll work together to raise the valuation to $100 million. Everyone can contribute as much as they want, and we’ll take a percentage of the shares.”

"One hundred million??" Zhu Linan was shocked: "President Chen, you mean you invest 1666 million US dollars, and we invest 100 million?? With the money we invest, we can only get one-sixth of your shares?"

"Don't panic," Chen Xuebing said calmly, "There's still Series C funding."

"In the first two rounds, we've built our reputation. Next, we'll bring in well-known investors from Beijing and Shanghai. I'll lead the Series C round, investing $30 million based on a $300 million valuation."

"We will complete these three steps within a month."

Everyone present gasped.

Xu Xin couldn't help but shake his head: "This pie is too big. If they raise funds like this, the valuation will probably catch up with Newegg before the IPO. This story is not worth believing."

"If you don't believe me, I'll make it a reality."

Chen Xuebing leaned back on the sofa: "Before April next year, my TMT Value Growth Fund will exit from BOE. The Beijing State-owned Assets Supervision and Administration Commission has expressed its desire to take over. I will have plenty of cash by then. I can sign the pre-investment contract for the Series D round now. As long as BOE meets the performance standards, I will invest $1.25 million (1 billion RMB) at a valuation of over $500 million. Of this, 50 million RMB will be used for capital increase to ensure the valuation, and $75 million can be used to acquire shares from the original shareholders."

“I’ve given you a guaranteed exit channel of 7500 million, and I’ll sell it for ten times the original price. How much you want to invest in these three rounds is up to you.”

Everyone was silent.

I rely on
No matter how much you invest, there's a guaranteed $7500 million principal that everyone can share. Even if JD.com goes bankrupt, it can still break even.

If this continues and it actually goes public, it's absolutely terrifying.

Is it close to Alibaba's level?
It might even surpass it!

“Valuation game,” Xu Xin said casually. “President Chen, this completely contradicts the principles of value investing. Are you really that confident?”

"So Mr. Xu is a follower of Buffett?" Chen Xuebing shook his head and smiled: "Buffett's philosophy can only be used to invest in the solid infrastructure surrounding the Internet, not in the real Internet. If you want to do that, you are not suitable to participate in JD.com."

Xu Xin held it in.

Buffett does not invest in the internet sector.

He believes that internet companies lack a "sustainable competitive advantage" and face an extremely high risk of technological disruption.

But the internet develops extremely fast and offers extremely high returns, so her mentioning Buffett here is a contradictory proposition.

"But we can't just burn things everywhere," Zhu Linan said, frowning.

Chen Xuebing laughed: "How much money exactly did we give to Mr. Liu to squander? I've come in a total of one hundred million US dollars from the A, B, and C rounds. Mr. Liu's goal is to expand into all product categories. We'll invest this money in monthly installments, releasing funds as we reach each stage. We'll expand while reviewing our investments, ensuring the money is used effectively, and limiting advertising spending. Mr. Liu, according to your plan, can one hundred million US dollars be spent on long-term growth projects over six months?"

Liu Qiangdong was 32 years old that year, and he stood like a lackey.

He didn't dare to speak for a long time.

Still reeling from the shock of a $500 million valuation.

It wasn't until he realized that all the investors were watching him that he understood this was a crossroads that could change his destiny.

"One hundred million is not enough. If we include logistics according to my plan, it will not be enough at all."

When they heard about logistics, everyone started shaking their heads again.

Damn it, this stubborn guy, he just can't stand up to the logistics company.

Does Alibaba have its own logistics?
Chen Xuebing was inwardly laughing, but outwardly he shook his head very seriously, agreeing with the investors' opinions.

However, his tone was slightly different when he spoke.

"According to your idea, integrated warehousing and distribution is indeed a core competitive advantage, but I think you lack experience and it will be difficult to achieve."

With the opportunity to realize his years of planning now at hand, how could Liu Qiangdong be easily defeated?

He reiterated, his neck stiff: "I can do it! With $10 million, I can establish three primary warehouses in Beijing, Shanghai, and Guangzhou! 48-hour delivery in North and East China! If I have 100 million, I can cover all major cities in the country within a year!"

Chen Xuebing scoffed: "Tier 1 warehouse? Does your platform only operate in big cities? What about Tier 2 and Tier 3 warehouses? How much will that cost? Here's the deal: I'll give you a chance. You can set up the three Tier 1 warehouses you mentioned first, and then compare and validate the model in other cities with everyone. If it really has an advantage, then everyone can decide whether to continue investing in you. If you can't demonstrate an advantage, then you're out of luck."

After hearing this, everyone felt that it was acceptable.

$1000 million doesn't seem like much, according to Mr. Chen's proposed financing plan.

If this topic had been brought up at the beginning, everyone would have thought it was too much. Xu Xin had only planned to invest 1000 million yuan in total, and it was impossible for him to burn it all.

"I don't think your model will make money easily," Chen Xuebing added fuel to the fire.

Liu Qiangdong clenched his fist, licked his dry lips, and thought of the hardships he had endured in the first half of his life. He said fiercely, "In the long run, there will definitely be profits! Even in the short term, we can build a good reputation with our customers!"

“Okay, I’ll wait until you surpass Alibaba.” Chen Xuebing shrugged and looked at the other investors. “Then let’s discuss how to help President Liu?”

Xu Xin narrowed his eyes: "President Chen, regarding the investment you mentioned, will the funds arrive on time?"

Chen Xuebing chuckled and stood up: "Payments will be made in installments according to sales performance. The first installment after the investment contract is signed shall not be less than one-fifth of the investment contract. If subsequent funds are delayed or defaulted, the first installment will be regarded as a penalty for breach of contract and donated to JD.com. You will not receive a single share."

As he spoke, his expression gradually became serious.

“It’s not just me who has to do this; all other investors have to do it too.”

"Damn it, the barefoot aren't afraid of the ones wearing shoes." Lei Jun muttered under his breath, then stood up: "I'll offer five million US dollars!"

Having received Chen Xuebing's response, Xu Xin no longer hesitated: "Mr. Chen, please sign the Series C and Series D investment contracts first. I will immediately invest ten million in the Series B round, without the need for installment payments."

They've saved up 20 million now.

Zhu Linan pondered for a moment and then looked at Liu Chuan.

"Our investment strategy is that of a venture capital firm, only suitable for Series B funding. 1000 million?"

Liu Chuan nodded.

“Then let’s go with Series B, ten million,” Zhu Linan said.

Zhao Lihuan revealed a deep smile: "President Chen, I will only invest 1000 million in the B round. The C round is too short a timeframe, so I won't participate. Let's see the results in six months. If JD.com establishes its brand, I will participate in the E round, let alone the D round."

Chen Xuebing smiled with his hands behind his back.

“Great! I think we’ll have many more projects in the future. Hopefully, communication will be easier then than it is today, since there are so many good projects and time is so tight.”

Liu Qiangdong was secretly alarmed; this was the world of capital.

With just two rounds of funding secured, Liu Qiangdong is now the owner of a company valued at $100 million.

But when he found a piece of paper on the table and did a careful calculation, he realized that in the Series A round, he held 100% of the shares but only 70%.

In the Series B round, the company raised 35 million, an increase of 3500%, but this amount shrank back to 74% of the Series A round, remaining at 51.8%.

After Series C funding, he stepped down from controlling stake.

"Mr. Chen, my controlling stake."

Chen Xuebing was speechless: "You still want controlling stake after raising Series C funding? I've been good enough to you. Be grateful if you can have 15% equity when we go public. Remember, every penny spent is burning your equity."

"I know! But we can't just have whoever has more shares listen to us, can we?"

"Where do you plan to list it?"

"I haven't thought about it yet. I wouldn't have dared to even consider going public before today!"

"The US, I guess." Chen Xuebing glanced at the others. "China doesn't have an A/B share system, but the US does, and the Cayman Islands does too. What do you think?"

(End of this chapter)