Economic Wisdom to Apply in Your Twenties

Chapter 55

Chapter 7 Section 3 "Stealing" Money from Investors
From October to December 1999, Li Yanhong drove all day on Sand Hill Road in San Francisco (the concentration of venture capital in the western United States) and went door to door, looking for suitable investors.Under the environment at that time, "China, the Internet" was undoubtedly a strong selling point.Therefore, once Li Yanhong and Xu Yong threw out the idea of ​​establishing a Chinese search engine, they attracted several venture capital companies to chase and invest money.But in front of the dollars delivered to the door, Robin Li's premise is to ask investors to be optimistic about the prospects of search engines.In Mainland China, there are quite a few projects that collapsed due to the inability of investors to continue to support them. Looking back, some of these projects do have good prospects, but the key is that they did not persist until the end.

After thousands of choices, Li Yanhong and Xu Yong finally reached an agreement with two investors, Peninsula La Capltal (Peninsula Fund) and Integrlty Partners.It is said that the agreement was reached entirely because of Li Yanhong's words.

An investor asked Robin Li: "How long will it take you to make this search engine?" Robin Li thought for a while and said: "It will take 6 months."

"For more money, can you do it faster?"

For ordinary people, as long as they can get investment, they often agree to the investor's request without even thinking about it, let alone increase investment.But Li Yanhong decisively rejected the other party's proposal, saying that he must think seriously.Although in fact, Li Yanhong promised 6 months of work, it was done in 4 months.

Originally Robin Li wanted to raise US$100 million, but the confident venture capitalists invested an additional US$20 and insisted on giving 120 million, accounting for 25% of Baidu's shares.

With Baidu's impressive record of profitability and listing, this venture capital can be said to be the most successful investment in the history of these two investment institutions.

Robin Li's financing experience shows us that integrity and technology are the most important factors when investors choose partners.Baidu belongs to the end of the first generation of the Internet, and there are many Internet elites who have succeeded together with Li Yanhong. These wealth elites have experienced the first Internet boom, and began to use the money they earned to be their own investors. Enter the second generation of the Internet.Among such a new group of investors, many are successful entrepreneurs emerging from the last wave of Internet entrepreneurship, such as Shen Nanpeng, the founder of Ctrip, Tang Yue, the founder of eLong, and the former CEO of the financial industry. Ning Jun, former Sina CEO Lin Xinhe, etc.

As entrepreneurs, the inner impulse and enthusiasm is the invisible hand that pushes us to realize it and start our own business immediately.However, you may be poor right now. At this time, a considerable and rich start-up capital will illuminate your future like an angel's halo.Why not go catch it?
From an economic point of view, this is actually a classic prisoner's dilemma: there is a deep gap between the unlimited entrepreneurial desire and the limited realistic conditions.It stalks our brains and tears at our weak wills and utterly untrained judgments.However, this is a profound test that every entrepreneur must go through.

On how to solve this prisoner’s dilemma, the startup financing sequence mentioned by the founder of the American online advertising giant Double Clink has great reference significance:
1. Own money, spend all your savings.

2. Use my wife's money.

3. Ask a friend to give you money.

4. To use the parents' pension, of course, they must be persuaded to agree.

5. Mortgage your house.

6. Overdraft to the bank.

There is irony in these six dead-end financing proposals.In fact, if you ask everyone who has successfully raised funds, his experience must not be blind financing.If you really believe in your business model and firmly believe that you can succeed, then don't rush to find investment, and use your own ability to make it look like it.Zhou Lei said that the best financing advice is to "spend your own money first and make things better." Regardless of the entrepreneur or investor, money is always calm, and it is only people who lose their minds that are crazy.

In addition, learning and learning to "get along with capital" is also a compulsory course for every entrepreneur.In people's minds, an "investor" seems to have two strange faces: either, he is a charitable father who is willing to give you money for free, allowing you to realize a dream; or, he is the most ungrateful Enemy, when you can't give him hope, when you can't earn him more money, he will abandon you without hesitation and never look back.

"Fairy? Or monster?" This is a false question.Between entrepreneurs and venture capitalists, there is always a delicate relationship of interdependence and mutual game.And we emphasize that comprehending the skills and wisdom of financing is an art that requires continuous learning and practice.

Wisdom Pieces: Five Keys to Stealing Money from Venture Investors

1. Innovation is not everything

The criteria for a good project in the eyes of venture capitalists (hereinafter referred to as "venture capital") is that the project is unique, difficult for others to imitate, can be replicated in a short period of time, has a huge customer base, and is expected to occupy more than 30% of the market in the future Share, and may even become the industry leader, the project can have a profit period of at least 5 years.The best project has already been put into the market, the prospect is promising, but the funds are insufficient.

2. Profit model gets the most attention

The ultimate goal of "venture capital" is to make money. Whether a project has a good profit model is what they care most about.The profit model is a way of making money that can be seen and touched by "venture capital". Using the most mature profit model in the industry is often more attractive to "venture capital."

3. The team is more important than the project prospect
In addition to providing funds for entrepreneurs, "venture capital" also provides a series of services such as legal, financial, human resources, government relations, and corporate relations.For investors, "venture capital" is equivalent to a partner.Therefore, "VCs" pay more attention to the strength and development space of the team to cooperate with, and they will even investigate the experience of future partners.

4. You must have good qualities
How much does the entrepreneurial quality of entrepreneurs play a role in financing? The answers of "venture capitalists" play a decisive role. "Venture investors" are emotionally willing to regard collaborators (entrepreneurs) as friends. If "venture capitalists" do not appreciate the entrepreneur's own qualities, even if the entrepreneur has a good project and a good team, it will be difficult to raise funds.

5. Persistence in pursuit of "venture capital"

Yang Dong, a partner of Softbank SAIF, said that all "venture capital" are most willing to cooperate with the kind of people who are persistent.If an entrepreneur does not have a persistent character, it is difficult to succeed.

(End of this chapter)