Winning the new financial era

Chapter 67 $5M Series B Funding

"Mr. Zhang, after several rounds of discussions and votes, our investment decision-making committee feels that Ruixiang's current valuation of US$30 billion is too outrageous, and it has deviated from the existing value of the target. We cannot accept this price.

Therefore, it is a pity that Temasek can only give up this cooperation if Ruixiang still insists on a valuation of US$30 billion.Hope we can cooperate again in the future! "

It was Li Hengbo from Temasek who called and started to put pressure on Zhang Yida.

"Then what is Temasek's internal valuation of Ruixiang?" Zhang Yida rubbed his eyes and asked on the phone.

"US$25 billion, and binding clauses must be signed!" Li Hengbo also spoke very straightforwardly, directly reporting the conditions.

"It's too harsh, let me think about it!" Zhang Yida said with a frown.

After exchanging a few words with Li Hengbo, he hung up the phone, then called Shen Beipeng, and explained Temasek's quotation and a series of situations.

"US$25 billion, and there are binding clauses?" Shen Beipeng muttered to himself on the phone. He actually thinks that the valuation of US$25 billion is not low. As for the binding clauses, it is basically a necessary condition for large-scale financing.

After thinking about it, Shen Beipeng directly suggested:
"This valuation is not too low, what Ruixiang needs most now is time to grow.

Before the giants like Leech Financial Services can react, they should take the 5 million US dollars first.

Once you get the financing, you can display your talents and win the market quickly.Even if the giants spend it with you, you can afford it.

If these giants start to be wary of Ruixiang, it will be difficult to get financing.

Without funds, giants can easily kill you in the cradle.Not to mention the follow-up development.

So don't get entangled in the valuation issue, the money is king when you get the money! "

Zhang Yida was also in deep thought. Shen Beipeng was not only a venture capitalist, he also ran a business before, and his experience in all aspects was beyond his own.

His suggestion is also very pertinent, this round of financing must be fast.This step will also lay the foundation for a sharp take-off. If you miss it, it will be difficult to become a first-class financial technology company, let alone compete with giants.

"Okay, let's finalize it as soon as possible! The timing cannot be delayed." Zhang Yida agreed with a heart.

Then, Shen Beipeng began to contact Temasek, and the two parties reached an agreement on the valuation of US$25 billion before Sharp Investment.

First get Temasek, the lead investor, and the other three institutions, SBI, GGV, and Qiming, will be easy to talk with as investors.

In the end, Heishan Capital, Zhenke Fund, plus 4 institutions of B-round venture capital, a total of 6 institutions gathered in Ruixiang Jinke Company, together with the management of Ruixiang, held a seven-party meeting.

The pre-money valuation of US$25 billion has long been agreed by many parties, and the biggest problem is the binding terms.

"First, it has a one-vote veto power over major matters such as the use and distribution of large amounts of funds, changes in company equity or organizational structure.

Second, Ruixiang conducts a new round of financing, and investors in this round have the right to preemptive subscription to prevent the shareholding ratio from decreasing.

Thirdly, when Ruixiang conducts a new round of financing, it should ensure that the investment price (valuation) of new investors should not be lower than the investment price (valuation) of this round.

If the price is low (the valuation has dropped), the management of Ruixiang will provide cash or equity compensation to the investors of this round.

This is the ratchet clause, an anti-dilution tool that is beneficial to investors, and it is also the most commonly used form of anti-dilution protection for investors.

Fourth, if the management of Ruixiang intends to transfer all or part of its equity directly or indirectly to any third party.

Then the investor in this round has the right but not the obligation, under the same conditions, to sell the corresponding amount of equity held by it to a third party who intends to purchase the equity, prior to the management of Ruixiang.

This is a tag-along right, which means that if the management of Ruixiang wants to cash out, it must bring us along, and we have to cash out first. "

In addition to these four articles, there are also some conventional binding provisions such as liquidation priority clauses, dividend priority clauses, information disclosure clauses, etc.

Among these clauses, the one that makes Zhang Yida most disgusted and vigilant is the first "one-vote veto power". As long as the other clauses are developed in a normal way, there will be no major problems if they go uphill.

"I can accept the other clauses, but the first clause, the one-vote veto, is too harsh, so I can't accept it.

What if Ruixiang wants to acquire an upstream and downstream company with great potential but is blocked and rejected, what if it is preempted by competitors?
Since you believe in me and invest in me, you must give me the greatest business authority. "

Zhang Yida glanced around the investors in the conference room, and said very seriously,
"Mr. Zhang, after all, this is a financing of 5 million US dollars, not 5 yuan. We just add an insurance for our investment.

We recognize your talent and management ability very much, but the 5 million US dollars are all investors' money, which has a lot to do with it, so we have to be cautious. "

Li Hengbo also said with a serious expression and a very tough attitude.

"Ruixiang itself has an AB share structure, and the voting rights of our venture capital institutions are weakened. If there is no veto, how can we guarantee the rights and interests of our investors?"

The speaker was Li Shilun, the president of SBI China. Although he acted relatively restrained, it could be seen that he was very excited.

Regarding their own interests, Tong Shijie from GGV and Gan Renping from Qiming also spoke one after another to put pressure on Zhang Yida.

Although Shen Beipeng and Xu Xiaoming helped Zhang Yida speak, but after all, they were not the lead investors of the B round, so it was useless to help.

Zhang Yida was very angry, but he couldn't get angry on such an important occasion.

Originally, my own age was already criticized. If I behaved immaturely, I would not reassure investors.

"Add more seats on the board of directors! Let everyone vote on important matters of the company with a show of hands!

Or just add a performance gamble, anyway, it is impossible for me to agree to a veto. "

Zhang Yida said this after thinking about it. In fact, these investors were still worried about Zhang Yida, and they were afraid of problems in the company's operation.

Gambling is a panacea, take it and stop making trouble.

"Yes, how to set the conditions of the bet, we need to discuss it with many parties."

Li Hengbo finally showed a smiling face. What he was looking for was a guarantee. If he didn't get a veto, it would be fine if he had a VAM promise as a guarantee.

Zhang Yida and Lin Zhenyang went out of the conference room to smoke a cigarette, and gave the conference room to a group of investors to discuss and gamble.

"What if we bet that they open their mouths to our lions?" Lin Zhenyang said after taking a puff of cigarette and expelling a large cloud of smoke.

"They're all smart people, and they won't open their doors randomly. It's nothing more than making a commitment to revenue and net profit for the next three years based on the price-to-earnings ratio." Zhang Yida said nonchalantly, and he was still very sure of completing the bet.

"Okay, as long as you are sure. Ruixiang can get to where he is today, and you have the greatest credit.

Do whatever you want!I support you unconditionally. "

Lin Zhenyang smiled at Zhang Yida, and looked at Zhang Yida sincerely.

Zhang Yida also felt very relieved, he and Lin Zhenyang have been getting along very happily since they started their business.

There is no intrigue of other entrepreneurial teams, all kinds of nonsense.

Some are only the mutual encouragement and trust of two dream-chasing youths.

Patting Lin Zhenyang on the shoulder, Zhang Yida didn't say much, everything was kept silent.

When the two returned to the conference room, several major venture capital institutions also discussed the gambling plan.

"Based on a price-to-earnings ratio of 30 times, if Ruixiang wants to support a post-investment valuation of US$30 billion, its annual net profit must reach US$1 million.

But considering that in the next few years, the profits of the entire group of Ruixiang Jinke will be used to support the mobile payment battlefield.It may not be possible for the group to make profits as a whole in the short term.

If calculated with a price-to-sales ratio of 5 times, Ruixiang's annual revenue must reach 6 million US dollars. "

In the end, two sets of betting plans were formed:

方案一：锐向14年净利润不低于1亿美元，并保持20%的环比增长，15年净利润不低于1.2亿美元，16年净利润不低于1.44亿美元。

方案二：锐向14年营收不低于6亿美元，并保持20%的环比增长，15年营收不低于7.2亿美元，16年营收不低于8.64亿美元。

The completion of any one of the two plans is regarded as the completion of the VAM.

If the VAM is not completed, the difference in net profit in three years will be made up by Rui to the management, and cash or equity will be compensated to the B round investors.

On behalf of Rui, Zhang Yida signed this B-round investment agreement with Jinke Group:
"B round of financing of US$5 million, led by Temasek with US$2.5 million, Blackshirt Capital followed with US$1 million, SBI, GGV, and Qiming each followed with US$5000 million.

Since Zhenke Fund’s management fund is too small, it only has a plate of tens of millions to [-] million, so it has no choice to continue to increase its bets and allow its shares to be diluted. "

The share structure after financing is as follows:

Zhang Yida’s Cayman company Yizhou Overseas holds 52.5% of Ruixiang Jinke Group;

Lin Zhenyang holds 6.67% of the shares through his own Cayman company;

Ruixiang Enterprise Management (employee stock ownership platform) holds 6.67% of the shares;

Blackshirt Capital holds 17.5% of the shares;

Zhenke Fund holds 3.33% of the shares;

Temasek holds 8.33% of the shares;

SBI, GGV, and Qiming each hold 1.66% of the shares.

Zhang Yida's voting power also dropped, down to 83%.

Lin Zhenyang's voting rights also decreased a little bit, with 10.54%.

The two together hold more than 93% of the voting rights, and the company's management rights are still stable.

In addition, Blackshirt Capital increased its holdings by US$1 million in this round of investment, and its shareholding ratio increased by 17% compared with the previous 0.5%.

5亿美元的资金分为三个阶段拨付，首期立即拨付2亿美元，另外2笔1.5亿美元的资金在3个月后，6个月后视锐向业务进度进行拨付。

After the agreement was reached, both Shen Beipeng and Xu Xiaoming were overjoyed. In just half a year, Ruixiang's valuation has doubled by 10 times, which will add luster to their investment career.

Zhang Yida was neither happy nor sad, neither favored nor humiliated.I thought to myself, which of the small TMD giants has not seen a valuation increase of ten or eight times in a year or so, and the small scene is small, so don't panic!
The seven-party talks on the B round of financing have come to an end, and the next thing is for the public relations department to arrange a financing conference to hype up their fame!

It doesn't matter to Zhang Yida, just let the public relations department make arrangements.

(End of this chapter)