Chapter 339: Losing $1 Billion and Finding a Job Even with a Lantern

Son Zhengyi was naturally very happy about Li Xiaofan's call.

Because if Li Xiaofan's venture fund is willing to participate in the investment project led by Son Zhengyi, it is a relationship of "leading investment" and "following investment".

If we push the time back 10 to 20 years, people will pay attention to the financing news announced by each invested project, and they will find that there are more than one venture capital fund VC participating in each investment. Why don't VCs invest alone and monopolize all the returns?

The answer is simple: spread the risk!

Although other funds will share the returns in the future, they will first share the risks. When the venture capital mechanism of the capital market matures, the funds needed for financing a good unicorn project are often shared by multiple VCs, and there are few cases where a VC invests in a project alone.

At present, after Yahoo successfully went public, Son Zhengyi is ambitiously expanding his acquisition and investment territory.

Although the banks that come to him are willing to provide him with financing assistance, they are often shocked by the lion's mouth of the old man Sun.

Because his appetite is too big!

For example, the general equity pledge rate in the industry is 50%, but Masayoshi Son asked for a 70% pledge rate for Yahoo's equity. The bank certainly could not meet his unreasonable request...

So Masayoshi Son's road to huge financing is not so simple and easy.

In his previous life, in 1996, Masayoshi Son's SoftBank Group invested a total of US$3.1 billion to completely acquire the publishing business of Ziff-Davis Group.

After the huge investment in Yahoo's successful listing, the ambitious Masayoshi Son recently planned to take over both software and hardware and enter the hardware company.

A while ago, he set his sights on Kingston, a rapidly growing emerging technology company.

Kingston was founded by Chinese entrepreneurs Du Jichuan and Sun David. At that time, they developed a groundbreaking new single-in-line memory module SIMM, which was not only a great success, but also gave birth to a new memory product industry standard, and the company also rose rapidly.

In 1995, Kingston successfully entered the "billion-dollar club" with sales revenue exceeding US$1.3 billion.

Kingston's rapid development makes Masayoshi Son salivate.

Last week, he negotiated with the two founders, Du Jichuan and Sun David, to acquire Kingston, and reached a preliminary acquisition intention: to acquire 80% of Kingston's shares at a sky-high price of US$1.5 billion.

Every move made by this old Sun is earth-shaking!

But every time such a huge amount of financing is not so simple, Masayoshi Son has to use all his strength and spend a lot of time to complete it.

Now Li Xiaofan is interested in cooperating with him, and as a "follow-up investor", Masayoshi Son, the "lead investor", is of course the most welcome.

In the industry, as a "lead investor", VC has a relatively large voice. In the face of interests, "sitting in a row and eating fruit" is not feasible in the capital world.

If the opinions of various VCs on the company's operation and management are not unified, which one should the invested company listen to? The "lead investor" VC bears the absolute majority of the investment amount and enjoys absolute priority voice.

For example, the company's board seat must be given to the "lead investor" VC first. Important matters of the company not only need to be approved by the board of directors, but also must be approved by the "lead" VC. In matters involving investment returns such as selling company equity and listing, other parties generally cannot oppose the decision of the "lead" VC. Simply put, the company cannot do what the "lead" VC disagrees with, and no one can oppose what the "lead" VC wants to do.

But as a follow-up investor, there are also many advantages.

For example, in the past life, excellent investment institutions such as Sequoia Capital and IDG did a very thorough due diligence on the invested projects and rarely made mistakes. So as a small follow-up fund, you don't have to think too much, just follow Sequoia Capital, IDG and other follow-up investments with your eyes closed. In the end, the question is whether they are willing to let you follow the "sedan"?

But Masayoshi Son is different. He basically gambles wildly based on his feelings!

So it is inevitable that there will be failures.

Like the Kingston project, in the past life, SoftBank Group acquired 80% of the company's shares for US$1.5 billion in 1996. After taking over Kingston, Masayoshi Son launched his hardware development plan.

He pushed Kingston to cooperate with Toshiba to upgrade memory for Toshiba personal computers. This was the first time that a personal computer OEM manufacturer cooperated with a memory manufacturer to manufacture co-branded product modules.

Although Kingston was moving forward, Masayoshi Son encountered troubles one after another.

In the past, Kingston was a "very strange company". As the world's largest memory company, this company was uncharacteristically not raising funds, not going public, and not taking loans. It is said that the company's employees did not need to punch in, did not talk about performance, and did not talk about KPI at all...

The daily management of the company was still in the hands of Du Jichuan and Sun David. They did not want Kingston to go public, which made Old Sun helpless.

At this time, the core problem was that SoftBank's capital chain had problems. Old Sun's big investment, which made him unable to cover the eight jars and seven covers, so that he was unable to pay the remaining $330 million acquisition payment to the two founders Du Jichuan and Sun Zhengyi on time.

At that time, SoftBank had won the honor of Internet investment hegemony because of Yahoo, and most of the projects invested were Internet companies. But the existence of Kingston confused the capital market, and investors were worried that their strategy was unclear. Whenever SoftBank's stock price rose and fluctuated, this issue was raised by competitors, interfering with its image as an Internet hegemon.

By 1999, Masayoshi Son began to reflect more thoroughly on SoftBank's development positioning, and concluded that it was a wrong decision to acquire Kingston. After seeing that SoftBank's chess moves were a bit messy and concluding that the acquisition of Kingston was a wrong decision, Masayoshi Son immediately made up his mind: sell Kingston and refocus his firepower on the Internet.

So, Masayoshi Son made another earth-shattering decision: sell 80% of Kingston's shares back to the two founders Du Jichuan and Sun David for $450 million.

This deal lost $1 billion!

Therefore, although Mr. Sun has reached a preliminary intention with the two founders, Du Jichuan and David Sun, to acquire Kingston's equity for $1.5 billion, Mr. Sun has not considered how to raise and cash out this huge sum of money.

He is a "follow your feelings" capital hero!

Now, Li Xiaofan called and said that he wanted to cooperate with him to invest together, which made Mr. Son laugh.

Such a good thing is hard to find even with a lantern!

"Mr. Li, that's great. I will send you the information of several investment projects I have on hand. Among them, I recommend the Kingston project the most, the world's largest storage product manufacturer!"

"Okay, thank you so much Mr. Sun! After your email comes, I will read and study it first, and then contact you!"

Li Xiaofan's heart: I will definitely not touch the Kingston project!

But it is most appropriate to lead those potential LP partners to inspect the Kingston project and let them open their eyes!

Moreover, several years later, these LP partners will thank Li Xiaofan for not blindly following SoftBank Group to invest in Kingston.

In 1999, they will all give a thumbs up and say: Mr. Li, you are so wise!