American History 1988
Chapter 204 - 198: Dividing the Fruit

Chapter 204: Chapter 198: Dividing the Fruit

"What costs might be involved if a customer is ready to use IP telephony?"

In order to promote the IP telephony business, World Link certainly had to fully assess everything internally.

"Without considering optical fiber lines, the only hardware cost would be the phone terminals."

Danny pointed to the two desk phones on the table, whose R&D was mainly handled by MCI.

"Of course, that’s just the most basic IP phone functionality; if you want to connect them with the Teams on the computer.

As well as support subsequent email functions, there might be a need for a gateway device.

However, considering that most companies have their own servers and gateway devices, this part of the hardware cost could also be excluded."

Dean fiddled with the desk phone with an LCD display, "How much do they cost?"

"Around 100 US Dollars, roughly three times the cost of a traditional phone." Danny was the main person in charge of the World Link R&D team, and he knew these figures very well.

Because of an additional screen and a chip to process data, IP phones were much more expensive than traditional ones.

If you wanted to ensure profit margins on the terminals, then the selling price had to be increased to at least around 150 US Dollars.

This could be the main concern for customers to choose it; after all, the initial investment was several times higher than traditional phones.

But this could be resolved through bundled sales, such as offering the IP terminal for free with the condition that a company signs a contract for a number of years in exchange for this benefit.

Dean believed that with MCI’s methods, they had many ways to convince customers, as this was their field of expertise.

"What about call charges? Compared to traditional phones." Hardware is a one-time investment, but the phone service itself is also of concern.

Hearing this question, Danny was a bit excited, "Considering their overall costs, they are unbelievably low.

Whether long-distance or local, the operational cost of an IP phone is only about 10% to 20% of that of a traditional phone!"

Shit! Durell couldn’t help but grab a calculator and quickly punched in the numbers, a cost reduction of 80% to 90%?!

Doesn’t that mean IP telephony, even after cutting the cost of traditional calls in half, still had a huge profit margin?

"I need to make a trip to Washington." Durell was impatient, eager to witness the birth of a revolutionary product.

The field of telephone communication—a vast and enviable market.

If World Link continued to grow like this, perhaps it would become another giant.

Although he knew things wouldn’t be that easy, Durell was still restless and eager to head to Washington to see.

To see how the now inconspicuous World Link grew into a behemoth.

"Alright, guys, we’ll discuss the specifics with MCI later. It will be some time before IP phones are truly in use."

Setting up servers, connecting lines, and even establishing the southern state offices—all of these needed time.

According to Dean’s original estimate with David, if World Link could start official business in March, that was already beyond expectations.

"Thank you, Danny, World Link will remember everything you’ve done."

"It’s my pleasure, Boss." Danny very perceptively packed up his things, and then left the room again carrying that cardboard box.

When only the company executives were left in the meeting room, Dean smiled and shrugged.

"Alright guys, now let’s talk about Byte Company’s third round of funding."

Phew—, that was an exciting topic.

Valentine couldn’t help but want to pull out his cigar again, while Durell and David Morgentaler also smiled.

"Your expressions have already told me, it’s all good news, isn’t it?"

Dean sat back at the head of the conference table, where a cup of freshly brewed coffee was already prepared.

"Haha, Dean, you’re not the only one who has been bombarded by phone calls." Valentine had never enjoyed this kind of treatment.

The hot-tempered man was usually given a wide berth by most people.

But recently, the whole world seemed to have turned upside down, those who previously avoided him like the plague now came bearing sweet words.

Mother F*cker, if he didn’t know their intentions, Valentine might have been lost to their sugar-coated shells.

How could someone as unlikable as he possess the charisma that those people praised so highly?

These guys all wanted something from him. What could make these people rush to him? Of course, investment shares of Byte Company.

"You guys can probably never imagine who called me recently?" Valentine boasted proudly, "Arthur Locke."

Durell and David Morgentaler were a bit surprised, "Hasn’t he retired already?"

"Who knows?" Valentine didn’t care much, "I guess no one can resist the lure of Byte’s IPO."

Arthur Locke was Silicon Valley’s first-generation investor, the man who coined the term "venture capital".

He was the one who encouraged several young men from Shockley Laboratories to leave and start Fairchild Semiconductor.

Years later, he prompted them to defect again, forming Intel Semiconductor.

Following were HP, Apple, and Scientific Data Systems—behind their establishment was the shadow of Arthur Locke.

If time were rewound five years, in Silicon Valley, no one dared to confront Arthur Locke, with a network of relationships so vast it was frightening.

Now, this already retired investment giant seemed to be stirring again.

"Look, Dean. The $400 million valuation we opened with, nobody even questioned it,"

Durell had always thought this valuation was a bit conservative, Byte Company had already caught the attention of all of Silicon Valley.

Since the beginning of January ’91, when Byte Company announced its plans for a third round of fundraising,

action had started on Sand Hill Road, either contacting them directly or through various roundabout connections.

Everyone was conveying one message, that they were willing to invest in Byte Company.

The $400 million was just the current valuation, Byte Company’s potential after the IPO was bound to be much more.

This last chance for a ride seemed to promise returns many times over.

What kind of business could multiply its capital by several times in just a few months?

With such an opportunity, of course, no one wanted to miss out.

"The recent calls, they’re so many they almost cost me my sleep," Dean said with a wry smile, "A farmer even called me, asking if he could invest in Byte Company.

I suspect he doesn’t even know what software is, yet he assured me with utmost confidence that our product was installed in his son’s calculator."

"Hahaha, maybe he thinks a calculator and a computer is the same thing?" Dean’s complaint made everyone laugh.

Look, even a farmer had heard of Byte Company’s name, bolstering the confidence of everyone present a bit more.

"Alright, let’s see which investment intentions Byte Company has received," Dean had compiled a list himself.

"These are the calls I’ve received recently that I think are more important. Now everyone also write down your quotas.

Then together we’ll confirm who gets a seat, and who doesn’t pass inspection."

This sounded somewhat arrogant, but no one felt there was anything wrong with it, as Byte Company was not lacking investors.

People eagerly pulled out pens to jot down their choice investment institutions on the list that Dean passed down.

Most had already contacted these investors privately, and it was undeniable that these investment institutions were not the best.

But this belonged to their realm of personal relationships, and everyone maintained an unspoken agreement about it.

Those seated here represented the core power structure of Byte Company, and the fundraising targets needed their approval to get on board.

Of course, Dean allowed them to maintain their personal relationships appropriately because this third fundraising was not that crucial for Byte Company.

Byte Company already had its lead investment institution, and the board members were relatively set.

Releasing 10% of the equity would not affect the board’s decisions, especially since it was distributed among dozens of investment institutions and individuals.

This round of fundraising felt like they were "sitting in a circle, sharing fruit" to Dean and the others.

Of course, the big names on the list would get more, while the pure relationship-based participants could only get a taste of the sweetness.

The list was quickly gathered, and Dean saw many unexpected names on it.

Moreover, the list was too long, at a rough count it had well over a hundred names.

Without a doubt, most of them would be eliminated, with less than a third remaining preserved.

"Our plan is to complete the third round of fundraising in March, start on the IPO path in the summer, and officially go public with trading in August or September.

Now it seems..." Dean shook the list in his hands, "we’ll be busy before then."

...

The third round of fundraising, which seemed inconsequential to Dean and his colleagues, became the object of fierce competition among many investors here in Silicon Valley.

Because Byte Company’s current valuation was as high as $400 million, even releasing 10% of the equity represented a huge sum of $40 million.

Given the investment habits of venture capital institutions, they would not take on this financing amount alone, as that would be too risky.

So, this $40 million could potentially be allocated to a dozen or more venture capital firms.

The remaining small fractions could possibly be handed over to relationship-based investors, like top management’s personal connections.

These individual investors, typically contributing tens to hundreds of thousands of US Dollars, were not after the share percentage but the returns their money could bring.

Of course, the third round of fundraising was the same for most investment institutions; they knew they could not gain an advantage in shares.

These investors were more focused on short-term gains, and it was very likely they would cash out their shares after Byte Company went public.

Because so many were eager to get on board, investors even engaged in intense competition with each other.

Dick Kramlich of Enyi Investments had been having a pretty good time these past few days.

Ever since he got a guarantee from Jimmy that Enyi Investments could get a share allocation of $2 million to $4 million, he’d been boasting about his impressive achievement everywhere.

Being able to secure such a significant share of Byte Company during its boom times was a symbol of an investor’s prowess.

For this, Dick even threw several parties in a row, enjoying the sensation of being the center of attention.

For an investment ranging in the millions, Enyi Investments wouldn’t fork out the whole sum by itself.

Dick needed to divide it into dozens of portions and use them as chips to trade with others.

As for who would be the lucky one, that depended on who performed in a way that pleased him the most at the parties.

But Dick’s pride didn’t last long before he received an unexpected call.

Arthur Locke, that first-generation investor who had caused him a fair share of complaints.