American History 1988
Chapter 372 - 361: If You Don’t Accept This 100 Million US Dollars

Chapter 372: Chapter 361: If You Don’t Accept This 100 Million US Dollars

Sun Zhengyi had studied at the University of California, Berkeley before he returned to Neon to found SoftBank.

Thus, he was not a stranger to Silicon Valley in California; he had spent a few years of his campus life there.

However, merely relying on these connections, Sun Zhengyi was still unable to penetrate Silicon Valley’s venture capital circles; he remained an outsider.

Without networking and being Asian, it was very difficult to infiltrate Silicon Valley’s dense venture capital network.

But Sun Zhengyi had acquired a Merril technology publisher, as well as control of a leading American computer field organization.

It was only after these shell operations that he was somewhat accepted by the local capital circle.

Right when Microsoft’s Windows 95 was about to be released, he visited the Yahoo office, just a few kilometers away from Stanford University.

When they first moved in, David and Yang Zhiyuan had painted the walls, but their office was still in a mess.

It was filled with rollerblades, CD cases, empty drink cans, old "Micro Times", and a blue plaid synthetic blanket.

With a touch of black humor, David’s job at Yahoo was to rank and filter search results.

He was bringing order to the internet, but his office looked like it had been hit by a storm.

Such a meeting scene made David and the others feel very awkward.

Therefore, to avoid such a reception location, David and Yang Zhiyuan thought of taking Sun Zhengyi to a French restaurant for a meal.

However, the latter declined, "There are countless opportunities to eat, but not many to talk business."

Sun Zhengyi’s style was just so direct, likely influenced by his reckless nature.

Yang Zhiyuan and David exchanged glances and had no choice but to abandon their original plan and move to the office next door for the meeting.

As soon as both parties took their seats, Yang Zhiyuan, who was always the leader of the team, spoke first.

"Mr. Sun, can you talk about the purpose of your visit to Yahoo?"

"I want to invest in Yahoo," said Sun Zhengyi without beating around the bush; he got straight to the point.

"We would be very happy to do that," Yang Zhiyuan nodded without surprise, as there had been many people interested in Yahoo lately.

They had also received several calls from venture capitalists, but due to Yahoo’s unique money-burning model, smaller-scale venture capitalists were excluded.

It was clear that Yahoo now needed more capital, and it had to be capital with strong backing.

This was why Yang Zhiyuan and the others were receiving Sun Zhengyi; they had heard about his vast business empire in Neon.

"Tell me about your valuation of Yahoo." After getting an affirmative response, Sun Zhengyi pressed on to the main topic again.

He didn’t even bother with the symbolic step of listening to an introduction to Yahoo, which was meaningless to someone as decisive as him.

Okay, Yang Zhiyuan had already sensed the unique style of this investor, which was starkly different from that of Silicon Valley venture capitalists.

After a brief consultation with David, Yang Zhiyuan tentatively quoted a price for Yahoo.

"Considering Yahoo’s current number one market share in search and its over 10 million daily average active users,

our preliminary valuation is 300 million US dollars; it is the undisputed internet portal!"

Half a year ago, when Yahoo first raised funds, its valuation was around 30 million US dollars.

But now, Yang Zhiyuan had groundlessly jacked up Yahoo’s valuation tenfold.

No one could provide a rational explanation based on this valuation, but the internet didn’t need one; the entire market was surging rapidly.

To be honest, although there are various reasons, Yang Zhiyuan setting the valuation at 300 million US dollars in one go still made his colleague David break out in a silent sweat.

Not just him, even Yang Zhiyuan himself felt uneasy about such a quote.

Unexpectedly, Sun Zhengyi agreed to the valuation without hesitation.

However, the diminutive man also put forth a demand like "a bazooka".

"I can infuse 100 million US dollars into Yahoo, but in return, I want 30% of Yahoo’s equity."

Yang Zhiyuan and David were so stunned by the sudden hefty olive branch that they were at a loss for words.

"Mr. Sun, we are pleased that you value Yahoo so much, but... we don’t need that much capital."

Yang Zhiyuan didn’t expect Sun Zhengyi to agree to such a valuation without even trying to negotiate.

It was certainly good news, but 100 million US dollars in funds exceeded Yahoo’s development plans.

The intended second-round funding target was in the ten-million-dollar range, and too much capital could disrupt Yahoo’s rhythm.

Faced with a flustered David and a clueless Yang Zhiyuan, Sun Zhengyi held his own views.

"Jerry, David, Yahoo’s model is destined to be a money-burning business.

You must ensure Yahoo remains and continues to stay ahead of your competitors.

Otherwise, if Yahoo is overtaken, you’ll lose the entire internet market."

Sun Zhengyi pointed out the weakness of Yahoo’s model with precision, which was one of its "persistent problems".

In the eyes of other venture capitalists, Yahoo’s money-burning model made them extra cautious.

Once a startup falls into a cycle of burning cash, it means they need to continuously fund it and supply it with nutrients.

As the cost of investment increases, they find themselves in a difficult position.

Pulling out would mean all previous investments were in vain, while continuing means there is no end in sight to the burning of money.

Moreover, the average funding pool raised by venture capitalists here in Silicon Valley is usually around 250 million US dollars.

They couldn’t possibly invest 40% of their capital pool into a single project; the sunk cost would be too enormous.

If these venture capitalists invested 100 million US Dollars into a startup, they would certainly expect to obtain complete control of the company in return.

But Sun Zhengyi dared to write such a check, even though he had to pay a hefty price and could only acquire less than one-third of the company’s shares.

Moreover, should it fail, the loss would be unprecedented.

He was a desperado; he didn’t belong to Silicon Valley—he was an outsider.

Jerry and David exchanged glances but remained silent, still undecided.

This decision was beyond their authority to make as Yahoo had other shareholders.

"Jerry, everyone needs 100 million US Dollars. Think about Netscape’s latest bidding strategy,"

"How much will you have to pay to make Netscape set Yahoo as its recommended search engine?"

Sun Zhengyi had once again grasped a sore point for Yahoo—indeed, the "care" from Netscape was about to vanish.

As the latter succeeded in its IPO, its internal shareholders and Wall Street were very dissatisfied with Netscape’s previous gratuitous promotion of Yahoo.

Any perceptive person could see that with over 90% market share, Netscape’s homepage was extremely valuable.

Because there were only three or four portal websites in Silicon Valley, but there was only one browser.

After monopolizing the platform, who would become the explorer browser’s homepage entirely depended on their financial strength.

Under the pressure from internal and external shareholders and considering the subsequent free browser policy, Dean agreed to the board’s bidding strategy.

After making the browser free, they always had to find other ways to fill the revenue gap.

Otherwise, the pressure from Wall Street would be even greater; Dean could only make a choice, letting Yahoo compete independently with its rivals.

After all, it was Dean who held shares in Yahoo, not Netscape.

The other shareholders weren’t obligated to consider Yahoo’s interests—it was business, and Dean couldn’t be forced to make decisions against shareholders’ interests.

However, this wasn’t so wonderful for Yahoo, since Netscape’s decision was announced.

Excite and Lycos were both gearing up to compete for the homepage rights of Netscape’s browser.

To Jerry’s knowledge, the bidding for the homepage could go as high as tens of millions of US Dollars.

The fee was high, and Jerry admitted it; he also admitted that 100 million US Dollars could indeed be very useful.

In this winner-takes-all new market, Yahoo’s future growth depended on whether it could continue to grow rapidly.

Therefore, it needed capital for growth.

It wasn’t hard to imagine that if Excite and Lycos had stronger financials than Yahoo, they would certainly seize this opportunity.

The question was, who would provide such capital? Would it be the venture capital firms here in Silicon Valley, or would it be through going public?

Jerry had been considering this issue, but now Sun Zhengyi had arrived.

This "outsider" seemed to have some kind of magical coolant flowing through his veins.

He had offered a sky-high check and was ready to enter the fray at any time, showing no sign of madness.

Jerry decided to discuss with David a little more, while they also waited for the other two shareholders of Yahoo.

Without a doubt, Sun Zhengyi’s proposal was tempting since going public involved risks of failure.

But on the other hand, Goldman Sachs had previously valued Yahoo, and their starting bid was 200 million US Dollars.

If Goldman Sachs could take Yahoo public, the benefits Jerry and David could gain would be greater.

Because by going public, they wouldn’t have to give up 30% of their shares—it might only be half or even less of what Sun Zhengyi demanded.

If financing was necessary, from such a perspective, maybe going public would be slightly more advantageous.

Sensing that the two men were leaning toward a decision, Sun Zhengyi once again broke the convention.

"Who are Yahoo’s competitors?"

Jerry and David were somewhat puzzled but still gave him the answer.

"Excite and Lycos."

Sun Zhengyi turned to his assistant and commanded, "Write down those names."

After giving the instruction, he turned back to the two men.

"If I can’t invest in Yahoo, then I’ll invest in Excite and completely obliterate you!"

Jerry and David were stunned as they looked at the slim figure before them.

Such arrogant, domineering words seemed out of place coming from his mouth.

But precisely Sun Zhengyi’s threat hit Yahoo’s vulnerability.

In the competition among internet search engines, there could only be one winner.

Therefore, whichever company the investor who could write a 100 million US Dollar check chose to support would win the competition.

Jerry and David were again left dumbfounded; they had never before encountered an investor like this.

Just as they were uncertain, a conflicting voice came from outside the door.

"I wouldn’t recommend that, Mr. Sun."

Thump—the door was pushed open, and Dean walked in with Moritz.

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