novelden Chapter 68: Consensus Reached, Everyone Gets On Board
Chapter 68: Consensus Reached, Everyone Gets On Board
Chapter 69: Consensus Reached, Everyone Gets On Board
Lin Chuan's pre-investment valuation of 750 billion is actually an exorbitant price.
DeepBlue Technology may grow to a scale of three trillion yuan in ten years, or even higher, but that's all in the future.
Clearly, Lin Chuan's demand for 750 billion was intended to leave more room for negotiation with investors.
After much back-and-forth between the two sides, a consensus was first reached on the valuation issue, which was one of the many points of contention.
The final pre-investment valuation was set at 450 billion, and all seven investors agreed to this figure.
The second point of consensus was the proportion of equity to be transferred.
The original plan was to sell 20% of the equity, which the seven investors intended to divide equally. However, for easier calculation, they proposed taking 21%.
Each institution holds a 3% equity stake.
Lin Chuan readily agreed, since mandatory buybacks were inevitable anyway, so an extra 1% wouldn't be a big problem.
The third point of consensus is that for specific projects involving core trade secrets, the right to know will only be granted to shareholders who participate in the project or a specific proportion. In short, the seven major investors have no right to view the company's core trade secrets, and only have the right to know ordinary public information such as the company's articles of association and regular financial reports.
The fourth point of consensus was the concerted action agreement, which meant that if the investors signed it, they would lose their voting rights and say in DeepBlue Technology.
Lin Chuan was adamant on this point, leaving no room for negotiation.
The agreement was about ensuring control of the company. Seeing that there was no room for negotiation, the investors did not dwell on it and all agreed to sign the concerted action agreement.
The fourth point of consensus was the annual repurchase premium rate. Lin Chuan offered a premium of +50% per year, while the investors demanded that it double every year.
Ultimately, both sides made some concessions and reached a compromise, locking in an annual premium of +70%.
The biggest point of contention is still about the start time of the repurchase.
The investors want to wait at least ten years before initiating the buyback process. Since a mandatory buyback agreement has to be signed anyway, they have decided to trust the founders to make DeepBlue Technology stronger and bigger.
If you don't believe it and think Lin Chuan can't succeed, then you shouldn't get on board at all.
If you decide to invest this money, then you must firmly believe that DeepBlue Technology can develop.
For investors, the later the buyback takes place, the greater the absolute return will be.
If the shares are repurchased after ten years, even without considering the cumulative dividends generated during that period, it would still bring a sevenfold return on investment.
The investors wanted to set the timeframe at ten years from now, but Lin Chuan refused.
"How about this, let's add a precondition." Lin Chuan looked at the group of investors and said, "When DeepBlue Technology's cumulative dividends exceed 3000 billion, the repurchase conditions of the founder or DeepBlue Technology will be met."
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"In this way, in addition to the fixed premium, each of you will receive an extra dividend from this 3000 billion cash dividend. With the early repurchase and this dividend as a supplement, you will have earned quite a bit. Exiting earlier also saves time and improves capital utilization."
In this round of financing, 21% of the equity was transferred to the seven major investors. If the dividends are distributed at 3000 billion, the investors will receive 630 billion in cash dividends.
Cash dividends alone can generate a return on investment of +558%.
According to the agreed equity distribution plan, each of the seven capital institutions should theoretically receive 90 billion yuan in cash dividends.
This additional repurchase condition means that, assuming DeepBlue Technology distributes 3000 billion yuan in dividends next year, the investors will not be able to refuse if Lin Chuan initiates the repurchase process next year.
If the total amount of dividends distributed does not reach 3000 billion, the shares cannot be repurchased within ten years and can only be repurchased after ten years.
Lin Chuan clearly didn't want to be bound by time, and he estimated that the national team might enter the market in three to five years. At that time, he would have to free up equity, so he would naturally have to buy back the equity held by these investors.
They withdrew, and the national team entered the game.
"Mr. Lin, is that really true?"
The Sequoia Capital representative looked at Lin Chuan and hurriedly said something, surprising all the investors present.
For a moment, no one knew whether Lin Chuan was arrogant, delusional, or genuinely confident, and they didn't know where his confidence came from.
In the eyes of the major investors, even if DeepBlue Technology were given ten years to develop, it might not be able to come up with 3000 billion yuan in dividends, which is simply a pipe dream.
Lin Chuan certainly has the confidence to do so. Given time, DeepBlue Technology could easily distribute 3000 billion yuan in dividends annually.
At this moment, Lin Chuan calmly replied, "Of course it's true, everyone, what do you think?"
Upon hearing this, the seven investment institutions present exchanged glances.
Clearly, they were all tempted.
If this supplementary condition is written into the financing agreement, then exiting earlier won't matter.
As Lin Chuan previously stated, exiting early actually saves a lot of time and costs. You can take the money with interest and leave, and use that money to invest in other projects, thus improving capital utilization.
I agree.
,
The head of Jinsheng Capital was the first to speak, and the others were taken aback for a moment. Then the head of IDG Capital also spoke.
"I agree."
I agree.
"agree."
All seven major investors expressed their support for the plan without exception.
Next, Lin Chuan and the seven major investors spent another half hour exploring the details, and finally reached a consensus on all the differences.
In this round of financing, all seven major VC institutions, including Sequoia Capital, IDG Capital, Matrix Partners China, and Goldman Sachs, participated in the investment.
Based on a pre-investment valuation of 450 billion yuan, the sale of 21% equity would raise a total of 119.62 billion yuan, resulting in a post-investment valuation of 569.62 billion yuan.
The seven major investors each hold 3% of the 21% equity, with each contributing approximately 17 billion yuan.
"Mr. Lin, it's a pleasure doing business with you!"
'
"It's a pleasure working with you."
Lin Chuan shook hands with the heads of the seven investment institutions one after another. After the business was concluded, they took their leave.
The two sides have only reached a gentleman's agreement so far, and a formal agreement will not be signed so soon.
The drafting of the contract takes time, and the financing amount of nearly 10 billion is no small matter. Both parties need lawyers to review the contract in detail.
It was expected to take about a week, which coincided with the Spring Festival holiday, so it was decided to proceed after the holiday. Lin Chuan was not worried that the investors would back out if the time was delayed.
Even if the financing fails, it will not have any substantial impact on DeepBlue Technology.
On the contrary, the investors are worried that Lin Chuan might back out, since the additional 3000 billion yuan dividend condition is too difficult for them to achieve, and they are worried that Lin Chuan might change his mind.
After the Spring Festival holiday, the seven major investors gathered again at DeepBlue Technology on February 1st.
At 10:00 a.m., the two parties officially signed the financing agreement.
The signing ceremony took place in the same conference room as last time; there were no media, no reporters, and no flowers or champagne.
After Lin Chuan signed and stamped the document, the seven major investors finally felt relieved.
After the agreement was signed and the two parties exchanged contracts, the head of Sequoia Capital stood up first, extended his hand to Lin Chuan, and smiled, "Mr. Lin, it's a pleasure to cooperate with you."
"It's a pleasure working with you."
The other six investors also stepped forward and reached out their hands, and Lin Chuan shook hands with each of them.
The matter was thus settled, with all seven investment institutions participating.