Yao Xin: My five financing experiences

Yao Xin: My five financing experiences

Yao Xin, born in December 1980, is from Zhengzhou City. Yin, founder and CEO of Shanghai Juli Media Technology Co., Ltd. and founder of PPLIVE.

A founder born in the 1980s has gone through five rounds of financing and successfully got SoftBank’s Masayoshi Son to spend a huge sum of US$250 million. What is his secret to conquering investors? What kind of ups and downs did he go through in the process? What inspiration does the bloody competition in the video industry give to others?

Lecturer: Yao Xin, founder of PPLive

I started my business on campus in 2004. There were three founders at first. Besides me, one was a technical manager who used to work in a company and was my boss at the time, and the other was a private entrepreneur with whom I had known each other for many years. Also the provider of my early funding.

Four months after starting my business, I inexplicably received my first investment from SoftBank. The reason for the investment is simple, because we are technologically innovative and were the first to develop B2B live streaming and on-demand technology. When meeting the investor, he said, "What's your valuation?" I don't know what valuation is, so I assumed that the three founders of us all work, how much annual salary can we get in a year, which is calculated as 200,000-300,000 yuan per person. , three people won 1 million yuan. Therefore, our first valuation was RMB 1 million, and we held 49% of the shares after financing.

I thought financing was very simple at the time. After I got the money, it was time to start banging the gongs and drums. I didn’t even know what was going on with the investment account, so I signed the agreement and ran away, and came back to continue development. Later, I discovered that there was a problem. After talking to everyone, I realized that it would be good for angel investors to get 20% of the equity.

In September 2005, a prosperous Internet boss came to me and said, "I think you are doing a good job, but I heard that you were diluted a lot in the first round, and you gradually withdrew from that company." Don't do it, bring out the technology, I will give you more than 5 times the investment, at least 1 million US dollars, I will take up 25% of you at most, and pull you out. ?Only then did I realize the cruelty of real life and knew that I had sold it cheaply. When someone offers a very high price, do you feel excited? Yes, you do. I went back and thought about it for a long time, and I couldn't tell too many people. I could only think about it by myself, which was a struggle. I thought twice about it at that time, and later I made a special trip to Beijing to reject the big boss, because I felt that it didn't matter if I failed to start a business. The most important thing was credibility. I had to be a person of high moral character, and finally I made this choice.

One year after starting the business, PPLive has initially achieved revenue balance. I was developing in Wuhan and starting a business on campus. I thought it was pretty good, but the thing I regretted the most was getting financing. Once I got it, it was a time bomb. When I started my business, it was not for business and IPO, but because I liked to change the lives of people around me. The sense of accomplishment is what really motivates me. At that time, I was particularly opposed to commercialization. I felt that it was good to provide technology and maintain a pure technology model. However, with the injection of investment, the company also made a series of adjustments.

In 2005, I felt that the company could survive, but it was not enough to develop. Therefore, starting in 2006, PPLive entered a gradual transformation process, transforming from a technology-based company to an Internet operating company, spinning off the platform that provided technical solutions, and focusing on PPLive online TV services.

In 2006, the number of users began to grow rapidly. We also conducted a round of financing of US$5 million at the beginning of 2006, and then the company moved to Shanghai. At the beginning of 2007, we received another round of financing, with a joint investment of US$21 million from DFJ, Baidu, and Lanchi.

From then until 2008, our users were growing rapidly, from tens of millions to hundreds of millions, and the number of daily users expanded rapidly from less than 1 million in the early days. to over 10 million. I thought that if we followed the path of an Internet video company, we might go public in 2010 or 2011, but I didn’t expect that many unforeseen events happened in the middle, which gave us several blows.

First of all, there was the May 12 Wenchuan Earthquake. All video services were basically suspended for a month. No entertainment services were provided. All earthquake reports were conducted. There were problems with the operation of the business model. The second blow was the Olympic Games. The Olympic Games allowed the entire video industry to appreciate the power of media for the first time. The collective was robbed by CCTV, which obtained the copyright. If we go to the International Olympic Committee at the earliest, we can get all the copyrights for about 1.5 million US dollars, and it will be exclusive. But the final value of CCTV sold to each company was 20 million yuan, equivalent to 4 million US dollars. At that time, our competitors took it. I thought that before differentiation, we must first homogenize it, so I gritted my teeth and took it. However, the advertising sold was very small, only about 4 million to 5 million yuan, which is equivalent to 80% of the money. Smashed in. There are several video companies that did not spend any money and fell to second or third place after half a year. If I hadn't bought it at that time, I would have basically been ready to close down.

The third blow is the economic crisis. From April to June 2008, Youku in the video industry received US$40 million, and Tudou received US$60 million. We did not launch the third round of financing in 2008. This financing was delayed for a long time because we wanted to do a good job in the company's internal business before the Olympic Games. After the Olympics in September, I went to Silicon Valley in the United States to promote financing. There was a Washington Interactive Bank opposite the hotel where I was staying. When I came back, I found that the flight newspaper said that this bank was facing bankruptcy. I felt a bit dangerous at the time, but I didn't know that the economic crisis would affect China.

Within one month, the economic crisis brought the video industry from a hot spot to a freezing point. I went to the United States to fudge financing, prepared three plans, three different quotations, and obtained three financing negotiation documents. A month later, some investors took the initiative to ask to stop investment activities, and some even reached the point of failure, and the financing window for the entire industry was closed.

Some investors have internally put forward a requirement that more than 50% of their projects must be cut. I remember that there was a PPT that Sequoia Capital made for all companies circulating in Silicon Valley. The last sentence was: "Who is your boss?" The last four words were: "Cash is king." At that time, one of our investors, Defengjie, invested in a number of video websites. In addition to PPLive, there were also UUC and Ku6. Of the last three, only one could be retained. As a result, Ku 6 was sold to Shanda in 2009 for less than US$40 million. This was a very cruel process. This made me realize once again that investors are the icing on the cake. They must raise money when they have money. If they lack money to raise money, they will lose the price of financing.

Overseas, everyone advocates light assets. Having abundant cash flow before financing is also required in the process of starting a business. At the end of 2008, the whole company held an annual meeting. I played a video to the team. It was the most popular "Soldier Assault" that year. It quoted Xu Sanduo's words: "Don't abandon, don't give up." The economic crisis is actually the best opportunity to kill your competitors, because you cannot do too many things at this time. You can only choose one thing, which will differentiate you from your competitors. From 2008 to 2009, we were creating differentiated competition. We believe that if this industry wants to develop, it cannot just rely on traffic to survive. It really needs to create a media, because only the media can have advertising premiums, and the credibility of the media is spread to the products. This is the intangible value of sales, and this value can defeat competitors.

Later in 2009, also by chance, Shanghai Science and Technology Investment of the Shanghai Municipal Government became one of our two strategic partners (the other is Baidu). It was a very small shareholder, but it gave us A lot of policy support helped us survive the 2009 economic crisis. We completed the fourth round of financing in 2009, with an amount of about US$14 million, and we lasted until the end of last year.

In the second half of last year, we continued to carry out financing plans and were doing "dual share sales". Because I experienced the economic crisis in 2008, I could not wait until I was short of money to raise funds. I had to prepare for a rainy day. On the one hand, I raised funds, and on the other hand, I prepared to go public based on the stock market conditions at that time.

At the end of last year, Nasdaq was crazy about the Chinese concept. We saw that Lanxun performed well after its listing, and Dangdang and Youku were also preparing for listing. So we decided that the first choice at that time was to conduct private equity. If the private equity failed to succeed, we chose IPO. , only in this way can we have a better negotiation situation with investors through double preparation.