You call this entrepreneurship?

Chapter 249 Backstab
Xiong Xiaoge has been working in venture capital for so many years and has seen all kinds of entrepreneurs.

There are people who embezzle money in various ways, I have seen people who are greedy for money, and I have also seen people whose ambitions are higher than the sky and whose appetites are deeper than the sea.

Qin Shaoyan has great abilities and a better appetite.

But this 360 million US dollars really left Xiong Xiaoge speechless. He did like to increase the valuation, but could you wait until we get on board before raising the valuation?

What's the point of you just bragging to us? With such a high valuation, the next round of financing must involve other venture capitals to share the risk.

What do other investors think of this valuation? They will definitely not accept it.

If no one recognizes it, what’s the point of having a high valuation?
Zheng Nan was silent for a moment and then said, "Boss Qin, you just started your business not long ago, so you don't know much about the valuation of Internet projects."

"There are corresponding methods for evaluating each project, such as looking at the market, data, revenue, and future expectations..."

"No matter how good the Qvod project is, its current valuation cannot reach 360 million US dollars. Your valuation is inflated."

Qin Shaoyan pondered for two seconds, "First, let's define what is an overvaluation."

"When a project or a company's assets do not match its value, it is called an inflated valuation."

"First of all, the $360 million value of Qvod was not announced by me, but was recognized by outstanding foreign peers."

"Secondly, video websites are a new concept and a new track in the Internet industry, and Qvod is the first video website in China. The evaluation standard should be higher than the market value, and its potential and future expectations are also the highest."

"Finally, Internet companies are emerging industries that are completely different from traditional industries, and we cannot use the old valuation methods to constrain new industries."

"Old people should follow the old rules, new people should follow new rules. It is not feasible to use the old rules to restrain new people."

"You are stifling market innovation and hindering the progress of Internet companies."

"I think Qvod's valuation is not overvalued at all, it's just too high."

Xiong Xiaoge couldn't hold it in any longer. "What do you mean by using old valuation methods to constrain new industries?"

"I've been in venture capital for so many years, but I don't understand valuation as well as you do, right?"

Qin Shaoyan said sincerely: "That's hard to say."

Xiong Xiaoge laughed out of anger. It has been exactly ten years since the first Internet company in China, Yinghaiwei, was founded in 1995. There are hundreds of companies engaged in the Internet industry in China, and there are countless investment cases.

IDG began investing in Tencent in 1999, and Internet companies such as Baidu and Sohu have also participated in the investment.

Now, a young man who has been engaged in Internet business for a year and a half actually said that Xiong Xiaoge does not understand Internet valuation. This is really a bit against the will of Heaven.

Xiong Xiaoge stared at Qin Shaoyan and said coldly: "Then I would like to ask Mr. Qin, how should the Internet be valued?"

At this time, Qin Shaoyan finally relaxed and thought that this was the right way to chat.

Next, you will get into my rhythm. Didn’t you say that my valuation was inflated? I will write it down for you... and talk about the Internet valuation in detail.

In fact, Qin Shaoyan didn’t understand any valuation methods. He had only heard about Berkus, sum of risk factors, scorecard valuation, comparable transaction method, etc.

However, as the Internet is an emerging thing, there were no applicable valuation standards at the beginning. Only after fierce competition in the market did some valuation standards gradually emerge.

In today’s Internet industry, it is hard to say how much a website is worth during the early days of entrepreneurship.

One is to look at various user data, and the other is to look at profitability and future market expectations.

How did the previous Internet bubble come about? The concepts of Internet companies were hyped up one after another, and their valuations kept getting higher and higher, all based on data.

To this day, looking at data is still a common method.

If there is no profitability and only the data is considered, then the valuation is very false, but investors cannot say that the data is worthless.

What does the Internet look at if not data?
How to value data is more difficult.

"Boss Xiong, that's too much. We are just discussing and learning from each other." Qin Shaoyan pondered for two seconds. "This Internet industry may seem like one industry, but some of the websites have very different businesses, just like two industries."

"For example, Penguin and Alibaba, one is an instant messaging software, and the other is an online e-commerce company."

“Surely the valuation methods for these two companies are different?”

Xiong Xiaoge glanced at Qin Shaoyan and said nothing, but his expression became obviously serious. He wanted to hear what Qin Shaoyan had to say.

"I have bought some Penguin shares before and have done some research on Penguin." Qin Shaoyan said confidently, "I think Penguin's current valuation is obviously too low."

“First, the value of an Internet company depends on its number of users, node distance, monetization ability and monopoly premium.”

"According to Metcalfe's Law, the value of an Internet company is proportional to the square of the number of users. The more users there are, the greater the value of the company."

“The value of a network is not only related to the number of nodes, but also to the distance between nodes. The distance between network nodes is determined by exogenous factors such as technological progress and infrastructure construction, and endogenous factors such as the network’s content and business model.”

“The Internet is open, but not equal. An important feature of the Internet is that the winner takes all.”

"In the field of instant messaging, Penguin is the only dominant player, but no one considered its monopoly premium when it was valued. This is a very low-level mistake."

"Everyone is focusing on its monetization ability, and they place too much emphasis on the monetization ability of the Internet, which results in the monetization ability being overweighted as one of the valuation factors when making valuations."

Xiong Xiaoge was very surprised, "Monopoly premium?"

"Yes, it's the monopoly premium." Qin Shaoyan said seriously, "There is only one instant messaging software on the market, plus a huge user base. As long as we find a way to monetize it, its value will definitely double."

Xiong Xiaoge nodded thoughtfully. He had always been optimistic about the potential of Penguin, but it was a pity that he gave up halfway.

"The same logic can be used to prove the value of Qvod." Qin Shaoyan changed the subject and said, "As an emerging track of the Internet, the value of video websites must also have new evaluation standards."

"The data of our website has been growing rapidly, especially the monthly active users. The user stickiness of our website is also quite good. These can be used as the expected future value of Qvod."

"Once we find the right monetization method, the company's profitability will be unquestionable. Everything is ready, and we just need the right momentum."

"According to Metcalfe's Law, coupled with the monopoly of China's No. 1 video website, isn't it reasonable that the valuation is somewhat high?"

"Right, Mr. Zheng?"

Zheng Nan couldn't handle this.

I said that your valuation is overvalued, but you first defined what overvalued means.

Finally, tell me that a high valuation does not mean an inflated valuation.

Then he used the monopoly premium and Metcalfe's law to prove to me that the high valuation was reasonable.

Zheng Nan didn’t know whether it was reasonable or not, but he was speechless at this point.

Qin Shaoyan continued, "Qvod's valuation is first of all related to industry factors. Generally speaking, the higher the industry ceiling and the faster the market growth rate, the higher the valuation multiple. Usually, the latest financing valuation data of companies in the same industry is used as a reference."

"Qvod is competing with YouTube, and YouTube's revenue is more than one billion US dollars."

"Secondly, valuation is often positively correlated with the company's growth expectations. The stronger the company's growth expectations, the higher the valuation multiple."

"Finally, valuation will also be affected by factors such as market supply and demand. Valuation is the result of inquiry. There is no calculation formula, nor is there a right or wrong answer. It ultimately depends on the negotiation results of both parties."

"The current situation is that YouTube has given an acquisition price. Is there anything wrong with discussing the valuation of Qvod based on this acquisition price?"

Xiong Xiaoge sighed and said, "You are right. I hope that when other venture capitalists come to raise funds, your words can convince them."

"As long as they believe it, I have nothing to say. I will just sign and pay the money." After saying that, he stood up and walked towards the door.

Zheng Nan also said, "Mr. Xiong and I agree. If other venture capital firms can accept this valuation, then we at Sequoia will invest even if we have to sell everything we have."

Then he stood up and pretended to leave.

Xu Xin was a little confused and looked at the two of them in surprise. Let's not talk about this anymore.
"Wait, everyone, please stay." Qin Shaoyan said immediately, "I have something else to say."

Xiong Xiaoge stood at the door and turned to look at Qin Shaoyan, saying teasingly: "You have three chances."

Qin Shaoyan hesitated for a moment and said, "Boss Xiong, there are no outsiders here. Everyone present is a shareholder of Qvod.com. I will just speak my mind."

"I didn't set the price of $360 million."

Xiong Xiaoge said impatiently, "One last sentence."

Qin Shaoyan said sincerely, "In fact, I never thought about selling Qvod."

Xiong Xiaoge looked at Qin Shaoyan speechlessly, "Boss Qin, which of your words is true?"

He now has no trust in Qin Shaoyan. This guy is a liar. He just said that he would tell the truth to his own people, but listen to what he said, there is not a single truth.

Qin Shaoyan was stunned, "What I said is true."

At this moment, the office door was suddenly pushed open, and Zhang Pingyi rushed in with a serious face.

"Mr. Qin, something happened." Zhang Pingyi was about to speak, but when he looked at Xiong Xiaoge and the other two in the office, he closed his mouth again.

Qin Shaoyan was a little surprised. "If you have anything to say, just tell me. There are no outsiders here."

Zhang Pingyi hesitated for a moment and said with some embarrassment: "David Banks wants to take people away."

"Go?! Where to go?" Qin Shaoyan was stunned. "Why are you going when you haven't paid yet?"

"He just received a call and said the negotiations were cancelled." Zhang Pingyi said helplessly, "The acquisition plan has been terminated."

Damn it? !
Qin Shaoyan was stunned for a moment, then became angry.

What the hell is this?
What the hell is David Banks doing?

It was clearly agreed before that the bid would only be 240 million US dollars, but the first price that popped out was 360 million.

He was directly put on the stand by Qin Shaoyan. Facing the questioning of Xiong Xiaoge and others, he managed to fool them with great difficulty.

Now that I've listed the price, you say you don't want to buy it.

I'm here giving a fucking lecture, and then you stab me in the back.

I am the major shareholder of YouTube. I haven't asked you to withdraw yet, but you just left me here and ran away.

Which side sent you as a traitor?

At this time, Xiong Xiaoge was also a little confused. He looked at Qin Shaoyan and then at Zhang Pingyi, and said with a serious face: "Qin Shaoyan, what on earth are you doing?"

Qin Shaoyan frowned, "Don't panic yet, let me ask what's going on."

"Boss Xiong, please go to the next room and take a rest first."

Zhang Pingyi quickly took Xiong Xiaoge, Zheng Nan and Xu Xin out of the office.

Qin Shaoyan picked up the phone and sent a text message to Edward, "Bring David Banks to the office immediately."

Soon Edward led the person over, entered the office and closed the door.

Qin Shaoyan looked at David Banks sitting on the sofa without saying a word, staring at him coldly.

David Banks felt a little awkward. "Mr. Qin, can I have a cup of coffee?"

Qin Shaoyan suddenly asked: "Why cancel the acquisition negotiations?!"

David Banks hesitated and said, "This is what the company's shareholders want."

"Am I not the largest shareholder of the company?" Qin Shaoyan laughed angrily, "Which shareholder am I?"

"It was a representative from Microsoft," David Banks said directly. "They called me directly and asked me to cancel the negotiation."

"The person sitting in front of you is YouTube's largest shareholder, who owns 51% of the company's shares." Qin Shaoyan emphasized again, "Without my consent, no one can cancel this negotiation."

"Even if the company's shareholders' meeting votes, I have the final say."

David Banks was silent for a moment, "Boss, I'm just a worker, and I'm in a difficult situation too."

Qin Shaoyan frowned, "I'll tell Davis in person."

"Boss," David Banks suddenly said, "The Microsoft representative is not Mr. Davis Hansen."

Qin Shaoyan was really stunned. "If it's not Davis, then who is it?"

"It's Steve Bowman."

"Who is that?" Qin Shaoyan asked in confusion, "When did Microsoft's representative change? Why didn't anyone notify me?"

David Banks also said helplessly: "I don't know either. This is the notice I received."

Qin Shaoyan immediately realized that there must be a problem that he didn't understand, and this problem caused the acquisition to fail.

"You guys go out first." Qin Shaoyan calmed down and said, "David, take your people back to the hotel to rest first. Don't leave Beijing for the time being. I will communicate with Microsoft and Sequoia."

"OK." David Banks nodded. "If you get any results, please call me and let me know, Boss."

After Edward led everyone out, he closed the office door.

Qin Shaoyan picked up his phone and tried to call Davis, but found that the call was not going through.

So he called Taylor at Sequoia directly.

Taylor's call was quickly connected, and he complained, "Damn it, I'm about to go to bed, and I have to answer your call so late."

"Sorry, I have something urgent to do." Qin Shaoyan said casually, "Taylor, it's about YouTube."

Taylor suddenly laughed. "Which one are you referring to? Is it Yahoo's acquisition of YouTube, or YouTube's acquisition of China's video website?"

"Huh?" Qin Shaoyan was a little surprised, "You know everything."

"Of course, I found out about these things very quickly." Taylor said with some satisfaction, "I also know that this is all your work."

"I have to say that your plan is indeed excellent and great."

Qin Shaoyan continued to ask, "Then do you support me?"

"Of course I support it," Taylor said, "but what about YouTube's acquisition of the Chinese video website?"

“I’m not optimistic.”

(End of this chapter)