Rebirth of wealth and freedom starts from the World Cup

There are generally several steps for a startup to complete its Series A financing.

The first step is preliminary negotiation: the startup company makes initial contact with the venture capital institution to introduce the company's development status, business model, etc., so that the investment institution can have a preliminary understanding of the company.

The second step is to submit a business plan: Startup companies need to submit a detailed business plan to venture capital institutions. This plan usually includes key information such as market analysis, competitor analysis, financial forecasts, etc. to help investment institutions comprehensively evaluate the company's potential and investment value.

The third step is due diligence: After investment institutions become interested in a company, they will conduct a detailed due diligence on the startup. This stage is mainly to understand the company's operations, management team, financial status, legal affairs and other aspects to ensure the safety and feasibility of the investment.

Finally, there is negotiation and signing: after due diligence, if the investment institution decides to invest, the two parties will enter the negotiation stage of financing conditions. This includes determining key terms such as investment amount, equity ratio, and investment period. Once an agreement is reached, the two parties will sign a formal investment agreement.

Zhao Zixuan had already discussed preliminary negotiations with Huang Zheng and had also read Pinduoduo's business plan. As for due diligence, other investment institutions might be more concerned about it.

But for Zhao Zixuan, who already knew the potential of Pinduoduo, the so-called due diligence was nothing but a waste of time.

The final negotiation and signing are what he values ​​most.

After Zhao Zixuan sat down, he wanted to find Boss Duan of BBK to say hello. However, to his surprise, after he glanced at the many bosses and investors in the conference room, he did not see Boss Duan.

Aren’t you even going to participate in such an important round of A financing?
It seems that Huang Zheng, the so-called teacher, is not very competent.

Zhao Zixuan was thinking this in his mind, when at this moment, an investor named Chen Xiaohong who claimed to be from H-Capital came forward to talk to Zhao Zixuan.

She showed her white teeth and asked with a smile: "Mr. Zhao, what do you think of the rapid growth of Pinduoduo's data?"

Zhao Zixuan did not answer the other party's question immediately, but looked at her appearance.

He thought Chen Xiaohong was quite pretty, except that her skin was a little dark, similar to the color of wheat.

This skin color may be more popular in the eyes of some European and American men, but in the eyes of the vast majority of Chinese people, aesthetics such as fair, young and thin are more in line with the traditional standards of the descendants of Yan and Huang.

Zhao Zixuan pondered for a moment and said, "It is said that everything is difficult at the beginning, but Pinduoduo's beginning was unusually smooth. This is indeed a little unbelievable. It is normal for Mr. Chen not to believe this data."

He did not make a clear statement, but mainly hoped that this time he could lead the investment in Pinduoduo at a lower price, so he secretly hoped that other investors would be reserved about this financing.

However, he also knew that there were many knowledgeable people in this financing meeting, and it would not be easy to take the lead.

In exchanging opinions with everyone, Zhao Zixuan gradually understood why most investors missed out on Pinduoduo.

The vast majority of investors present were skeptical about Pinduoduo's rapid growth data and were confused by its business model (from the self-operated C2B model for fresh fruits and vegetables to the social e-commerce model with merchants entering the full platform).

Some people even believe that the company may have adopted unfair means, and some even bluntly say that Pinduoduo has "evil intentions."

Another group of people focus too much on the concept of "group buying" and believe that it is difficult to make it big and strong.

Some people are pessimistic about Pinhaohuo's fresh food e-commerce model, believing that it simply will not work.

Xu Xin, who had invested in NetEase and JD.com, was also present at the event. Her views actually represent the main reason why most people missed Pinduoduo.

Today Capital had already conducted research on Huang Zheng's company in the early stages of Pinduoduo, and Xu Xin felt that there were some problems with the company's model at the time. Even after Pinduoduo transformed its business, it still failed to win Xu Xin's favor.

In fact, Xu Xin had conducted in-depth research. She even asked her employees to call many of Pinduoduo's users, who were mainly concentrated in third- and fourth-tier cities and were around 40 or 50 years old.

However, even so, she ultimately missed the opportunity.

Xu Xin later concluded: "We don't really understand the lifestyle of the lower classes."

It was only after Today Capital conducted field research that it came to a profound realization that among the 14 billion people on the mainland, 10 billion people do not actually have sufficient financial capacity to upgrade their consumption.

At the critical moment of the merger between Pinduoduo and Pinhaohuo, Yuri, the founder of DST, and Liu Qin, the founder of 5Y Capital, had exchanges with Huang Zheng. They observed that the domestic market seemed to be shifting from consumption upgrading to consumption downgrading, but Huang Zheng did not explain this phenomenon in detail or provide more relevant data.

Pinduoduo was successfully listed in just three years, and its market value quickly reached US$300 billion.

It can be said that missing out on the investment opportunity in Pinduoduo and Huang Zheng later became a common regret for the vast majority of investors in the domestic venture capital circle.

This regret even has a subtle impact on subsequent investment decisions.

For example, when Tang Binsen, who also came from the game industry, appeared, he reminded people of Huang Zheng in the past. Well-known investment institutions such as Cathay Capital and Sequoia Capital also invested in these two companies at the same time.

Fengshang Capital invested in Yuanqi Forest in its B round. Its founder Gao Feng once mentioned Pinduoduo in an interview and said: "I can't understand why people who make games would switch to selling vegetables."

Therefore, when Tang Binsen sought financing, he realized that another similar opportunity might arise.

However, compared with the above two reasons for missing out on Pinduoduo, a more fatal and common mistake may have come from a common view in the investment circle at the time: that is, it was believed that Alibaba and JD.com had already consolidated their market position and the opportunities for platform-based e-commerce had been greatly reduced.

An investor of Sequoia revealed that in the second half of 2015, with the sharp decline of the O2O market, Sequoia's early investment focus shifted from consumer Internet represented by e-commerce O2O to other fields such as SAAS, Internet medical care, education, and technology.

This decision undoubtedly seemed wise at the time.

However, there are very few investment institutions like Sequoia that have strong error correction and follow-up capabilities.

Therefore, when Pinduoduo's Series B financing door was closed, this capital myth was completely out of reach for most people.

Pinduoduo’s financing story is a business case that is always worth reading.

It reveals the most difficult part of investing: how to maintain firm conviction in the face of true non-consensus.

At the same time, it also confirms a proverb: opportunities are often hidden in the unknown.

As Huang Zheng said in an interview: "We have found a new business breakthrough in a saturated field that seems to have no opportunities, so there is no need to waste a lot of resources on excessive competition."

Unlike those investors who missed out on Pinduoduo, Zhao Zixuan knew very well that only by truly understanding and believing in Pinduoduo's potential could he stand out in this round of financing.

Therefore, he decided to use his advantage of being far ahead of the times to lead this controversial Series A financing.

"Mr. Huang, it's getting late and everyone has their own schedules, so let's just move on to the bidding phase."

As soon as Zhao Zixuan finished speaking, the noise in the conference room subsided immediately.

Huang Zheng was originally standing in front of the PPT, ready to continue his presentation, but Zhao Zixuan's proposal changed his mind. He realized that the time of this heavyweight investor was precious, so he decisively decided to enter the financing bidding phase in advance. Chen Xiaohong noticed Huang Zheng's attention to Zhao Zixuan, and she turned to Zhao Zixuan curiously and asked, "Mr. Zhao, it seems that you are ready to invest?"

Zhao Zixuan met her gaze, his eyes gleaming with confidence, and he responded calmly: "Since we are here, we can't make this trip in vain."

Chen Xiaohong smiled knowingly and said tentatively, "If Pinduoduo can get the support of Heguang Technology, the prospect of this investment will undoubtedly be very optimistic. I am also somewhat tempted and want to invest as well. Mr. Zhao, how much do you plan to invest?"

Zhao Zixuan was silent for a moment, then stretched out a finger but said nothing.

Chen Xiaohong tried to guess: "One million?"

Zhao Zixuan shook his head slightly, indicating that she should continue guessing.

"Is it 1000 million?" Chen Xiaohong tried again.

Zhao Zixuan still shook his head, with a mysterious smile on his face.

Chen Xiaohong raised her voice in surprise: "It can't be 100 million, right? Are you really so confident in Pinduoduo?"

Zhao Zixuan smiled calmly and corrected him, "No, my confidence does not only come from Pinduoduo, but also from Huang Zheng. I have always believed that investment is first and foremost about investing in people. Huang Zheng is the person I am optimistic about."

Chen Xiaohong frowned slightly and questioned: "Having said that, don't you think Pinduoduo's data growth is a bit abnormal?"

Zhao Zixuan glanced at her and asked, "Do you think they tampered with the data and deliberately deceived us?"

Chen Xiaohong asked back: "Isn't that the case?"

Zhao Zixuan smiled slightly, "I can only say that different people have different opinions."

It is inevitable that the data unilaterally issued by Pinduoduo is true or false, and there is water in it. If you invest based on the data alone, many companies worth investing in will not be able to stand firm in the early stages.

In fact, if you put yourself in his shoes, if Zhao Zixuan did not have a vision and perspective that transcends the times, he would probably be unlikely to invest large amounts of money in a startup company with "evil intentions."

After all, a startup's reputation is also very important.

As Huang Zheng announced the start of bidding, the first company to make a financing offer was IDG, which offered US$100 million.

Zhao Zixuan was not very familiar with this investment company. Chen Xiaohong saw his confusion and explained to him: "IDG is Zhang Zhen's old company."

Zhang Zhen, this name is not unfamiliar to Zhao Zixuan.

In his impression, Zhang Zhen is undoubtedly one of the biggest winners in Pinduoduo's turbulent early investment stories.

The most talked-about part of the legend of Zhang Zhen's investment in Pinduoduo is the hot pot banquet.

It was the end of 2014, Gaorong Capital organized a unique hotpot party, dozens of founders gathered together, including Huang Zheng.

During the dinner, Huang Zheng casually mentioned his blueprint for social e-commerce.

He asked Zhang Zhen a seemingly simple but profound question: "Do you know what percentage of Costco's total sales is made up of non-physical merchandise?"

At that moment, Zhang Zhen, who claimed to be well-informed about this field, was speechless.

Before they finished their hotpot, Zhang Zhen was already impressed by Huang Zheng's unique insights. He saw that Huang Zheng looked at the problem from a different perspective, so he gave a valuation of up to $6000 million without hesitation.

This number even shocked Huang Zheng.

Huang Zheng pondered for a moment, left the table on the pretext of something, and after a brief discussion with his partner Hu Zemin in the bathroom, he readily accepted Zhang Zhen's proposal.

The whole process took only fifteen minutes.

Gaorong Capital, as a leader of the new generation of VC in China, has unique investment vision and a low-key approach.

LPs from many funds have praised Zhang Zhen’s extraordinary qualities - he can always keenly identify those "really great people" and invest heavily in them without hesitation.

Huang Zheng and Chen Xiangdong (founders of Gaotu) are outstanding representatives of this investment philosophy.

However, this is just the beginning of the story. What really made Gaorong Capital famous was Pinduoduo's Series B financing.

At that time, Pinhaohuo was at a critical juncture in its transformation into Pinduoduo, and the road to financing was extremely difficult.

Although the domestic VC market has just experienced a wave of decline in e-commerce and O2O, and the story of Pinhaohuo is still at the level of "B2C self-operated business focusing on fruit group buying", Zhang Zhen once again firmly chose to believe in Huang Zheng and his own vision.

Someone once reminded Zhang Zhen to pay attention to investment risks, but he remained unmoved.

With his persistence, Gaorong Capital became the key force in Pinduoduo's Series B financing.

This piece of history is widely circulated in the investment circle. Some people even summarize it as: "Look at the data when you shouldn't look at the data, and don't look at the data when you should look at the data."

Just when most funds were backing off, Zhang Zhen once again invested in Pinduoduo.

Professional investors have analyzed in hindsight that Pinduoduo's Series B round was actually divided into two rounds: the first one was the life-saving money jointly contributed by Huang Zheng and his best investors.

This includes a key amount of funds from Gaorong Capital.

According to conservative estimates, Pinduoduo will bring at least US$70 billion in returns to Gaorong Capital.

An article analyzing Huang Zheng on the Internet wrote: For investors, missing out on Pinduoduo may be a pity, but for Huang Zheng, this may be an unnecessary persuasion - as long as performance continues to rise, explanations are redundant.

Because he had heard the legend about Zhang Zhen a long time ago, when Chen Xiaohong mentioned this legendary investor, a hint of anticipation flashed in Zhao Zixuan's eyes.

He looked around, as if he wanted to catch a glimpse of Zhang Zhen, and asked Chen Xiaohong, "Which one is Zhang Zhen?"

His voice was full of admiration and curiosity for this legendary figure in the investment world. (End of this chapter)