2003: Starting with Foreign Trade

Chapter 391 A Powerful Financing Team

"If you ask me, Mr. Ma, you should just focus on making games. Games have unlimited potential for you. As for e-commerce, leave it to us. That way, you can concentrate your efforts on one area."

Perhaps it's because of the good financial report, but Pony Ma seems to be quite free lately. This is the second time Tan Jincheng has seen him.

He actually chose to sit in on the three-way negotiations with Orange Technology and Sequoia Capital.

Tan Jincheng's words were a bit unreasonable and arrogant, but Pony Ma just smiled. Internet companies want to do everything. They do have the idea of ​​doing e-commerce, but that is not their current focus.

Even in gaming, they're still nobodies.

In 2006, the domestic online game market reached a scale of 77.8 billion RMB, with an annual growth rate of 63%.

The industry is experiencing rapid growth, but competition is more intense than in previous years.

The top three companies in terms of market share are Pig Farm, Shengda, and Jiucheng, which together account for 57.2% of the market. These three companies have almost taken over 60% of the market, leaving so many other internet factories to share the remaining market. The competition among the smaller companies is fierce.

However, since Tencent's transformation and efforts last year, its game business has performed quite well. With the explosive popularity of its second game, QQ Speed, it has increased its market share to 7.7%, ranking fifth.

"Then, Mr. Tan, tell us how we should play the game?" Little Ma asked with a smile, not at all angry.

"Just do a good job with the operations, and make sure that equipment and characters don't disappear anymore. Ever since my classmate found out that I have a partnership with Tencent, he's been asking me if he can get a refund from you."

Pony Ma's face darkened; this was a dark chapter in Tencent Games' history.

In fact, after seeing how much money NetEase and Shenzhen Shengda made from games, Tencent quickly became the distributor for a game, which was its first game, QQ Triumph.

In an era when online game resources were scarce, as long as a game wasn't particularly bad, it could be quite profitable if it was managed even slightly well. But QQ Triumph was an exception.

Tencent, with absolutely no experience, ruined the game in less than six months. Equipment and characters disappeared inexplicably, data was abnormal, and the game was riddled with bugs.

In just six months, the number of online players dropped by 90%. Although it hasn't been shut down yet, it's actually been abandoned for a long time. This game not only didn't make money but also lost money, making a huge joke.

In fact, during this period, Tencent and Orange Technology had similar game strategies, both focusing on social interaction and casual mini-games. Tencent's QQ Games Hall had already overtaken Lianzhong Games Hall to become the largest online platform for casual games.

At its peak, QQ Games Hall had over 100 million concurrent online users, and it was the success of the Games Hall that solidified Tencent's direction in developing social mini-games.

The immense popularity of Happy Farm is why Tencent is so eager to import it – it perfectly aligns with Tencent's strategy.

"Don't hit someone in the face, Mr. Tan. That's not very nice. Everyone has moments when they're not very smart."

"Haha, just kidding, just trying to lighten the mood."

No one asked for a refund, but some classmates did ask Tan Jincheng in their high school group chat if he could give them some fertilizer after they found out that Happy Farm was created by him.

If Tan Jincheng and Zhang Xupeng were still at their high school, they would have become legends, especially Tan Jincheng.

During the National Day holiday, when the agreement was signed at the Shanchi Wangjiang Industrial Park, Tan Jincheng also took some time to return to his alma mater and donated some money. Zhang Xupeng also donated a batch of computers.

Since founding Flash, Tan Jincheng has donated a considerable amount of money, some of which were purely donations, such as to his hometown and alma mater. These donations were generally without any ulterior motives.

Some donations can help businesses run more smoothly, and this isn't unique to our country; it's a common practice abroad as well, all over the world.

Foreigners take this even further, donating to their own foundations.

In our country, at least in this day and age, very few entrepreneurs do things like this; their donations are truly substantial.

In the Tencent conference room, the group was chatting, mainly waiting for Kuang Ping to arrive. Kuang Ping had set off from Guangzhou that morning, but encountered some problems on the way, though he would be there soon.

The lineup of investors in the Series B funding round for Orange Technology, including Qiming Venture Partners, Sequoia Capital, Tencent Capital, and Orange Ventures, is quite impressive.

In investment terms that everyone can understand, the angel round is about tailoring the investment to the investor and taking a chance, while the Series A round is when the business model has been basically validated and proven to be feasible.

Reaching Series B indicates that the company has entered a period of rapid growth. As for Series C, it means that the company's profits and various data have improved, and it sees the possibility of going public, with some institutions preparing to jump on the bandwagon.

All that's left is the IPO. Orange Technology's angel round was invested by Tan Jincheng himself and his father-in-law Gu Hongshun. He took the most lucrative and riskiest part of the profits.

The equity dilution process skipped the angel shareholders. If the normal process had been followed, Tan Jincheng would have only held about 45% of the shares after the Series A funding.

After the A-share listing, Orange Technology's equity structure is as follows: Tan Jincheng 61%, Gu Qingqing 22.5%, Cheng Hao 1.5%, and Qiming Venture Partners 15%.

In the Series B round, all shareholders, including Qiming Venture Partners, will have to release shares. Since there are two shareholders, at least 15% of the equity will have to be released this time.

Cheng Hao expected to retain 3.5% of the 5% stake, and Tan Jincheng decided to honor that in this round as well. Combined with the release of employee stock ownership, Tan Jincheng is releasing a significant number of shares this time. Employee stock ownership isn't entirely free; it's divided into employee incentives and internal subscriptions. The internal subscription portion can still generate some return on investment.

As for how many shares Sequoia Capital and Tencent Capital each want, and whether Qiming Venture Partners wants to continue investing to prevent its existing shares from being diluted, these issues will be discussed once everyone is present.

Tan Jincheng's negotiation habit has always been to first settle the share allocation, and then discuss some minor details.

Once you've dealt with the hardest part, the rest will be easy.

Oh, right, there's also valuation. I believe both Kuang Ping and Sequoia have done an assessment. Kuang Ping is concerned about his own interests, and Sequoia is also concerned about its own interests.

Tan Jincheng himself wasn't really sure how much Orange Technology was worth right now.

But it's definitely more than 3 million.
-
Beicang, Shanchi Building.

In the Orange Technology office area, no one was focused on work today, and employees were whispering among themselves.

Managers including Cheng Hao and Gu Yanning were all very unsettled. CEO Gu Qingqing conveyed the news of Orange Technology's Series B financing to the entire company via internal email.

Regardless of whether the financing is successful or not, the company will take this opportunity to establish an employee stock ownership platform, giving all employees the opportunity to acquire company shares.

The specific details have also been listed. There are rewards for outstanding employees, and for employees with average KPIs and new hires, there is an option for internal purchase. It's up to everyone to choose.

The employees were very excited, especially the first few who joined the company with Gu Yanning; no matter how inexperienced they were when they first arrived, Happy Farm was truly created by them.

It goes without saying how important Happy Farm is to Orange Technology at this stage, so all of them have already reserved the company's incentive shares.

Compared to ordinary employees, Cheng Hao's heart was actually more unsettled. His outward calm was just his effort to restrain himself and maintain the image of a leader.

In addition to the email to all employees, Cheng Hao also received an email from Tan Jincheng, who said that he could now get all of his remaining 3.5% of the shares. Tan also suggested in the email that he take advantage of this Series B financing to cash out some of the shares.

Mr. Tan makes a good point. It's perfectly acceptable to cash out after the IPO, but there are regulations governing executives' cashing out after the IPO, and we don't even know when the IPO will take place.

Taking advantage of the Series B funding to cash out some money and enjoy life is the real solution.

As Mr. Tan said, after the Series B financing, the company is unlikely to have a Series C financing and will choose to go public directly. If that is the case, then it is hard to say when the company will be able to cash out.

Maintaining his composure, Cheng Hao strolled around the office area, where a joyful atmosphere permeated the entire company.

"Isn't President Cheng going to treat us to a cup of coffee?" Gu Yanning teased.

Cheng Hao is the biggest beneficiary of this equity incentive plan.

Gu Yanning didn't hide her words from the programmers. Since everyone was in no mood to work today, they might as well take this opportunity to take advantage of Cheng Hao and have some fun.

"Yes, Mr. Cheng is treating."

The group of people Cheng Hao brought also joined in the commotion. They knew that Cheng Hao would have shares—5% of the shares, which, based on the valuation during the previous Series A financing, already made him a millionaire.

He made tens of millions in less than a year. Although his treatment at the pig farm was not bad, he still couldn't earn this much.

With so many people joining in the commotion, the hierarchy disappeared. Orange Technology, which, like Flash, was primarily staffed by young people, became so noisy that even those working upstairs and downstairs could hear it.

"Okay, okay, please, please. But even though you're happy, you still have work to do, especially the Happy Farm project team. You absolutely cannot have any problems there."

"No problem, Director Cheng, don't worry. I'll just have the cheapest Americano, to save you some money."

"I won't save money, I'll order the most expensive one. It's not easy to catch a chance to get a good deal."

Cheng Hao smiled helplessly; a major hemorrhage was inevitable today.

"Alright, alright, stop shouting. Just write down what you want to drink and I'll go buy it for you myself. You just focus on your work."

"Also, you should thank President Tan and President Gu. Even in internet companies, no boss is so generous. You have the opportunity to receive stock options less than a year after joining the company. Remember to work hard when it's time to work hard."

Cheng Hao was also quite emotional. Before being recruited by Tan Jincheng, although he had hope for the future, he never expected that he could achieve a leap in his net worth in less than a year.

The internet is truly fascinating.

(End of this chapter)