Zhang Jiahong heard the news, she was at a loss for a while, she was willing to accept the other party's conditions, but Lao Yan couldn't pass.

In the afternoon, Tony Xu called Qin Fangyuan and said that in view of the sincerity of the cooperation between the two sides, it is recommended to reduce the option pool to 10%, so that everyone can dilute each other less.

At this moment, the direct loss is the interests of the management team, including Qin Fangyuan. When Qin Fangyuan first joined Mingming Media, he proposed that he should ask for 10% personally, and if he followed the VC's plan, Qin Fangyuan would only be able to get 10% of the options. He vetoed it without authorization, and did not discuss with Zhang Jiahong at all.

Maybe Zhang Jiahong heard the news, and she called Qin Fangyuan to the office early the next morning, saying: "The most important thing for us now is to successfully raise funds, only by financing the company can we survive, and then go public, whether it is options or stocks, it is valuable, otherwise it is a blank piece of paper, what is the value?"

Qin Fangyuan didn't say a word. His deep and quiet expression made Zhang Jiahong a little unbearable. For the benefits he deserved or promised by his previous boss, Qin Fangyuan was unwilling to compromise and discount. He knew very well why he wanted to abandon Wall Street and return home. Making money is not a sin, it is only a means that is sinful. It is only natural to take what you deserve, or to get the proportion that has been promised, otherwise why run back?

In fact, since joining Mingming Media, Qin Fangyuan has been calculating the timetable for ringing the NASDAQ bell, and even calculated the income when he exits his options. He once privately revealed to Shi Wenqing that his dream is to be an excellent investment banker, and to return to China is to get the first pot of gold, and joining a start-up company is to shorten the time to realize his dream.

Zhang Jiahong once thought about breaking the contract for the promise of giving Qin Fangyuan 10% options, but he quickly denied it. When is this? At the critical moment of financing, Qin Fangyuan is a key figure, deciding the life and death of the company, how can he die before he can leave the army?

She simply said: "That's it, Fang Yuan, I will personally promise you what I promised you, ensure that you have the number we promised before, and I will make up for you as much as you want!"

Since Zhang Jiahong, as the head of the family and the major shareholder of the company, said it so clearly, Qin Fangyuan had nothing to say. However, he said that he attached great importance to this, and that he did not return to China for a limited salary, although the current high salary is already an unbearable burden for the media. This kind of "China opportunity" is known in the industry, and the shares owned after the IPO will be returned at more than ten or even dozens of times the value, and the annual salary is a drop in the bucket. Another point is to participate in the whole process of a company from financing to IPO, be familiar with enterprise management, and accumulate experience.

Qin Fangyuan replied to Tony Xu that the company agreed to the option pool plan. However, he also attached a condition: in the future board of directors' compensation committee, it was borne in mind that media representatives would have a veto power over the allocation of management options.

As soon as Tony Xu heard it, as long as he didn't break through the upper limit of the share of the option pool, as for how to distribute it, it was not the main point they were concerned about, so he gave a favor and readily agreed.

4. All kinds of protocols, all kinds of cats

A few days later, Sentai Fund sent a Te

M sheet (term sheet, similar to an agreement of intent). Te

M sheet is an agreement in principle reached between the investor and the proposed investment enterprise on the future investment transaction, which concentrates the main provisions of the formal investment agreement, articles of association and other documents signed between the investor and the invested enterprise in the future. Although it is only a few pages, Te

The m sheet contains a summary of all the key elements related to the financing, so once both parties sign Te

m sheet, the next financing process will be very procedural.

Take the Te

m sheet, Qin Fangyuan remembered a case told by Qian Feng at the first class reunion after returning to China, and couldn't help laughing. "What international practice?"

m sheet.” The farmer entrepreneur shook his face: "Te."

m sheet?don't follow me all that foreign language, how do I sound like 'fucking shit'. Isn't it just a framework agreement? It's still intentional, and there is no legal constraint, no problem, sign it! Exclusivity period? No! You get a two-month exclusivity period, let me keep other investors out, and finally you find a bunch of faults for me, and then press my price, then don't I call the earth ineffective every day? This is your wishful thinking, hehe......

There is also a joke told by Yiyuntang on Weibo. The investor offers an investment agreement with a lot of terms, which is a headache for a business owner. He said to the investors: "Is this an investment agreement? It is clearly a treaty of loss of power and humiliation of the country! Don't talk to me about any international conventions, we in China have to follow China's conventions." What is the right to follow, the right to drag, look at the translation of this term, is it difficult to speak? You know here that you want this right and that right, why don't you see you asking for the right to freedom of speech, the right to vote for citizens, or whatever? Our private enterprises are trying to survive in the cracks, and they will be bullied by you when they come?"

This time, Qin Fangyuan and the others were also stuck in these terms. Bearing in mind that Zhao Yu, the legal manager of the media, is one year older than Qin Fangyuan, has just passed the judicial examination, and has worked in the legal department of a listed company in Zhongguancun before, although he is not a lawyer in the strict sense, he is still familiar with some clauses.

Qin Fangyuan, Zhao Yu and Shi Wenqing studied the terms together, and the questions focused on three aspects:

The first is the lock-up period, which is the exclusion period clause in which other investors cannot be contacted for three months before the formal agreement is signed. Qin Fangyuan and the others specially invited Tony Xu's team to come over to discuss.

Tony Xu said casually: "Investment and financing cooperation is like a couple of men and women falling in love, since you have talked to me, you can't talk to others anymore." ”

This kind of words, at first glance sounds very reasonable, but think about it carefully, "investment and financing cooperation is like a pair of men and women falling in love", this metaphor is not wrong, but the later "since you have talked to me, you can't talk to others anymore" This sentence has not been finished, incomplete, only requires the enterprise to be dedicated and loyal to the investor, and does not reciprocately require the investor to be equally dedicated and loyal to the enterprise. Since enterprises can no longer "fall in love" with other investment institutions, should investors no longer be able to "fall in love" with other enterprises of the same type? In fact, many investment institutions want to invest in one enterprise in one industry, at least three or even more companies in that industry at the same time.

Tony Xu stated: "For this industry, we have only contacted Remember Media at present. Aren't you the boss of the industry? We generally only invest in the first place in the industry, and don't look at anything else, so rest assured. ”

Qin Fangyuan took over: "The three-month exclusion period is too long, I personally recommend 45 days?"

"45 days? We don't have to do our due diligence. ”

"We can give the intermediary 15 days to investigate, 15 days to issue a report, and 15 days for you to discuss, so that's enough!"

"Not enough. 15 days of investigation time? Accountants, auditors and lawyers can't sort out the materials, it's too stressful!"

"What if it's 45 working days? So add 10 days to the weekend, and you've got 55 days. ”

"Mr. Qin, your calculations are too precise, I really convince you! Okay, let's not care about this detail. If you follow this rhythm everywhere, and you don't know when you want to talk about it when you sign a formal contract, it is estimated that it will be difficult to close this year. ”

This is the first project that Qin Fangyuan has done in China, and he doesn't know how long it will take to complete the delivery. He looked at Shi Wenqing, he should understand.

There are also very extreme cases in this industry. Shi Wenqing once told Qin Fangyuan that there is a renminbi fund in China, which is very bullish to say, and more than a dozen of the invested companies have been listed, and it is said that there are billions of yuan in funds under management. In order to grab the project, he did not do customer interviews, historical financial analysis, future financial forecasts, and competitive analysis, and directly changed the business plan provided by the company into an internal investment proposal, mainly grasping the repurchase and VAM clauses and resolutely placing an order. Qin Fangyuan said that this is simply incomprehensible on Wall Street! Shi Wenqing said that this is called animal ferocity, a large number of hoarding projects, and in the era of money grabbing, it is getting bigger and bigger, and even deliberately being rumored by the outside to have a deep background, people who know the details know that in fact, it is a few grassroots people who are engaged in it, and in the stage of warlord melee, the fight is who is bold, fast-handed, and ruthless!

Maybe thinking of this, Shi Wenqing quietly made an "OK" gesture to Qin Fangyuan, and Qin Fangyuan understood.

Qin Fangyuan asked the lawyer to add a clause: During this period, your fund cannot negotiate cooperation with any opponent who has a competitive or potential competitive relationship with Mingming Media.

Tony Xu shrugged his shoulders and smiled: "I said, we only vote first, don't look at second." ”

Qin Fangyuan patiently explained: "The exclusivity clause should be reciprocal. ”

The second is the negotiation of a series of priorities. This is Te

The trickiest of the m sheets. For example, the right of first refusal, which is Te

A very important clause in the M sheet determines how the cake will be distributed after the company's liquidation, i.e., the funds will be distributed to the shareholders who hold a specific series of shares in the company, and then to other shareholders. For example, the Series A financing of Te

The m sheet specifies how much Series A investors, i.e., Series A preferred shareholders, will receive before the common shareholders. By the same token, subsequent issuance of preferred shares (Series B, C, D, etc.) has priority over Series A and common shares, meaning that investors get their money back before the entrepreneur and the management team.

For another example, the pre-emptive right clause requires that when a company conducts Series B financing, the current Series A investors have the right to choose to continue investing in order to obtain at least a new share ratio corresponding to their current equity ratio, so that the equity ratio of Series A investors in the company will not be reduced due to the issuance of new shares in Series B financing. In addition, the right of first refusal may also include the transfer of shares of the current shareholder, and the investor has the right of first refusal on a pro-rata basis.

Zhang Jiahong and Lao Yan almost didn't care about anything, they all agreed one by one.

The two sides are at war and stuck on the terms of the composition of the board. Sentai Fund and Dadao Investment proposed that the board of directors should set up five seats, Sentai Fund and Dadao Investment, which co-invested, each with one director, and one director from the original shareholders of the media, and then jointly hire an expert from outside as an independent director.

Series A investor Lao Yan has no objection to this clause. Zhang Jiahong felt that something was wrong, but he didn't know what the problem was.

Qin Fangyuan certainly knows the sensitivity and importance of the board's provisions. There is a popular saying in Silicon Valley: "Good boa."

ds do

't c

eate good compa

ies, but a bad boa

d will kill a compa

y eve

(A good board doesn't necessarily make a good company, but a bad board can ruin a company.) ）”

Qin Fangyuan calculated that after the completion of the B round of financing, Zhang Jiahong's shareholding ratio dropped from the original 60% to 37.8%, and even if the option shares paid to the management team were added, the actual equity shares also dropped to less than 50%, and once the three investors formed an alliance, Zhang Jiahong was completely at a disadvantage. Qin Fangyuan fully communicated with Zhang Jiahong about the seriousness of this problem.

Qin Fangyuan explained: "The essence of equity financing is the change of the company's equity, and when the company's equity changes, it will inevitably affect the company's control and management. ”

Zhang Jiahong was surprised: "I feel that something is wrong, but I don't know." Isn't the board of directors an ornament? I'm the boss, I'm the majority shareholder, and of course I'm in charge. ”

Qin Fangyuan didn't smile, he looked serious, this look made Zhang Jiahong feel that the situation was a little serious.

The devil is in the details. Qin Fangyuan felt obligated to remind Zhang Jiahong of the drawbacks that might arise if he lost control of the board: "Mr. Zhang, we must strive for this clause, and its importance exceeds the valuation. I remember when I was in college, I used to watch some soap operas in Hong Kong and Taiwan, and the key disputes took place in the board of directors, because the control of the board of directors affects the entire life of the company. In fact, it's not terrible for a business to lose control, but it's a very bad thing if a growing business loses control prematurely. Therefore, we need to think clearly on this issue and prevent this kind of thing from happening.

"Once they lose control of the board, in the most extreme case, they will fire you, the founder. It is possible that investors will join forces and take full control of the board of directors, in which case they can refuse to raise a third round of funding, and if the company runs out of cash, they will force the company to raise the next round from them at a low valuation. If the IPO doesn't work or if there is a better acquirer, they will sell the company cheaply to other companies they have invested in, regardless of the founders' feelings about treating the company as a child.

"In general, most of the owners of private companies are founders before fundraising, but after fundraising, the newly formed board of directors will be the new owners of the company. After Mr. Huang was imprisoned, in order to force the chairman who succeeded him to leave the board of directors, re-elect the chairman and replace the directors, what a stir there was, which shocked the capital market for a while!"

Zhang Jiahong was terrified when he heard it. After the A round of financing, the company also set up a board of directors, Zhang Jiahong is the chairman, Lao Yan and her father are the other two directors, but there has never been a board meeting, and the phone call between the two of them is basically solved.

I rely on it! Financing money is not a peaceful time in the world, and there are many institutions. It seems that pie will not fall from the sky, and there is no money in the world for nothing.

Qin Fangyuan saw Zhang Jiahong's nervousness, he tried to soothe her anxiety, and said: "Mr. Zhang, what I just talked about is just a possibility, not necessarily happening, the reason why we want to pay attention to this is from the perspective of risk control." ”

Zhang Jiahong's heart palpitated: "Let's wait for me to go back and think about this clause." ”

The next day, Zhang Jiahong said to Qin Fangyuan: "I can't agree to this clause. I consulted with a lawyer, and they suggested that the board of directors should be composed of three seats, with two original shareholders and one for new investors, and one observer seat for Series B investors.

OK! That's a good design. Receiving Qin Fangyuan's affirmation, Zhang Jiahong raised his face and said proudly: Hmph, those who do investment want to play tricks with me, compare their hearts, these are all leftovers when I was doing sales!

Sentai Fund agreed to the design, but put forward an additional request, which was to require the CEO to occupy a common seat on the board.

Zhang Jiahong listened and agreed: "I am the CEO myself, there is no problem with this." ”

However, this temporary proposal of Sentai Fund has aroused Qin Fangyuan's vigilance, why should he emphasize that the CEO must be a member of the board of directors?

Tony Xu's explanation is that, first, the CEO, as the main role of the company's executive management, participates in the board of directors and can better understand and implement the resolutions of the board of directors, which is conducive to the point-to-point transmission of information, and the decision-making information will not be distorted due to multi-level transmission;

Zhang Jiahong was also puzzled by Qin Fangyuan's question.

Qin Fangyuan said to Zhang Jiahong: "Mr. Zhang, I don't rule out that this will be a trap in the future, what if you are not the CEO in the future?"

Zhang Jiahong couldn't understand this sentence for a while: "How can it be? Oh, even if I'm not the CEO, then you have to listen to me! I'm the chairman, and if I recommend the candidate, I must be a trustworthy person." ”

Qin Fangyuan wanted to laugh a little, but when he turned his head and thought about it, how could Zhang Jiahong know so many mysteries? He explained to Zhang Jiahong: "The CEO is decided by the board of directors, not just by you. What do you think would happen if the company changed its CEO in the future, and the new CEO would have a common seat on the board of directors according to the agreement signed with the VC this time, and if the new CEO and the investors were of the same mind?"

After Qin Fangyuan's explanation, Zhang Jiahong really understood. Yes, the new CEO is not her, she must be an external professional manager. She suddenly remembered a friend's company, where the VC recommended a CEO to the board of directors, who was also a director, and as a result, the CEO and the investor director took control of the board of directors, vetoing the expansion plan, compensation plan, and budget, and nearly removing the friend from the chairmanship. Thinking of this, she couldn't help but break out in a cold sweat.

Zhang Jiahong added a big score to Qin Fangyuan in his heart, this wave of financing has made him gain a lot of knowledge, and he really responds to the sentence "Outsiders look at the excitement, insiders look at the doorway".

Zhang Jiahong and Qin Fangyuan repeatedly insisted on the plan they discussed, and finally Sentai Fund gave up their proposal for the CEO to join the board.

Repay the favor, repurchase rights, anti-dilution, preferential dividend rights and other terms, bearing in mind that the media have let them go one by one, in Zhang Jiahong's words, it is called "grasping the big and letting go of the small".

I was about to sign Te

m sheet, but I was stuck in another seemingly small thing: who pays for the audit fee and the lawyer's fee? Of course, the investor thinks that it should be paid by the financier. Zhang Jiahong's face turned green when she heard this: "I have to borrow my salary next month!"

Qin Fangyuan threw this question to Shi Wenqing: "You have to coordinate this matter." "As a result of the coordination, the cost will be borne by the investor if the investment is not successful, and if the investment is successful, it will be paid by Mindful Media.

Signed Te

M sheet, the investment institution will appoint an intermediary to enter the market to do due diligence.

It's hard to get started. When everything was finalized and the intermediary was about to enter the market, Qin Fangyuan did not expect Zhang Jiahong to behave so fiercely.

Zhang Jiahong didn't understand that investors were moving people to do due diligence: "I didn't do any due diligence in my first financing of $3 million, why are I doing so much now?"

Shi Wenqing was anxious, and he came to explain to Zhang Jiahong: "Mr. Zhang, your first financing is basically equivalent to angel investment, and the procedure is relatively simple. A perfect business plan, a well-prepared slide deck and an appealing presentation can only win the VC's interest and investment intention, and in order to finally obtain funding, it is also necessary to give the investor a comprehensive understanding of the evolution history of the company's legal structure, historical operating conditions and development expectations, financial status and profit and expenditure forecasts, as well as the company's internal management status. Customers and suppliers understand the market and resources of the company, so that they can have sufficient evidence to prove that their business is worth the money. ”

Qin Fangyuan drew a picture on the whiteboard and explained: "Due diligence is an investigation of the detailed financial and operational status of the target company with the cooperation of the target company before the investor makes a transaction or investment decision, including reviewing the company's accounts, investigating the company's internal and external stakeholders, such as suppliers and customers. ”

As soon as Zhang Jiahong heard that he wanted to investigate the company's financial and operational conditions in detail, he quit: "Some things are the company's trade secrets, how can they be given to outsiders?"

Qin Fangyuan couldn't laugh or cry a little: "Mr. Zhang, before the intermediary comes to investigate, he has to sign a series of confidentiality agreements with us." Typically, due diligence is actually a feasibility study of the project's investment, and it is also used as a basis for deciding whether to deal and pricing. Due to the serious information asymmetry between venture capital companies and entrepreneurs, the due diligence of venture capital companies is to reduce information asymmetry and provide sufficient scientific basis for venture capitalists to make correct investment judgments.

"During the due diligence process, the VC will not only carefully visit the company, talk with the middle and senior management of the company, but also send the company a few or more than ten pages of due diligence checklist, requiring the company to provide the company's historical changes, major contracts, financial reports, financial forecasts, financial data of various segments, as well as customer lists, supplier lists, technical and product descriptions, and successful case analysis. The VC may also consult with your suppliers, customers, lawyers, and lending banks, and even managers from past employers and colleagues, and they will even investigate the people involved in providing the information to prove that the information provided is reliable. ”

"This is too cumbersome! At the beginning, we took Lao Yan's money in US dollars, and we met a few times, and finally went to **, and it was finalized on the spot, and they didn't ask for this report, that report, and that investigation. Zhang Jiahong said, "This is good, if we want to investigate everything about us, the seven aunts and eight aunts have all turned it out, and it is not easy for us to get some money!" When she said this, Zhang Jiahong showed the expression of a little woman, cute, innocent, and it seemed that someone was robbing her beloved cosmetics or jewelry.

Qin Fangyuan patiently explained: "Lao Yan's money is said to be a round of investment, but in fact, it can also be said to be an angel investment. Angel investment is risky and rewarding, less money accounts for more shares, and gambling is more important. And now this stage is venture capital, which belongs to medium-term financing, and if we want to get a better price, we need equal performance and scale.

"In fact, due diligence is not only an opportunity for companies to prove themselves, but also an opportunity for companies to discover their own problems and improve themselves. Investors conduct due diligence to assess the risks after the investment, but also to provide targeted value-added services after the investment. If we do not agree with the other party to do due diligence, it means that this wave of investment is basically over, and we will not invest! Even if the renminbi fund comes in, we still have to do due diligence, but the degree is different. ”

Having said so much, what Zhang Jiahong cares about most is Qin Fangyuan's sentence "Investors don't invest", so what else are you considering? Then come in, the ugly daughter-in-law always wants to see her in-laws.

Before entering the market, Qin Fangyuan of course asked the other party to sign a confidentiality agreement, and tried to minimize the potential negative impact in the future from the perspective of legal risk control.

Sentai Fund sent a general template for a confidentiality agreement, in which the two parties agreed on the precise definition of trade secrets, the scope of confidentiality, the duration of confidentiality, the licensing procedures for investment companies to disclose the company's trade secrets, and the liability for breach of contract after leaking trade secrets without permission.

However, Qin Fangyuan put forward two things: first, the company wants the disclosure to be two-way, the company tells the investor what he has done, and the investor should tell the company the peer affiliates that have invested or are about to invest. Once the investment target has been determined, investors should take the initiative to stop contact with the competitors of the invested company, and try not to invest in the competitor after completing the investment. Second, if the investment company does not decide to invest in the enterprise after completing the due diligence, it should also stipulate in the confidentiality agreement or confidentiality clause that all the materials of the due diligence shall be returned to the enterprise in a complete and timely manner.

The first point is easy to understand, and as for the second point, the reason is that the investment company's due diligence on the enterprise is a comprehensive and in-depth understanding and mastery, and the investment company has basically mastered all the trade secrets of the enterprise after completing the due diligence on the enterprise.

Tony Xu smiled: "Isn't this the first project you just did back to China? Don't make a fuss about the first point, your opinion can be reflected in a formal agreement, not a non-disclosure agreement. As for the second point, I disagree, if the investment is not successful, unless the audit and legal fees are borne by the media in half, the ownership of the investigation report belongs to the investor. ”

Tony Xu also called Zhang Jiahong for this reason, complaining: "Why is your Director General Qin so unfavorable? How can we have confidence in future cooperation by taking care of some small things?"

ie

s to e

t

y (entry threshold), that is, lack of competitiveness, then the project itself is not investable. Therefore, investors don't need to waste time talking about trust and the like, and any project that is afraid of leaking secrets proves to be a project that cannot be invested, OK?Next!"

When Zhang Jiahong heard this, he was surprised and delighted, surprised that Tony Xu must not make extraneous branches, so as not to lose a big one because of a small one, and he was happy that Qin Fangyuan's performance in the negotiation was that he did take the enterprise as his own business to talk about, and he was professional and rigorous. She immediately said to Tony Xu: "It's to grasp the big and let go of the small, I will communicate with Qin Fangyuan." ”

She didn't look for Qin Fangyuan at all, she gradually saw that Qin Fangyuan was a tendon in his professional field, and he didn't obey his boss if he obeyed the technical authority, but don't discourage his enthusiasm, and besides, what he did was not wrong. So, she found Shi Wenqing and asked him to coordinate from it, so as not to lose a big one because of a small thing.

In this matter, Qin Fangyuan gave up insistence. He knew that if the financing was not successful, the company really would not be able to bear half of the cost, and a penny would suffocate a hero!

After consultation, Sentai Fund and Dadao Investment jointly engaged intermediaries - a law firm and an accounting firm to conduct due diligence - and then decide whether to formally invest according to the pertinent due diligence conclusions issued by the intermediaries.