This lively fundraising feast drew mixed reviews from investors regarding Renren.com.
Some investors who participated in the bidding complained loudly, saying,
"The fundraising is so complicated; in reality, they want to take all the benefits themselves, leaving no sense of security for investment institutions."
Shen Nanpeng publicly stated:
"Renren.com unexpectedly did not accept due diligence in its Series B financing, nor did it provide financial reports to investors. The valuation was merely a reference to comparable companies and past transaction prices. Therefore, many investors later gave up bidding, and our Sequoia Capital is also considering."
IDG Xiong Xiaoge also said:
"Let's not join this fun. It's just a project, the official side hasn't responded much, don't easily believe the hype."
Even until the night before the second round of bidding, an unknown third party was still transferring shares of Renren.com:
"Based on a post-investment valuation of 3.5 billion USD, the entire first-layer SPV is being transferred, with a 50 million USD quota, allowing for visible shareholder status."
Some even said:
"For projects everyone knows, even if the company is very good and the valuation is high, there isn't much money to be made. Some institutions like to use star projects to raise funds, just to trick people who don't understand the industry."
December 20th.
Renren.com Series B financing, second round of bidding.
As of 3:30 PM that day, the average subscription ratio for Class D/Class B shares, with a maximum of 200 million USD (upper limit for a single investment institution's investment amount), was 1.61:1.
Some institutions estimated that this meant Renren.com's post-investment valuation could reach 3.5 billion USD.
It was only then that people realized Shen Nanpeng was f*cking setting off smoke bombs.
As the lead investor, Sequoia Capital had already carved up most of Renren.com's financing quota.
However, some small and medium-sized institutions that qualified for the second round received calls from Renren.com dismissing them and arranging for the refund of their initial deposits.
Everyone was stunned.
Truly, smoke bombs were being released everywhere, for free.
All the previous pessimism was fake!
It was all to pull the wool over people's eyes!
In reality, these big institutions were extremely optimistic about Renren.com.
In response, Chen Pingjiang also conveyed through the media:
"Capital has keen eyes and the sharpest sense of smell. Everyone's extremely high subscription enthusiasm precisely demonstrates capital's immense optimism for Renren.com's future prospects.
We are more inclined to view this financing plan as an innovation in financial methods, and hope the outside world does not over-interpret it. Furthermore, Renren.com will launch new major projects after financing, and investors are guaranteed to make a profit. It is very likely that this is our last round of financing!"
Why were Chen Pingjiang and Renren.com so arrogant and powerful, setting a fixed valuation, not accepting due diligence, and still attracting so many people?
Why did Chen Pingjiang dare to set a bidding mechanism with a simple and crude standard—the highest bidder wins?
All investors who offered a higher D/B subscription ratio could participate in the subscription, without accepting recommendations from anyone or any intermediary institutions.
Nobody's words mattered; money did the talking.
Firstly, Renren.com itself was powerful enough.
As the current leader in SNS social networking sites, Renren.com firmly held its competitors down, and as of December 20th, Renren Farm's daily active users surpassed 80 million, a truly astonishing number.
Secondly, Renren.com's profitability was also incredibly strong.
In addition to the huge profits from "Steal the Car" and collaborations with major car manufacturers, its advertising and in-site recharge businesses generated over 30 million yuan each month.
Especially after Renren Farm exploded in popularity, this revenue source had already exceeded 80 million yuan and was expected to break 100 million yuan in December.
Don't forget the cash cow DNF was also about to be launched.
This figure was considered a freakish existence among unlisted internet companies in 2007.
After all, many websites either hadn't found clear monetization channels or only had a few million yuan in advertising revenue per month.
All things considered, Renren.com's annual revenue was estimated to exceed 1.5 billion RMB.
Tencent's revenue in 2007 was 3.8 billion RMB, but it had a market capitalization of 80 billion RMB.
Calculated this way, Renren.com's pre-investment valuation of 2.5 billion USD was not high.
If Chen Pingjiang hadn't wanted to build a headquarters building, he wouldn't even have needed financing.
Finally, Chen Pingjiang had publicly stated that this might be Renren.com's last round of financing, implying it was a now-or-never opportunity.
Therefore, although from an investment return perspective, the expected return on investment for this round in Renren.com was not high.
For the many investment institutions participating in this round of financing, investing in a successful "unicorn" case was more important.
Low returns didn't matter; the key was to get on board.
It was even more important for small investment institutions; in the future, Renren.com would be a case study on their PPTs!
It indirectly proved their "vision"!
Many VC/PE firms had good reason to believe that there might not be a better company than Renren.com in the next 3-5 years.
......
On December 25th, Renren.com initiated its third and final round of bidding.
Some investors offered a 2:1 ratio, and even higher prices, but still couldn't avoid being eliminated.
This was Chen Pingjiang's ruthlessness.
Many investment institutions could afford the 200 million USD capped Class B shares, so what was the ultimate solution?
It could only be a competition of who could lend Chen Pingjiang more money.
In any case, Chen Pingjiang only planned to sell 10% of the shares in Series B, raising 250 million USD, but that didn't prevent him from borrowing more.
Ultimately, this ratio reached 2.5:1.
This meant that by raising 250 million USD, they could in turn borrow 625 million USD in interest-free loans.
With the gentle tap of a wooden gavel, the unprecedented month-long financing method finally came to an end.
This grand circus had been running for almost a month, attracting countless eyeballs and further boosting Renren.com's popularity.
The slanders of the eliminated, the joy of the winners, and the applause of the entrepreneurs mingled together.
"This round of financing was led by Sequoia China, with IDG and Singapore's sovereign wealth fund Temasek as co-investors, setting a record for the largest single investment in a domestic internet company."
"Through a series of ingenious operations, Renren.com secured 250 million USD in financing and 625 million USD in interest-free loans by only divesting 10% of its shares, reaching a post-investment valuation of 4 billion USD."
"Currently, conservative estimates place Renren.com's founder and leader's net worth at over 2 billion USD, and the industry generally looks favorably upon Renren.com's subsequent development."
"..."
After securing the investment, Chen Pingjiang slept soundly for a whole day.
During this period, meeting various investors and negotiating had consumed too much energy.
Waking up, he couldn't tell the time, and stretched lazily while sitting on the edge of the bed.
His phone was filled with missed calls and congratulatory messages.
Chen Pingjiang carefully replied to each message and called back the missed numbers.
It took almost an hour to deal with everything.
Chen Pingjiang himself might not have felt it deeply, but after the news of the successful financing spread, everyone who knew him was genuinely shocked, feeling that the distance between themselves and Chen Pingjiang was growing further and further.
The next day at work, as Chen Pingjiang reached the 16th floor, he saw new couplets posted at the main entrance.
The four large characters "财源广进" (May wealth flow in from all directions) were particularly striking.
Wan Yuqian was still carefully watering the money tree.
Chen Pingjiang curiously asked:
"Where did the money tree come from?"
Song Xinyue, who had already been promoted to administrative director, chuckled:
"Yesterday afternoon, after the news of the successful financing came out, General Manager Wan went and bought it."
Chen Pingjiang nodded:
"Keep an eye on this thing, don't let competitors come and kill it."
After speaking, Chen Pingjiang walked towards his office, leaving Wan Yuqian and Song Xinyue behind him looking puzzled.
Passing through the office area, a group of employees, all with smiling faces, stood up one after another to greet Chen Pingjiang.
Respecting the boss was fake!
The real truth was that the small partners who received stock options saw their net worth skyrocket after the successful financing.
Soon after Chen Pingjiang sat down, the branch manager and a key account manager from Donghang Bank appeared in his office.
They were as enthusiastic as could be.
Chen Pingjiang looked at the key account manager, amazed, wondering if Donghang Bank had brought out all its secret weapons.
The woman in her early thirties, dressed as a mature and elegant lady, exuded an aura of authority.
She was very dedicated, even wearing black stockings in late December, and her gold-rimmed glasses made her look absolutely ascetic.
"Mr. Chen, congratulations, congratulations. Let me introduce myself, I am Zhong Chi, the branch manager of Donghang Bank's Minjiang Branch, and an acquaintance of Mr. He Zhiyu. This is Shi Zongfang, our bank's key account manager."
Zhong Chi's face was wrinkled into a chrysanthemum, and his warmth made Chen Pingjiang have to commend him.
Why were the bank people so eagerly coming to find Chen Pingjiang?
Of course, it was to attract deposits.
Although the total financing of 875 million USD would arrive in three installments, on average, each installment would still be 2.2 billion RMB, and the first installment would be deposited into Renren.com's designated account before the end of the month.
Today was December 26th, with 5 days left until the end of the year.
With so many advantages stacked up, it was understandable why Zhong Chi was so enthusiastic.
A high-quality client like Chen Pingjiang was like an angel to the Minjiang Branch, which hadn't met its deposit targets!
As the saying goes, don't hit a smiling face, especially for business people, no one wants to offend a bank, as they might need a loan at any time.
Chen Pingjiang smiled and nodded, signaling Guan Yifeng to pour tea:
"I understand Branch Manager Zhong's intention, but our company has always cooperated with China Construction Bank, I'm afraid..."
It is necessary to explain Chen Pingjiang's image in the eyes of Branch Manager Zhong and Shi Zongfang here.
He was probably like a walking cash machine.
How much is 2.2 billion yuan?
A black briefcase in movies probably holds about 2.4 million yuan, so it would take about 15 armored trucks to hold it all.
Even based on the standard configuration of 5 people per escort vehicle (1 driver, 2 guards, 2 cashiers), it would require a team of about 75 people for escort.
Taking a general branch as an example (not sub-branches or outlets), retail deposits usually average two to three hundred million yuan, while sub-branches mostly have only one hundred million yuan.
A county-level area, with a dozen or so institutions, might have retail savings of about two to three billion yuan (excluding corporate deposits).
This indicates that Chen Pingjiang, with over two billion yuan, could basically dominate the retail deposits of other banks in a region, except for the Big Four banks.
Thus, Chen Pingjiang's importance was evident.
And for Branch Manager Zhong, this importance was doubled because their branch had not yet completed its deposit targets.
To be honest, at this moment, Chen Pingjiang could make all sorts of demands.
As long as they were not illegal, he could basically do anything he wanted, even serve as an honorary branch manager, receiving a salary just for the name.
In addition to conventional measures like high interest rates, VIP channels, salons, health check-ups, travel, and specialized wealth management products, the bank could also use its resources to help Chen Pingjiang with many unexpected things.
Especially if they could persuade Chen Pingjiang to process payroll through the Minjiang Branch.
Tsk tsk...
The benefits that could be obtained, if written out, might even be censored.
What could the bank do with this money?
Lend some loans, bridge some gaps, manage some wealth, and boost deposit targets.
They could earn back several times what they spent on Chen Pingjiang in minutes.
Some might argue,
"I work on projects, handling billions of yuan, and often have tens of millions in deposits on the books, but the manager is just normally polite?"
To this, one can only say,
"What right does a project manager have to decide which bank to use, or whether to switch banks?"
Furthermore, even at 2007 interest rates, the commission for attracting demand deposits was three per mille, or 6.6 million yuan.
However, if it were a demand deposit, if Chen Pingjiang wanted to withdraw the money, Branch Manager Zhong would probably react as if his biological mother had died.
At that time, the tellers wouldn't dare to process it, the branch manager would stall for time, bringing up issues like "difficulty in capital turnover," "can it not be transferred," "can it be transferred later," and so on.
Therefore, in the eyes of Branch Manager Zhong and Manager Shi, Chen Pingjiang at that moment was truly a walking cash machine.
Revised financing amount, previous text also revised.
(End of chapter)