Original Sin of Venture Capital

I’ve been planning to write about this topic for a long time, since I’m witnessing too many sites burning money endlessly, what’s worse is people feel so good about burning money as if the ultimate goal of a startup is “Get Venture & Burn it”. Hey, where is the revenue, dude?

When I start to sell great online storage service, there will surely be 10 sites offering the same service for free within 30 days. Finally no one of us can make money. The same thing happens to email system, ringtones download, online office suite…We build great products which people really need and want to pay for it, then VCs come and screw up everything. The simplest way is to copy your product and offer it for FREE. If free is not enough, fine, they send you a real check once  you sign up. What the hell is happening here? They spend huge cost on the product but they give it away to everyone for free!

Can you imagine a medicine shop giving away all medicines, or a restaurant offering free foods? Yes, you are right, VCs are supporting DUMPING which is forbidden in traditional business, and trying to kill the whole industry until they live alone. This is the 1st original sin of Ventures.

Yet it’s not easy to kill others in most cases, since there are too many VCs in the world, and every VC wants to build a monopolistic company in some industry, and the result is, at least 2 or 3 monsters are still fighting endlessly, and as long as they are fighting, they have to continue their free model, and in the same time they are claiming how huge traffic they are acquiring and how many millions of dollars they are worth.

But sorry, can I ask a question: are you making money? oh, you are making money by advertisement? huh, great business model ! but can you just show me how much was the ad revenue last month and how much was your bandwidth cost in the same time?

When a company is spending much more cost than revenue, they invented new phrases for company valuation, such as Traffic, User Base, Active Rate, Retention Rate…… Before getting bankrupt, these numbers keep on telling beautiful lies to make people believe this company can make money in the future. The only thing they hide is, the future is endlessly far away. Finally, the real value of the company is buried by numerous VC phrases. VC phrases can change by 1000 times while the real value don’t, for example, when IDG invests 10 millions to my small laundry shop, and sells the stock to Softbank at doubled price after one year.

Wait, suddenly a new laundry funded by Sequoia is opened next door, and starts to offer free laundry service. It nearly kills me while all my customers turn their back on my laundry and go to free service, until Morgan Stanley knocks my door saying:”We can make you a marvelous 1000-page prospectus and turn your laundry into a NASDAQ IPO…” This is the 2nd original sin of Ventures.

The most frequent questions I meet is “How is your next round funding going on? How is the new VC?” I’m so sad no one ask me “How much is your revenue increased this month? Can you live on your own without VC in next 6 months?”  Well, right now it seems ridiculous to talk about revenue in online business. Young enterpreneurs spend most of their time making fancy business plans to kiss the ass of VCs, not for their own belief, what’s worse they consider Burning Money as a necessary step of a company, totally ignoring the best attributes of a great business: Cost Less & Earn More. This is the 3rd original sin of Ventures.

Chinese version of this post: 风投的原罪

SNS和床

做互联网,每天面对重复的功能和冗余的信息,经常无助得感到“浪费可耻”。

开始玩了facebook,发现不能丢掉校内里的大学同学,又收到LinkedIn里的邀请,接着发现QQ里还有一大帮中学同学,此外还有MSN是新客户最频繁的联络方式,还有手机SNS。。。。。于是便出现了问题:

1、如果你固定于一个SNS,那么其他SNS的联系人就无法正常得获取你的最新情况

2、如果你平等得对待每一个SNS,那么你每次都需要复制相同的签名档、当前状态、照片、Blog等,让每个SNS都同等更新。

3、大部分人选择的是一个平衡:以一两个SNS为主,高频率使用;其他SNS偶尔用用。尽管看上去很平衡,依然无法掩盖浪费的本质。

当一个SNS网站宣称自己有了1000万用户的时候,傻子都知道,这只是代表1000万个自动生成的个人主页而已,真正活着的、每天创造有价值内容的用户,很少很少。 除了1000万个垃圾主页被收录以外,在威逼利诱的“交友”功能下,还会附带产生10倍以上的垃圾关系、垃圾照片和垃圾留言,这些垃圾存在了10秒钟之后,就再也不会有第二个人知道了,判断是否垃圾,这是最简单的标准。

我真佩服那些在国内每个SNS里都有帐号的年轻人,更佩服前仆后继的SNS网站们,每个人都想当山大王,每个人都重复着“融资、烧钱、抢人、刷PV”的无聊游戏。 而这里有个恐怖事实:SNS网站越多,创造的社会总价值越小。因为人们对SNS的需求没有增长,而SNS却在不停疯长,于是人群被不断分割,每个SNS的浓度被不断稀释,越来越走向“非SNS”。

SNS就好像床,本来中国最多只需要14亿张床,大量的SNS却生产出了10倍的床。于是,每个人被迫要负责去睡10张床,光10张床还好,更麻烦的是,你还要为此去买10个床单、10个枕头、10个卧室。。。。。。SNS不管这些,只管疯狂的问VC要钱,制造更多的床出来,让更多的人来睡他们的床(额外插一句,最近的经济危机,终于让VC意识到不能把钱投给无聊的造床厂了)。。。。。。。人们看到那么多免费的床,感到无所适从,只好今天睡睡这个,明天睡睡那个,于是全国遍地都是床,很多床都是9.9成新。

与其这样,我有个很傻B的愿望,什么时候出现一个国有化的SNS吧,绑定身份,彻底垄断,只要允许个人根据自己的爱好来定制床,每人一张床就足够了。

加一句:比起国有化,我更希望联合国来做一个全球化的统一SNS

关于风投和融资的一些基本术语

关于VC投资的一些术语和概念,陆续更新中,感谢vicky提供的资料和补充

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VC的股份比例:

如果你的公司估值100万美金,那么,假设有VC投你50万美金,那么VC占的股份是:

50/(50+100)=33.3%

其他股东的股份按照(1-33.3%)=66.7%的比例稀释。比如原来你占有30%的股份,现在就只剩下:

30%x66.7%=20%

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VC的权利:

VC是世界上最坏的动物,永远要求更多,首先他们会要求自己的股份是优先股(Preferred Stock) 可转换优先股(Convertible Preferred Share)。主要是因为:

-优先清偿权:在企业破产后对企业资产享有优先索取权,将损失减到最小;

-股份转换权:企业进展顺利时,VC有权将优先股转成普通股,从而实现对企业资产和决策的控制

-决策权:一般优先股并不享受表决权,但VC的股份一般对企业的重大事务,如企业出售,生产安排等享有与所占股份不占比例的表决权,对经理层的决策甚至享有冻结权。

-收益性: 企业能够支付优先股的红利给VC;

-可赎回性:如果企业的发展速度未达到预期,可要求企业购回这些优先股

中国的情况和美国是有很大不同的,因为在中国的《公司法》中是没有“优先股”和“可转换优先股”的概念的。但是近几年在立法上使得VC在对企业投资中,可转换有限股在事实上是可行的

下面具体说明一下VC的优先清偿权和决策权:

优先清偿权(Liquidation Preference):也就是优先获取资产清算的权力,类似于债权人那样

VC投了你50万美金之后,VC的优先清偿额度就是50万美金,如果某一天公司衰落,就不得不被迫变卖(被收购),这里有两种情况:

-如果卖了个低价钱,比如40万美金,那么根据VC会行使“优先清偿权”,将把这40万全数收入口袋里走人,创始人将一无所有。如果卖了60万,那么VC将拿走50万,剩下的10万给创始人来分。

-如果卖了个好价钱,比如600万,那么,VC将行使“股份转换权”,把股份转换为33.3%普通股,兑现走人:

600万x33.3%=200万

远多于当年投资的50万

领售权(Drag Along Right): VC有权力强迫创始人和所有股东出售公司

当VC觉得公司运营出问题,或者VC资金周转不畅,急需抛售一些资产的时候,就有可能强迫出售整家公司,当然,前提是投资协议里有这个领售权条款。邵亦波很久以前就写过关于这个的说明。

TechCrunch曾报道过一家叫FilmLoop的公司的悲惨故事,FilmLoop拿到了来自ComVentures的七百万美金的投资,最后钱没花完,却因为ComVentures单向的业务整顿需求,强行把FilmLoop给低价卖掉,只卖了三百万美金,由于优先清偿权的条款,创始人一夜之间什么都没有了。

VC在这方面的特殊权力,不一定需要与股份成比例。

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VC的退出机制
VC退出投资一般有三种选择:

(1)公开上市即首次公开发行IPO,将不可流通的股份转为上市公司股票,实现盈利性和流动性,而且收益通常也较高

(2)出售;

(3)清算或破产(投资收益非常差的时候)。

为什么很多风险企业都注册在国外?

将中国公司注册在开曼群岛以及英属维京群岛(BVI)是为了第一种退出机制,即公开上市(就像阿里巴巴把公司注册在海外,然后在香港上市这种情况)。因为中国对国内企业上市募集资金的要求非常严格,审批程序非常复杂,所以如果以中国公司的身份去上市募资,不仅困难大,而且受到的限制也非常多。

而如果将公司注册在境外,由境外公司通过收购、股权置换等方式取得境内资产的控制权,然后将境外公司拿到境外交易所上市,就达到了本质上是境内企业上市的目的。由于表面上是一家境外企业上市,所以境内不必改组为股份有限公司、上市公司股份可以全流通、企业再融资能力强、增发新股不受限制、能够实现期权激励机制、有利于引进战略投资者与风险基金。

除了上面这些优点外,如果注册在BVI或者开曼,可以享受低税率、较少的企业规管,还有一些保密性的优势。