The CEO transition at Kuai Pao happened quietly.
On the eve of the Spring Festival, Pei Yi led his team to continue conquering territory in Luzhou’s food delivery market.
The number of official riders in the delivery departnt rocketed from just over 90 to more than 500. On top of that, a part-ti team of over 600 riders was brought on to ease the pressure during peak hours.
Normally, given Kuai Pao’s daily order volu, they would need at least 1,500 riders to handle 100,000 deliveries.
However, with 70% of orders currently coming from within the first ring road, Kuai Pao’s operations were relatively concentrated. This, combined with their intelligent dispatch system, was just barely enough to maintain their delivery tis.
Once their business expanded into more distant areas, the existing system and delivery capacity would face an imnse test, and the rate of delayed deliveries would likely skyrocket.
If they failed to expand their delivery capacity and optimize algorithms in ti, no amount of subsidies for user acquisition would be enough to support the rapid growth in orders. On the contrary, the decline in the delivery experience would cause them to lose users.
Thus, even with the year drawing to a close, Kuai Pao’s HR departnt was still recruiting in full swing, with over 50 new employees joining each day.
These new hires included offline promoters and rchant acquisition staff from 24quan, as well as R&D engineers from Manzuo and Gao Peng.
During the Thousand-Groupon War, a large number of group-buying websites were folding every month.
They were, in effect, continuously supplying the market with a stream of excellent talent.
Kuai Pao seized this as a pri opportunity for growth. For their ground-level rchant acquisition teams, there was no real barrier between the food delivery and Group Buy businesses.
The work model for both was nearly identical. Upon joining Kuai Pao, they could imdiately bring their existing network of Group Buy rchants over to Kuai Pao.
One could even say that the rate at which Group Buy websites were collapsing was inversely proportional to the growth of Kuai Pao’s rchant base.
anwhile.
Kuai Pao’s recent progress had, naturally, caught the attention of Ma Wenteng and Liu Zhiping.
"This kid is a real piece of work. He led Penguin on a rry dance and still won’t budge on giving up even a 5% stake,"
Ma Wenteng cursed with a laugh from his office chair.
"It’s not that bad. The fact that he’s even talking to us ans he wants funding. It’s just a matter of price."
"I valued Kuai Pao at 300 million, and what did he do? He turned around, added an entry portal on Pinbei, and jacked Kuai Pao’s daily orders up to the 100,000 mark."
Liu Zhiping shook his head, a similarly helpless look on his face.
He was starting to see the pattern. With any project involving Chen Yansen, if you didn’t offer a premium of three to five tis the value, he simply wouldn’t even consider taking the funding.
"Have Lin Chenfeng re-evaluate Kuai Pao based on its current order volu. I want this financing round completed as soon as possible."
Ma Wenteng instructed. He didn’t want to miss the pri opportunity to invest in Kuai Pao.
After all, both Digital Sky Technology and Jinsha Venture Capital had already expressed strong interest in investing in Kuai Pao.
If Penguin hesitated any longer, there was no guarantee Chen Yansen wouldn’t just go with another VC firm.
"I understand," Liu Zhiping replied with a nod.
At the sa ti.
Zhu Xiaohu of Jinsha Venture Capital, Zhou Shouzhi of Digital Sky Technology, and Shen Nanpeng of Redwood Capital had all received the latest updates on Kuai Pao.
None of them had expected that the once-overlooked food delivery model could, when combined with user traffic and capital, unleash such astonishing potential for growth.
After so consideration, Zhou Shouzhi called Chen Yansen to propose an investnt, offering a valuation of one billion.
Chen Yansen just smiled and politely declined.
Digital Sky Technology had indeed invested in many dostic internet companies, but beyond simple funding, it couldn’t provide any additional strategic resources to help Kuai Pao grow.
And Chen Yansen wasn’t short on cash.
Zhou Shouzhi had no choice but to regretfully withdraw from the competition for Kuai Pao’s Series A funding round. As for Ele, he had privately considered them, but after conducting an on-site inspection, he gave up on the idea entirely.
Compared to Kuai Pao, Ele was far inferior in delivery speed, order processing systems, and the developnt of its rider team.
After receiving one million US dollars from Jinsha Venture Capital, Zhang Xuhao had only upgraded the website. He’d also invested far too much in software engineers, product managers, and market operations staff.
But in the area Zhou Shouzhi valued most—on-the-ground business developnt—Ele’s performance was a complete disaster.
As a food delivery platform connecting users on one end and rchants on the other, Ele had failed to show impressive results on either front. Naturally, Zhou Shouzhi wasn’t interested.
This was also why Zhu Xiaohu was unwilling to invest in Zhang Xuhao a second ti.
At that mont, however, Zhang Xuhao was sitting in a eting room at Ah Li’s Strategic Investnt Departnt, waiting anxiously.
Under pressure from Kuai Pao, he had exhausted his network of contacts within the Jiaoda alumni circle, yet he hadn’t secured a single di in funding.
So now he had set his sights on the financial backers in Hang City.
CREAK!
The door was pushed open.
Zhang Xuhao scrambled to his feet and went forward to greet the newcors.
A bald, middle-aged man in a blue suit stood in the doorway, flanked by two assistants.
"President Ji, I’ve heard so much about you!" Zhang Xuhao greeted him with a slight bow and a fawning smile.
At the ti, the true head of Ah Li’s strategic investnt departnt was Cai Xin. Ji Gang was just a general manager and hadn’t yet been put in charge.
However, for an investnt of Ele’s size, Ji Gang still had the authority to make the final call.
"President Zhang, please have a seat."
Ji Gang replied with a slight smile.
Before agreeing to et Zhang Xuhao, he had studied both Ele and Kuai Pao. He was genuinely interested in investing in this O2O ecosystem, which differed from the Group Buy model. Furthermore, his direct superior, Cai Xin, also believed that food delivery had significant growth potential within the local services sector.
Since Chen Yansen had tead up with Jingdong to fight Taobao for e-comrce market share, Ma Liyun and Cai Xin had no interest in investing in Kuai Pao. Thus, they turned their attention to Ele.
"President Ji, this is Ele’s business plan. As of December 31st, Ele has 67,000 registered mbers, and our daily order volu is stable at around 10,000."
Zhang Xuhao cautiously handed over a docunt as he slowly began his presentation.
"Are you confident you can beat Kuai Pao?" Ji Gang asked suddenly, after taking the docunt and reviewing it for over ten minutes.
Zhang Xuhao froze for a second, but he recovered quickly. "The only thing separating Ele from Kuai Pao is expansion capital," he said, his tone firm. "As long as Ah Li is willing to invest in us, I guarantee I can surpass Kuai Pao within three months."
The worst thing for an entrepreneur is to show fear before the battle has even begun. Zhang Xuhao’s confident words earned a silent nod of approval from Ji Gang.
’In terms of product maturity, Ele has been around for three years. Presumably, their technology for the ordering and dispatch systems should be stronger than Kuai Pao’s.’
"If Ah Li gives you 50 million in funding, how much equity are you willing to exchange for it?" Ji Gang asked, setting the docunts down and looking at Zhang Xuhao.
’In his view, given Ele’s current size, even factoring in a premium, the valuation was 200 million at most.’
’So, if Zhang Xuhao offered anything less than 10%, Ji Gang would walk out of this room without a second thought.’
’His own bottom line was 30%.’
’After all, from his perspective, Ele was just a small-ti platform that had barely broken 10,000 daily orders.’
’If Chen Yansen hadn’t hyped up the whole concept of food delivery, he would be driving an even harder bargain.’
Zhang Xuhao fell silent.
He had no idea that Chen Yansen was about to inject 200 million into Kuai Pao, so he thought 50 million would be more than enough for Ele’s upcoming developnt.
But he only wanted to sell off 15% of the equity.
"President Ji, I only need 30 million in funding. I’ll trade 15% of Ele’s equity for it."
Zhang Xuhao replied after a mont of rapid calculation.
"Kuai Pao’s custor acquisition cost is about 15 yuan. With 30 million, you can only get two million new custors. You won’t even be able to conquer the food delivery market in Hu City, let alone compete with Kuai Pao."
Ji Gang shook his head, dismissing Zhang Xuhao’s proposal.
"How about 20% then?" Zhang Xuhao asked tentatively.
"30%! I don’t believe Ele warrants a valuation of 250 million," Ji Gang said calmly.
30%?
Zhang Xuhao shook his head repeatedly. Jinsha Venture Capital had taken 20% in the seed round. If he gave another 30% to Ah Li, the founding team’s stake would fall dangerously close to the 50% threshold.
’And what about the Series A, B, and C rounds to co? What would he do then?’
’After more than two years of research and operations, he knew all too well that user adoption of food delivery was low. It would take a massive amount of capital to cultivate the market and educate consurs.’
’If he agreed to Ah Li’s terms, he would very likely lose his controlling stake in the company.’
’But if he didn’t agree, Ele probably wouldn’t survive the first half of 2012.’
"25%. That’s the most I can offer. If President Ji doesn’t agree, I’m prepared to walk away from Ah Li’s funding."
Zhang Xuhao paused for a mont, sighed, and then spoke with grim determination.
"Okay, I can provisionally accept that number. But for it to pass the group’s resolution, President Zhang will need to go back, prepare the financial and business reports, and submit them to Ah Li’s VC departnt for review."
Ji Gang grunted in acknowledgnt before explaining with a smile.
"I understand." Hearing this, Zhang Xuhao couldn’t help but breathe a sigh of relief.
Regardless, with this money, Ele could at least survive the winter. Co spring, they could defend their turf in the Hu City food delivery market and accelerate their expansion.
...
...
「Luzhou, Central Bureau.」
After ng Yuanzhi explained the situation, he left the decision to the heads of Luzhou Construction Investnt and Xin City International.
These two local investnt firms together held nearly 20% of Jingdongfang’s equity.
Chen Yansen’s request could only beco a reality if he could persuade these two n.
"I disagree! To put it bluntly, Orange Technology is just a phone assembly factory. Its value is nowhere near that of Jingdongfang. There’s no need for us to sacrifice the essential for the trivial."
Wang Qingsheng of Luzhou Construction Investnt rejected the idea outright.
ng Yuanzhi frowned, inwardly displeased.
Seeing this, Xu Minggang of Xin City International imdiately understood what ng Yuanzhi was thinking and said with a smile,
"President Wang, Orange Technology actually has its own patented technologies, like the Aurora OS operating system, battery managent, global gesture controls, and fast charging. That said, I also disagree with directly transferring our shares to Senlian Capital. Instead, let’s have them offer shares in Orange Technology as an exchange."
ng Yuanzhi’s eyes lit up when he heard this. He thought Xu Minggang’s idea was excellent.
This way, they could deeply intertwine Jingdongfang and Orange Technology, which was much more aligned with Luzhou’s overall interests.
"If it’s an equity swap, then I have no objection," Wang Qingsheng finally agreed, after glancing at ng Yuanzhi’s expression and then back at Xu Minggang.
Jingdongfang’s total market cap was around 60 billion. Senlian Capital had already purchased 4.9% from the open market.
Since they hadn’t crossed the 5% mandatory disclosure threshold, the public was unaware that Orange Technology had already begun making moves on its supply chain in an effort to lower material costs.
"Since neither of you has any objections, we’ll tentatively agree on this plan. The rest can be discussed when we all et in person."
ng Yuanzhi made the call, settling the matter for the ti being.
That afternoon, Chen Yansen received a call back from Tao Jingwen, who relayed the proposed equity swap.
After a mont’s thought, Chen Yansen readily agreed.
After setting a ti for the negotiation, Chen Yansen hung up.
He planned to wait for Gao Weilin to return from his inspection in Hang City before proceeding with the Jingdongfang stock acquisition.
He could, of course, purchase a certain amount of equity on the open market, but that would not only drive up the acquisition cost, but also run afoul of the local capital from Yanjing and Luzhou that backed Jingdongfang.
They could easily brand it a hostile takeover, and there was no guarantee he wouldn’t be forced to spit back out whatever shares he managed to swallow.
But now, with ng Yuanzhi’s approval, those worries were gone.
Otherwise, even if Jingdongfang’s institutional investors left him alone, he would have to make a public filing for every 5% of equity he acquired. The retail investors on the secondary market weren’t idiots; they would absolutely hoard their shares, refusing to sell.
At that point, it wouldn’t be impossible for the price to jump from 1.6 yuan per share to 16 or even 26 yuan.
Chen Yansen had no intention of being a sucker!
At that mont, Gao Linwei was just boarding his flight back to Xucheng. His negotiations with Cheng Weixing had gone exceptionally well, and he had successfully secured the lead on the new project.
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