Chapter 126 Investment Agreement

  In the evening, Xia Jingxing received a call from Jonas in the hotel.

  Jonas: "Daren, our team thought about it, but still think we should have a frank chat with you."

  Xia Jingxing: "Oh, let's talk about it then!"

  Jonas: "Then I will tell you the truth, you invest US$900,000 in us, and we will dilute 15% of the shares to you."

  Xia Jingxing: "Where is Defengjie?"

  Jonas: "You don't need to think about them, you invest in us alone, and you will definitely get richer returns than investing together with Defengjie."

  Xia Jingxing: "This...this is not so good, it has spread a bad reputation."

  ...

  Xia Jingxing hung up the phone and looked at Andrew and Howard who were sitting beside him drinking.

  Howard shrugged, "Daren, I think you should turn off your social networking site and focus on venture capital.

  With your wisdom, you can definitely make brilliant achievements in this industry.

  On behalf of Defengjie, I will solicit you. You can become the youngest investment manager of our company. "

  Xia Jingxing smiled, "Thank you for your offer, I prefer to do things for myself."

   "Okay! When you figure it out someday, you can come to Defengjie to try."

  Howard is really convinced.

  After leaving the apartment where the Scape team was located, he was pulled by Xia Jingxing to drink.

  Drinking and drinking, Jonas called him first.

  According to the agreement with Xia Jingxing, he turned on the hands-free and turned on the power amplifier.

  Jonas also offered a "$900,000, 15% equity" condition.

  To be honest, he was a little tempted.

  Investment of 300,000 U.S. dollars more and 3 more stakes, leaving Dai Lun directly aside, and invest separately.

  But this scene was watched by Xia Jingxing, he couldn't act alone without hiding it.

   And Jonas can talk to him alone, he might not talk to Darren alone.

  Sure enough, after he refused, he called Darren again.

  If Xia Jingxing hadn't left his hand, their "fragile alliance" would most likely be disintegrated tonight.

  This person is a complicated animal.

  Xia Jingxing naturally be more careful.

  Howard admired Xia Jingxing’s insights into human nature.

  If you are not careful today, it is very likely that Jonas will be defeated one by one.

   Tomorrow, it is not impossible for the valuation to exceed 10 million.

  And the bloodshed, after all, it was their two investors.

  Because he and Xia Jingxing have just met, naturally there is no trust. Once doubt or suspicion arises, let alone continue to maintain the alliance, it is not bad if you can't fight.

  With this interesting experience tonight, the foundation of trust between the two parties has been strengthened a lot, and the alliance relationship will no longer be as fragile as before.

  ……

  ……

  The next day.

  Xia Jingxing and Howard came to the apartment where Scape was, and they had a direct showdown.

  Two plans A and B, one must be selected.

  Looking at the two men who crossed their shoulders, Jonas knew that his strategy had failed again, and frustrated, he handed over the decision to Nicolas.

  Nicholas did not hesitate to choose Plan B. The two investors invested 1 million U.S. dollars in Scape, with a post-investment valuation of 5 million U.S. dollars, and the founding team diluted 20% of the shares.

  He is not afraid of too much equity dilution. He first gets the money to keep the company alive before he can be qualified to talk about other things.

  People are more pragmatic, in stark contrast to Jonas.

  Howard is very satisfied. If Nicholas makes any trouble again, he needs to re-evaluate the team.

  Product R&D capabilities are good, but if the founder is too short-sighted, the company is destined to not go far.

   Fortunately, this group of people did not break through his tolerance.

  After signing the investment letter of intent, also known as the TS (termsheet) investment terms list, a due diligence is required.

  Scape is not a big company, and the investment amount is only one million US dollars, and it is not a particularly large amount. Therefore, without inviting professional companies to conduct in-depth due diligence, Howard, Xia Jingxing, and Andrew have done it.

  Among them, the most important thing is the intellectual property rights of Scape.

   "Nicholas, Jonas, and Scape’s P2P technology intellectual property rights are in the hands of the company jointly owned by the two of you. What is the situation?"

  Howard is very professional, and he checked out the core assets of Scape.

  Jonas smiled and said: "Those intellectual property rights were all applied for when we founded Kazaa. They do not belong to Scape, but we can license them to Scape for free."

   "Authorization?"

  Howard frowned, "If these intellectual property rights are not in the hands of Scape, we must re-evaluate the value of Scape."

  Xia Jingxing had never done professional venture capital, so she stole the teacher seriously without interjecting.

  After arguing, Howard forced the two to sign a twenty-year free license agreement.

  As for twenty years later, DFJ should have withdrawn from investment a long time ago.

  A small company, there is nothing to adjust.

  It took a few days to investigate all the products and relevant legal agreements of Scape, and confirmed that there was no problem, and the three parties began to sign the formal investment agreement.

  Xia Jingxing invested US$400,000 and obtained 8% of Scape's shares; DFJ invested US$600,000 and obtained 12% of Scape's shares.

  As for the founding team of Scape, all the shares held by it are discounted by 20%, which is multiplied by 0.8 for dilution.

  Before this equity division, Howard also asked the founding team of Scape to take out part of the equity and set up an option pool to motivate core employees.

  If you don’t set up the option pool in advance, and wait for the A round of financing to set it up, angel investors will be trapped in it: help the founding team to dilute the equity and jointly set up the option pool.

  A veteran investor in Howard, he will naturally not make such a low-level mistake. Before signing a formal investment agreement, he asked the six-member Scape founding team to set up an option pool.

  These six people are also quite generous, and each of them has assembled an option pool that accounts for 20% of the total share capital according to their proportions.

  In fact, it is not too high. Except for a few domestic companies such as Huawei, most companies have only a few percent of their total equity after their option pools are listed.

   When Google and Facebook went public, the employee shareholding ratio was as high as 30%.

  At this point, some domestic capitalists are not as generous as foreign ones, but the competition for domestic talents is too fierce and spoiled.

The formal investment agreement is a bit complicated. In addition to specifying the target company’s valuation, investment amount, and investment method, it also includes the use of funds, transfer restrictions, corporate governance, tag-along rights, pre-emption rights, pre-emption rights, anti-dilution clauses, Non-competition, the right to know, confidentiality clauses... etc. are a bunch of ancillary agreements.

  When Xia Jingxing signed angel investment agreements with Andrew and Old John, these terms were also signed, which is not unfamiliar.

  In addition to becoming a director of Scape, Xia Jingxing also has the right to participate in the A round investment in Scape, keeping the 8% shareholding ratio unchanged.

  In addition, when a company wants to acquire Scape, the investor has the right to sell, and according to the same acquisition conditions, they will sell the equity together with the founder.

  In other words, the founder cannot run away and the investor takes over the market alone. This is to protect the interests of investors.

  There are also founders selling equity, and investors are eligible to subscribe first.

  Share repurchase and gambling are not signed.

  On the one hand, angel investment is inherently risky, and its valuation is not high. It also requires repurchase, which is too bullying.

   is no longer called venture capital, it is called borrowing.

  Gambling is also generally used to encourage the founders to work hard when the product is in an explosive period when the valuation is divergent.

  (End of this chapter)