Author | Wu Xianzhi
Editor | Wang Pan
In the early hours of January 7, Zheng Gang, an investor in Smartisan Technology and founding partner of Zihui Venture Capital, suddenly bombarded Luo Yonghao, the founder of Smartisan Technology, in the middle of the night. Institutions such as Chi Venture Capital and Matrix Partners, as well as Li Wanqiang, Wu Yongming and others followed suit.
Interestingly, Wu Yongming (known as “Wu Ma”) was the founding partner of Fang Yuanjing Capital, the previous investor of Smartisan Technology, while Zheng Gang and Zihui Venture Capital, both investors of Smartisan, were not among them.
Zheng Gang told Photon Planet that Lao Luo did not even say hello to the financing of the new company. Wu Ma is a powerful investor. He is one of the eighteen arhats of Alibaba. Lao Luo must take good care of him. For our kind of investment People, he may feel that he doesn’t need to pay attention to them. “He is very strange. He always feels that investors will make trouble for him. Under normal circumstances, he is not willing to communicate with investors.”
The cause of the incident was that Thin Red Line informed Zihui Venture Capital in November last year that the new company that Luo Yonghao participated in the startup, Thin Red Line, had completed angel round financing, and the post-investment valuation was no less than 190 million US dollars. The equity (before the investment) is used to compensate the many old shareholders of Smartisan Technology. Among them, the old shareholder Zihui Venture Capital is expected to acquire about 0.69% of the equity through the three companies, on the condition that Zihui agrees to give up its investment in Smartisan Technology and its subsidiaries. The founder’s full repurchase rights, if not signed before the end of November, will be deemed as a voluntary waiver of the rights.
Zheng Gang, on the other hand, thinks the above behavior is unacceptable: “You don’t hold meetings, don’t communicate, and don’t have asymmetric information. You just throw an agreement, let us accept your equity, and you have to give up billions of dollars in repurchases? Are you right? Authentic, dishonorable, immoral. Since we voted for you, we are optimistic about you, and you are capable, why do you want to hurt the hearts of so many investors?”
In this regard, Luo Yonghao clarified and responded at noon on the 7th: Mr. Zheng criticized me for not holding a shareholders’ meeting for three years. In fact, he misremembered it. According to the company law and the company’s articles of association of Hammer Technology, Hammer Technology held a shareholders’ meeting every year.
Luo Yonghao said that Mr. Zheng Gang and his organization have helped me more than once when I was struggling to start a business in these years. It is indeed a pity that something like this happened today.
Luo Yonghao said that the relevant conditions and agreements were also voluntarily chosen by the old shareholders to sign or not to sign. Although we did not hold a group meeting for this matter, we sent identical emails to all the old shareholders of Smartisan Technology and confirmed them one by one through WeChat. How could there be “non-communication” and “asymmetric information”? “Many old shareholders happily signed and expressed their gratitude to us, because they know that investment is not a loan, and the failure of the invested company is a failure. So this kind of compensation for the failure of the previous entrepreneurial project is essentially It is because of unusual emotions and morality, rather than common jurisprudence and logic.”
In response to this matter, Photon Planet had an exclusive conversation with Zheng Gang, who described in detail the whole process of investing in Smartisan Technology, as well as the ins and outs of this matter.
“We are happy that Lao Luo can succeed, but you can’t blackmail us. You give us the equity of AR company, OK, we are very happy, but you can at least say how long the equity value exceeds the repurchase funds before exempting The repurchase clause, right? But you can’t tell us what kind of bullshit company this is, and suddenly throw the agreement over, you have to accept my equity in the VR company, and then give me the right to cancel the repurchase. I don’t even know if you can Done right? It’s unethical.”
To many people’s questions, since you are a venture capital investor, you should know that investment is risky. Why do entrepreneurs have to pay off their debts in their own names all the time? Zheng Gang responded that he had invested in nearly 100 companies, and I didn’t want to repurchase any of them, but when I encountered Lao Luo, I would repurchase them.
“This is an essential difference. You can’t let him look down on us. To be honest, you have to rely on your own vision to invest. You must have a way to bear the risks. Conversely, LP also requires our institutions to buy back Yes, I mostly met their requirements. In the entire fund I invested in Smartisan Technology, there was a total of 175 million yuan. Originally, about 60 million belonged to investors. I repurchased about 40 million yuan myself. That is to say, when we lost all our money, we actually spent money to buy back LP’s funds, leaving only about 20 million LP.”
Photon Planet exclusively learned that the D-round financing agreement signed by Hammer Technology in September 2017 did specify a 5-year repurchase clause, that is, if the company fails to achieve an IPO within 5 years, it needs to redeem the D-round after 5 years of investment completion. For the equity held by investors, the redemption price needs to receive dividends at an annualized rate of 5%. For the situation that cannot be redeemed, the point mentioned in the agreement is that if the company cannot pay the redemption payment, the founder should bear the joint and several redemption obligation.
The agreement clearly requires that the above-mentioned share redemption price and dividends be paid to the D round investor in one month within one month after the five-year period expires. It is also mentioned in the agreement that the above agreement should be clarified in the company’s articles of association after the completion of this investment, otherwise the company and the founders will bear joint and several liability for the D round investors.
By September 2022, the five-year investment period agreed in the agreement has expired, and the investor will have the right to redeem.
Previously, Luo Yonghao announced that he owed 600 million yuan in debt. Why did a 1.5 billion yuan repurchase appear here? Zheng Gang responded that the so-called 600 million is only money owed to the supplier, and does not include the repurchase funds of the investor, and 300 million of the 600 million repayment is paid by ByteDance for the acquisition of Hammer Technology assets.
The following is the main content of Photon Planet’s exclusive conversation with Zheng Gang:
Photon Planet: How did you first meet Luo Yonghao? Why invest in Hammer Technology?
Zheng Gang:It was Momo Tang Yan who first told me that I voted for a bid to introduce someone to you. Your Zihui Fund should become famous as soon as possible. You must make a successful big project, and then invest in one or two influential entrepreneurs.
Then we met in a coffee shop in Xincheng International, and we finally negotiated and we invested 5 million. Later, when we signed the angel round agreement, I added a clause to the agreement: Luo Yonghao, if you fail, you must give me your listed company 1 % of equity.
Lao Luo became angry, and he said: “You have negotiated the agreement with me, why add a new clause.” I said: “No, I am optimistic about you, because I still vote for you because you failed, but you can’t let I was completely wiped out, not to mention that I think you can come back. If the project is not successful when you go public, then when you make the next project go public, you have to give me 1% of the equity.” Lao Luo refused, so in the end I didn’t cast.
Photon Planet: Since you didn’t vote this time, why did you vote again later?
Zheng Gang:At that time, Momo Tang Yan invested 9 million, and then Lao Luo had to refinance after making the ROM. We invested 40 million, and another 30 million was from others. We invested a total of 70 million.
At the Hilton Hotel in Xixi Wetland, Hangzhou, Lao Luo, Tang Yan, and I went to meet Wu Ma and Sheng Yifei together, and I asked Lao Luo, “What are you going to do when you get 70 million?” Lao Luo actually said: “I got the money and went to Silicon Valley to start a business.” I said, “Go to Silicon Valley to start a business and make a mobile phone?”
So he told me about all kinds of corruption in China and so on, and I fainted after listening. I said that China has many problems and the environment is not perfect, but all entrepreneurs will encounter this problem. The environment needs to be improved, but you can’t be unconstrained. I told him later, if you succeed in China, I will support you with 500 million RMB to start a business.
So I shouldn’t have voted for him that time. We invested 40 million at that time, and the money came from LPs. I later bought back most of the investment from LPs.
Photon Planet: Are you not venture capital? Why should the founders be jointly and severally liable? Isn’t it the same as loan sharking?
Zheng Gang:First of all, the repurchase clause is actually a method learned from abroad. Now it is generally used in RMB funds. In fact, US dollar funds have such clauses, which are liquidation and repurchase clauses. I am used for moral defense, even if you lie to me, you will not be able to escape. If you did not lie to me, start a business honestly, and fail honestly, I will not ask you for money.
To be honest, to invest, of course you have to rely on your own vision, and you must have a way to bear the risks in it. I voted for nearly 100 companies, and none of them wanted to repurchase, but when I encountered Lao Luo, I wanted to repurchase. So this is an essential difference, and we can’t let them look down on us.
Conversely, LP also asked our institutions to repurchase. I have mostly met their requirements. In the entire fund I invested in Smartisan Technology, a total of 175 million yuan was originally invested. About 60 million yuan belonged to investors. , I repurchased about 40 million by myself, that is to say, when we lost all our money, we actually spent money to repurchase LP funds, leaving only about 20 million in LP.
Photon Planet: Isn’t it because you think Lao Luo has the ability to ask him to buy back? The reason why others didn’t ask the other party to buy back is because many people failed to start a business and didn’t make a comeback?
Zheng Gang:It is not ability, it is secondary, the first is the occurrence of moral hazard. This repurchase clause depends on how you use it. I take it as a moral hazard prevention mechanism, that is, if you lie to me, I can kill you. If it is to punish entrepreneurship and failure, then I will not want it.
We managed a total of more than one billion yuan, and the losses from the failure of our investment projects are much more than this, and the hammer is only one of them. There are still a lot of losses here, but Lao Luo’s matter is different. The main reason is that there is a moral hazard, so we invested in so many projects, and none of them got back. The question of whether things are authentic or not. To be honest, investment is risky, we admit it, but you have to do things right, let us have a good explanation, right? We can afford it, right? But you cannot fail in being human.
Photon Planet: Do you think he is not authentic when posting to Moments this time? The terms given are not acceptable?
Zheng Gang:We are happy that Lao Luo can succeed, but you cannot threaten us. Lao Luo felt that it was possible to repurchase, so he lost an agreement, saying that you would take a few tenths of a percent of my equity. I calculated that it might be worth one or two million dollars, and wanted to replace me. 1. 800 million repurchase rights.
You gave us the equity of AR company, OK, we are very happy, but you can at least say how long the equity value exceeds the repurchase funds before the repurchase clause is exempted, right? You can’t just tell us what kind of company it is, and then suddenly lose the agreement. You have to accept the equity of my VR company, and then cancel the repurchase right for me. I don’t even know if you can make it, right? This is not authentic.
Photon Planet: Didn’t you say that you only owed 600 million? Where did this 1.5 billion come from?
Zheng Gang:That’s the money to pay back the supplier, he didn’t mention paying us back at all. He also told the public that “returning the truth” is just for your success. If you “return the truth”, we can cooperate with you in acting. You should at least inform everyone of the internal information. They don’t have any requirements, but he will do it. less than.
The so-called live broadcast brought goods back 600 million. In fact, ByteDance paid 300 million for the assets of Smartisan Technology, and he paid back more than 200 million for live broadcast and goods.
Photon Planet: How much of the 1.5 billion investment do you take? What other institutions? What is your request?
Zheng Gang:We are about 175 million, and there are other companies such as Haitong Securities, Suning, Lianchuang, Linekong and so on. To be honest, they are all very good people, and they all believe in him. But since you are not authentic, this time I must ask you to repay the loan in full, not a penny, plus all the interest. There is a repurchase clause in our investment agreement. When the company fails to repurchase, Lao Luo personally needs to bear the joint and several repurchase obligation.
Photon Planet: In the agreement signed with Luo Yonghao, does it involve, for example, the company going bankrupt, and does he have to repay the loan personally? What was the deal like at the time?
Zheng Gang:The agreement must have a repurchase with unlimited personal liability, and it is normal for investors with special backgrounds such as CITIC and Dongfang Guangyi to be involved. To start a business in China, you have to respect the rules of the environment, you can’t take other people’s money, and you don’t respect the rules.
The rules of the agreement mainly involve that if it is not listed within 5 years, Luo Yonghao will buy it back. If any investor is given a repurchase, such as CITIC and Dongfang Guangyi, then all investors can repurchase.
He took information division, did not let us know, and only asked us to sign an agreement. So I was very angry. Since people are decent outside, they should be consistent inside, right? What’s more, these investors are so relentless towards you. He later met with a new group of investors and asked them to invest. These investors did not do their due diligence and did not ask us what was going on. They might make the same mistakes, such as Wang Xing.
MicrosoftYahei;font-size:14px;”>Original title: Exclusive conversation with Zheng Gang: You can act with Luo Yonghao, but you can’t blackmail us