94: Chapter 94 Subduing Da Dongzi

Beijing, JD.com headquarters.

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Liu Qiangdong sat in a simple, makeshift conference room, feeling somewhat dejected. Piled in front of him was his 37th business plan.

Over the past three months, he had met with 37 investment institutions, ranging from IDG, Sequoia, and SoftBank to various obscure funds.

The result was always the same: rejection.

The reasons were also much the same: the economic crisis hadn't passed yet, and to survive, companies had cut back on investment quotas; the B2C model was too asset-heavy; and building one's own logistics was essentially courting death.

To put it even more bluntly: "You are still losing money... there is no future in sight."

The most infuriating one was an investor from Silicon Valley who, after looking at the report, tossed it aside and said with a hint of disdain, "Mr. Liu, the model of JD.com was proven unviable in the United States long ago."

"Amazon succeeded because of the United States' developed logistics. China? You want to build your own logistics? You won't recover the costs for 10 years."

After seeing the person out, Liu Qiangdong sat in his office, feeling depressed for a long time.

He started his business in 2004, selling CDs from a counter in Zhongguancun, and in just five years, he had achieved an annual revenue of 4 billion.

During the last round of financing, the valuation was as high as 150 million US dollars. If not for the economic crisis, it would be at least 500 million US dollars now!

It sounded impressive, but only he knew it was all just an illusion; while it looked glamorous on the surface, JD.com had always been losing money.

In order to build warehouses, expand product categories, engage in price wars, and identify problems, the company had never turned a profit.

It wasn't until this year that he finally identified the most serious problem: the logistics delivery time was too slow, and many users were afraid to place orders!

So, he prepared to build his own logistics!

The idea was grand, but reality was cruel; there was only 80 million left in the account, which could support them for at most three more months.

If he couldn't raise more funds, JD.com would collapse.

As for building logistics channels, that was even more of a fantasy.

Just as he was feeling depressed there, his secretary pushed the door open and walked in, a hint of expectation in her voice.

"Mr. Liu, people from Huaxin Investment are here. And it seems like their boss, Huang Tianya, is leading the team. They have invested in Huawei terminals."

Liu Qiangdong's spirits instantly lifted, and the sense of defeat he had felt earlier vanished into thin air...

Huaxin Investment! That investment bank which had invested in Huawei, invested in Transsion, and even had a lot of business in the United States!

How could they possibly be interested in JD.com?

Still, he quickly straightened his clothes and headed to the conference room.

"Mr. Huang, I've long admired you." When shaking hands, Liu Qiangdong deliberately lowered his hand slightly, signaling his attitude.

"We have always looked forward to cooperating with Huaxin Investment and were planning to visit you. I didn't expect Mr. Huang to come ahead of time. The Huawei terminals that your company invested in, the Mate 1 released, are also best-selling products on our platform."

Huang Tianya smiled. Although he knew these were just polite pleasantries, they were certainly pleasing to hear; after all, who doesn't like to hear nice things?

"Mr. Liu, you are too kind. The fact that the JD.com platform could achieve 4 billion in revenue in such a short time—that is the real miracle."

Liu Qiangdong's expression brightened instantly; Huaxin Investment really seemed different from other investment banks.

Those other people never had this kind of attitude; perhaps there really would be a good outcome today.

Soon, after the polite pleasantries were over, Huang Tianya got straight to the point: "Mr. Liu, I have reviewed all of JD.com's materials. Starting the business in 2004, receiving 10 million US dollars in investment from Capital Today in 2007, exceeding 1.3 billion in revenue in 2008, and this year's total revenue is set at 4 billion."

"The transaction volume is indeed impressive, but our platform has always had one unresolved problem: the losses."

Liu Qiangdong's previously happy mood instantly grew tense. Here it comes, the issue of losses again.

"Yes, we are losing money," he admitted frankly. "But the losses are because we are building warehouses, building logistics, and expanding product categories. As long as the scale increases and costs come down, profitability is only a matter of time."

"I know," Huang Tianya nodded, then waved his hand to signal him to relax. "That's why I came today—not to question the losses, but to solve the problem."

Huang Tianya opened the laptop on the table, brought up a set of data, and placed it in front of Liu Qiangdong:

"Currently, the JD.com platform has three major advantages. The first is the guarantee of authentic products. This is the problem most users worry about when buying electronic products. Then there is the self-built logistics that you, Mr. Liu, want to do most. Although it burns money, the user experience will be better, and this is also an advantage going forward. The third is the expansion of all categories, from digital 3C to the entire industry; this is the most important step for the future."

Liu Qiangdong was completely stunned as he looked at what was in front of him.

Previous investors had always started by pointing out his three major problems (losses, heavy assets, fierce competition). This was the first time someone had started by pointing out his three major advantages, and these words instantly touched his heart.

At that moment, he felt it was a case of meeting a kindred spirit too late; he wanted to immediately raise a glass to toast him as a soulmate, but he knew this wasn't the time, so he forced himself to suppress the excitement in his heart.

"But the problems are also obvious," Huang Tianya said, seeing that the time was right, and added more fuel to the fire.

"Tight funds, slow logistics construction, and the urgent catching up of competitors. For example, Dangdang or Joyo Amazon, as well as Taobao. So you need money—a lot of money."

Liu Qiangdong had also recovered by now, so he tentatively asked: "Mr. Huang, how much money do you think... JD.com needs?"

He wanted to know how much this big brother was willing to invest; after all, small amounts of money couldn't solve the core problems of the JD.com platform at all.

"At least two hundred million US dollars." Huang Tianya held up two fingers, acting extremely casual, as if that wasn't 200 million US dollars, but as simple as an ordinary person pulling 2 yuan out of their pocket.

[Huang Tianya: Not that poor.]

"One hundred million of that will be used to build five major logistics centers, then 50 million for technical upgrades, and 50 million for market promotion."

Looking at this detailed plan, Liu Qiangdong was so surprised he didn't know what to say.

This design plan was even more detailed than his own; it had even planned out the core nodes. As long as he followed the operations listed above, he would achieve huge results in a short time.

"Two hundred million... US dollars."

It was no wonder he was so surprised. He had originally planned to raise a few hundred million and then force the logistics channel project to start; he never expected... that he not only had money, but also a plan.

"Yes, US dollars," Huang Tianya looked at him. "However, we want 40% of the shares."

The conference room was quiet for a while.

40% of the shares meant that Huaxin Investment would become the largest shareholder and the true actual controller. And he, Liu Qiangdong, would become just a hired hand...

Although he knew this was the end for most founders, giving up so much at once...

"40%..." Liu Qiangdong said with difficulty. "Mr. Huang, this percentage... wouldn't it be too high? Also, the current valuation of the JD.com platform..."

"Five hundred million US dollars," Huang Tianya interrupted him. "That is the post-investment valuation. Two hundred million US dollars for 40%, a premium of nearly 20%—this is the best condition I can offer."