Tom leaned over to get a clear look at the numbers and whistled. "Those guys of George's really held their noses and accepted it. It's not a billion, but it's a full seventy million more than the eight hundred and sixty million they were clinging to. What's interesting is that this seventy million difference is enough to cover the balance sheets of several Silicon Valley startups."
Takuya Nakayama put down the newspaper and picked up the fax.
The bottom of the document bore the signatures of Goldman Sachs partners, the Wall Street investment banking elite had backed down in this gamble.
"Know when to quit," Takuya said, tossing the document onto the coffee table. "If we push them too hard, Morgan Stanley will need time to restart the process. It's not worth dragging this out."
Frank pulled out a chair and sat down, letting out a long sigh. "Boss, that psychological warfare move really paid off. My back was drenched in sweat during the confrontation with George in the lounge. I was terrified he'd flip the table and storm out right then and there."
"Wall Street people care most about profits," Takuya said, taking a sip of his coffee. "They calculated the cost of default. Losing the underwriting rights for the first major Internet IPO would cost Goldman Sachs far more than meeting our price increase. That's what you call a brilliant strategy."
Tom clapped his hands, interrupting their debrief: "Since the price is set and the launch date remains unchanged—March 21st—it's time to get to work, gentlemen."
Frank rose and approached the towering stack of documents on his desk. "No one's sleeping tonight. We need to submit the final prospectus to the SEC tomorrow. The offering price, number of shares, and total fundraising amount—all these core figures must be double-checked and entered."
The atmosphere in the suite shifted from tense vigilance to frantic activity.
Several laptops whirred at full speed, their keyboards clattering rhythmically in the room.
The legal and finance teams from Silicon Valley Online were urgently summoned to the suite, beginning their all-night push.
Documents were printed, quickly revised, and annotated.
Takuya Nakayama sat in a corner, watching his subordinates scramble for the impending financial feast.
Two days later, the Nasdaq bell would ring for this Internet company.
Monday, March 20th.
Pierre Hotel executive suite, Manhattan, New York.
The coffee on the table had gone cold.
Several printed documents lay scattered across the surface.
Donald Valentine, a partner at Sequoia Capital, sat on the left side of the sofa, holding the final pricing confirmation letter from Goldman Sachs.
The number at the top of the page was clearly printed: $930 million.
John, a partner at KPCB, sat nearby, his gaze fixed on the same number.
Frank Marshall leaned against the edge of the desk, holding a glass of soda.
Tom Kalinske was flipping through the day's Wall Street Journal.
Takuya Nakayama sat on the single-seater sofa, idly twirling a fountain pen in his hand.
Donald set down the confirmation letter and looked up at Takuya Nakayama.
"Goldman Sachs has backed down. $930 million. Last Friday night at the roadshow wrap-up meeting, George Fischer was adamant about $860 million. I thought that was the final offer."
John added, "George claimed that Wall Street institutional investors were skeptical about the Internet business model and that $860 million was their absolute limit. What exactly did you say to George?"
Frank took a sip of soda and set the glass on the table.
"Mr. Nakayama asked me to deliver a message to George: either raise the price, or we'd switch to Morgan Stanley for the underwriting."
Donald frowned. "Switching underwriters mid-stream? The SEC process would have to start all over, a huge time sink. Goldman Sachs' legal team on Wall Street would calculate a penalty that would be astronomical. George actually fell for that?"
Tom folded the newspaper and set it aside.
"The penalty for breach of contract will be paid by Sega of North America. We can afford it. The executives at Goldman Sachs' Investment Banking Division calculated that they couldn't afford to lose this deal. Silicon Valley Online is the first pure Internet company on the Nasdaq. Handing this benchmark project to a competitor would ruin Goldman Sachs' reputation in tech stocks."
John picked up the confirmation letter and tapped it twice with his fingertips.
"This was a business gamble. You bet on how much Goldman Sachs values its influence in the industry. They backed down."
Donald leaned forward, crossing his hands on his knees.
"We invested $5 million in Series A for a 5% stake. In Series B, we invested $30 million for a 10% stake. KPCB's investment ratio was the same as ours. Each of us invested a total of $35 million, holding 15% of the company."
He paused, mentally reviewing the numbers.
"At a $930 million post-money valuation, our 15% stake is worth nearly $140 million. In less than two years, we've nearly quadrupled our paper returns."
John leaned back against the sofa and let out a long sigh.
"During the Series A funding round in the Redwood City conference room, I thought the $100 million valuation was too high. When you offered a $300 million valuation for the Series B, I called my partners late into the night and we discussed it for three hours before agreeing to co-invest. Looking back, we underestimated the growth potential of the Internet."
Donald turned to Takuya Nakayama.
"There's a question I've wanted to ask for a long time," he said, pausing to see Nakayama nod for him to continue. "Silicon Valley Online is funded by Sega. You could have easily kept this business in-house. Why did you give us and KPCB 30% of the shares?"
Nakayama stopped twirling his pen and tucked it back into his suit pocket.
"Sega is a Japanese company. Even though most of Sega of North America's management are American and Sega Headquarters rarely interferes in North American operations, that perception is hard to shake. For Silicon Valley Online to thrive in the US, to list on Nasdaq, it needed the backing of top-tier American capital.
Sequoia and KPCB have vast networks and media resources in Silicon Valley. Those 30% of shares bought us our ticket to Wall Street."
John chuckled.
"This deal is a win-win. We provide the funding and resources, and you handle scaling the business. Everyone comes out happy. When we met with Fidelity Investments in Boston, they couldn't understand why anyone would pay five dollars for virtual sunglasses for an avatar. Frank showed them the data: the average high-activity user spends twelve dollars a month in the ICQ lobby, with a marginal cost close to zero."
Donald nodded in agreement.
"That's the magic of the Internet. Traditional software sells units one by one, but you're selling user vanity and social needs. Virtual clothes and digital pets—things that would make traditional venture capitalists scratch their heads. But your financial statements have silenced all the doubters."
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