After an in-depth study of network equipment companies, He Zhengcheng discovered that Silicon Valley had many such startups, all of which had not been established for long.
For example, there was another well-known company called Juniper Networks, and another company producing products similar to Cerent called Sycamore Networks.
As for other companies like Extreme Networks, Foundry Networks, and Alteon WebSystems, they were all new players in the network equipment field.
"It seems our difficulties are not as great as we imagined!" He Zhengcheng said to the interns he had gradually recruited over the past few days.
Most of these people had professional technical backgrounds but lacked the passion for entrepreneurship and the desire to challenge new industries.
Currently, there were only two females and one male, all of whom were white.
"Yes, in the network equipment field, besides Cisco, they have too many competitors at the same level," Edward Bell said.
He was not from an Ivy League school or any internationally renowned university, but he was very hardworking.
He had a professional background in information and communication, and he also earned a bachelor's degree in financial investment, a dual degree.
Of course, the university he attended was not as good as He Zhengcheng's Polytechnic University.
"So, in terms of technology, which of these companies has a greater advantage?" He Zhengcheng asked.
"Juniper Networks has a greater advantage, but I think Cerent's potential is greater.
This equipment greatly improves Telecom services, not only increasing work efficiency but also allowing them to earn more money without increasing investment," Edward Bell said.
"Then we will focus on Cerent, while also considering Juniper Networks, Sycamore Networks, and other companies," He Zhengcheng decided.
"Okay!" the three assistants replied in unison.
He Zhengcheng and Edward Bell contacted Cerent, while the two female assistants contacted other companies.
Hmm, it seemed they were still missing a receptionist to answer calls.
But never mind, it didn't matter for now; they could add one later.
They still didn't know how long this outpost could be maintained.
Entering an unfamiliar industry, He Zhengcheng was actually very anxious.
Although he said this deal could disregard the success or failure of the investment, things were never that simple.
How to introduce Chinese enterprises, whether state-owned or private, the source and channels of funding, and whether it could pass America's review.
The follow-up work after an investment failure would be even more troublesome!
Cerent's senior management included experienced venture capitalists, which was both bad news and good news.
This indicated that the management was more rational and more receptive to capital, understanding the advantages of capital.
The bad news was that the cost of investment might be higher.
"We are a newly established investment institution, but that doesn't mean we lack experience.
Our main team members come from Peregrine, the largest investment bank in the Asia-Pacific region, and have over ten years of investment experience.
Furthermore, we have inherited many connections from this investment bank; for example, Mr. Li Ban Cheng, the richest man in Asia, is one of our investors.
Therefore, Cerent's products will more easily enter Hong Kong and the Asia-Pacific region.
Mr. Li also owns a large Telecom company, Orange, in the United Kingdom, and we have good connections in Britain and the European Union," He Zhengcheng said, putting on a serious facade.
"I know Peregrine..." Khosla said.
"I also know you, the legendary investor of KPCB," He Zhengcheng replied.
"Then you should know that I won't be easily swayed by you," Khosla said.
"There are many excellent companies in the network equipment field, and you have many competitors, such as Juniper Networks and Sycamore Networks, whose technical strength is no weaker than yours.
Khosla's presence has helped Cerent, but it has also limited the company's development.
You always guide the company's development with an investor's philosophy, but for a technology company, the most important things are the advancement of technical strength and quickly seizing market share, not ensuring the short-term interests of the original shareholders," He Zhengcheng said, like a newborn calf not afraid of a tiger, and unafraid of being ridiculed.
"Are you accusing me?" Khosla asked.
"I don't have that qualification; I just want to ask why you do this.
We want to become new players in Silicon Valley, and investing in this company is more about becoming friends with you," He Zhengcheng explained.
"Not everyone can be my friend," Khosla stated.
"I know, which is why before this, I became friends with Yahoo founder Yang Zhiyuan and eBay founder Omidyar, and I am currently an advisor to eBay.
Our company's boss has joined the eBay board of directors, so we can barely invest normally in the Silicon Valley internet," He Zhengcheng said.
"A good choice, a good strategy, but if it's just these, it might not be enough," Khosla commented.
"So, this time we want to invest in Cerent, hoping to gain Khosla's friendship," He Zhengcheng said.
"Then I'll give Cerent a valuation of two hundred million dollars! What do you think?" Khosla said with a smile.
"..." He Zhengcheng lowered his head in thought.
This company had only a little over two hundred employees and an annual revenue of only a few million dollars.
To talk about a two hundred million dollar valuation at this time was simply an outrageous demand.
And why did his attitude change so suddenly?
Entering a market and paying respects to the local power brokers is a necessary business operation, no matter where you go.
Was it worth paying too much for this?
He had too many things to consider in a short time, but he dared not hesitate, knowing that sometimes opportunities, once lost, never returned.
"One hundred fifty million dollars, we want ten percent of the shares, and we also want priority investment rights.
Within one year, the shares cannot be diluted.
The Goldman Sachs Asia-Pacific Executive Director is my friend and also one of our investors..." He Zhengcheng looked at some of Cerent's materials, thought for a few minutes, and gave his answer.
But the threat at this time was very laughable...
"It's impossible for the shares not to be diluted within one year, but the price of the next round of financing will not be lower than yours!
There will also be no priority investment rights," Khosla said with a smile, finding this young man very interesting!
"Priority investment rights are essential.
We must ensure our own interests, otherwise, the risk of this investment would be too great for us to accept," He Zhengcheng insisted.
"..." Khosla fell silent.
He Zhengcheng also showed no sign of compromise.
He wasn't obligated to choose KPCB, nor was he obligated to choose Cerent.
Since he had already shown sincerity, he also had to receive sincerity in return.
"Alright, I accept your sincerity, but it doesn't necessarily mean it's your sincerity!" Khosla stood up.
"We will continue to move you with our sincerity!" He Zhengcheng said seriously.
"I look forward to that day!" Khosla replied.
The two shook hands, and then a preliminary investment intent contract was signed.
This time was different from the investment in eBay; eBay was about to go public, and many documents were standard.
Although Cerent was still just a startup, its various rules and regulations were relatively formal.
Even so, Shanhai Capital still had to conduct an audit.
Otherwise, who knew if there would be any traps?
In the capital market, if you are foolish, you can't blame others.
This once again showed that in this era, for any startup, not having voting rights was a very foolish approach.
After signing the preliminary letter of intent with Cerent, Khosla gave He Zhengcheng several contact methods; these people were the current partners of KPCB.
"I look forward to our next discussion, Mr. Khosla!" He Zhengcheng said before leaving.
"You are always welcome," Khosla replied.
He Zhengcheng's experience was not extensive, and he didn't know if he had missed anything or suffered any losses in this negotiation, nor did he know if Hong Kong would accept this outcome.
After all, from a financial and other data perspective, this investment seemed like a failure.
Was a network equipment company with millions in annual revenue and no profit really worth so much money?
Wouldn't someone suspect: Is Shanhai Capital sacrificing the interests of our investors for its own benefit?
"That's how things are.
Many media outlets have started reporting on their product, which has great market potential.
I heard that many venture capitalists are preparing to act, but they are hesitating because of Khosla from KPCB.
I was worried about delays, so I directly agreed to their demands.
The rest still needs you to come and negotiate!" He Zhengcheng reported to Ji Jiasheng.
"Okay, give me three days; I'll be there soon," Ji Jiasheng said without hesitation.