Chapter 325: Over 60 times return on investment! Chen Yansen: I just made it up!
In 2012, Spotify just completed its Pre-E round of financing, with a post-investment valuation of 1.5 billion US dollars.
After eight months of rapid expansion, based on a reassessment of the current market share and number of paying users, the valuation is around 2.5 to 3 billion US dollars.
Compared with the IPO valuation of US$26 billion six years later, there is eight or nine times of room for growth, and there are more than sixty times of profit opportunities compared to the peak market value of US$149 billion.
For Chen Yansen, investing in Spotify can not only bring him a rich return on investment, but also complement the application ecosystem of the Alexa smart speaker.
Moreover, Daniel Ek's fees are not high. If it were Apple's iTunes, Cook might charge him 30% of the music copyright fees.
Therefore, Spotify is obviously worth investing in at this time! Chen Yansen looked at Daniel, deliberately showing a hesitant look on his face. After pondering for more than ten seconds, he slowly said:
"Senlian Capital has not yet entered the overseas investment field. I am optimistic about the future development of Spotify, but the premise is to solve a series of problems such as high copyright costs, unclear profit direction, weak user growth and low payment conversion rate."
The difficulty in making profits for a music software is enough to discourage 99% of potential investment institutions.
After all, the core demand of investors is to make a profit, not to pay for the entrepreneur's dream out of their own pockets.
The copyright dilemma is like a quagmire that has entangled Spotify.
Daniel nodded slightly, and replied in a serious manner: "Mr. Chen, I admit that copyright fees are indeed the biggest obstacle to Spotify's profitability.
To this end, I have communicated with Universal, Sony, Warner and other record companies, and are preparing to optimize the royalty payment model and charge according to actual playback volume, thereby reducing the copyright costs of non-popular songs. "
"Can Universal, Sony and Warner agree?"
Chen Yansen asked back with a smile.
Who would be willing to give up the fat meat in their mouth? The more users Spotify has, the higher the royalties of the record companies will be. Universal, Sony and Warner will never agree to it! The other party used the word "preparation" and did not sign a contract. This is just a temporary wording for financing.
Seeing that Chen Yansen was not fooled, Daniel couldn't help but sigh. Most Asian investors are shrewd and rational.
Three years ago, Li Jiacheng's Horizons Ventures participated in Spotify's Series B financing. During the negotiation process, Li's financial analyst came up with an eye-catching valuation algorithm model, which lowered the offer price by 20 million US dollars.
In his opinion, even though Chen Yansen was not accompanied by professional financial and legal personnel, he was obviously a shrewd businessman and it would be difficult to fool him.
After thinking for a moment, Daniel looked at Chen Yansen and said, "If Spotify is dragged down by copyright fees, Universal, Sony and Warner will lose 500 million US dollars every year. As Spotify's market share continues to increase, this number will continue to expand, even to 2 billion or 5 billion US dollars. They will not sit idly by and watch Spotify decline."
The three major record companies may make concessions, but how big the space is remains unknown.
He has good business acumen and operational capabilities, but due to the high copyright fees in Europe and the United States, after several rounds of financing, the founding team's stake in Spotify has become smaller and smaller.
Prior to this, he had successively contacted investors from Goldman Sachs, Fidelity Capital and Coca-Cola, but after some conversations he found that the highest offer was only 2.8 billion US dollars, which was far from his psychological bottom line.
Therefore, he tentatively asked Chen Yansen about his investment intentions, hoping to introduce non-European and American investors to disperse the investors' shareholding ratios and ensure his own controlling rights.
Chen Yansen smiled and said indifferently: "Maybe."
"Spotify is preparing for its E-round financing..." Daniel said bluntly.
"You want me to invest in Spotify?" Chen Yansen asked in surprise before he could finish.
"That's right! Of course, whether the cooperation can be achieved depends on Mr. Chen's wishes." Daniel replied.
"What are your psychological expectations?" Chen Yansen leaned back, picked up the hot coffee on the table, took a sip and asked.
"3.4 billion U.S. dollars. If Chen Yansen is interested in investing, I am willing to sell 5% of the shares."
Hearing this, Daniel's face unconsciously showed a hint of joy, and he quickly replied.
"Too high. Do you know how much a music app with 20 million daily active users and 5 million paying users is usually valued in China? At most 300 to 500 million US dollars."
Chen Yansen shook his head slightly and answered his own questions.
"But Spotify is facing a global market with different potential. Once it is successfully listed, its market value in the future will not be less than 10 billion US dollars."
When Daniel heard the words 'three to five hundred million US dollars', he instantly became anxious, leaned forward, and responded immediately.
“I heard that Universal Music is secretly negotiating with Apple for exclusive licensing. If Spotify is unable to pay the copyright fee, the three major record companies may just wait for Spotify’s capital chain to break, and then take the opportunity to acquire it at a low price.”
Chen Yansen put down his coffee cup and said with a chuckle.
"No, it's impossible!" Daniel's face turned pale and he denied it in disbelief.
"Maybe it's fake news and can't be taken seriously." Chen Yansen hummed, looking as if he was downplaying it.
But Daniel's mentality was already in a mess. He was afraid that Universal, Sony and Warner would stab him in the back. In addition, the investors' unreasonable price-cutting behavior made him believe it to the extent that he believed it.
“A 5% equity ratio is fine, but I cannot accept a valuation of 3.4 billion U.S. dollars. Below 3 billion U.S. dollars, there is still a possibility of cooperation.”
Chen Yansen continued.
"The offer of 3 billion US dollars is too low. The numbers given by Goldman Sachs are all above 3 billion US dollars." Daniel immediately refused.
"Forget it, let's put the investment aside for now and talk about the cooperation between Alexa smart speaker and Spotify." Chen Yansen changed the subject concisely and straightforwardly without any hesitation.
He would not believe the other party's lies! Since Goldman Sachs Capital was willing to offer a valuation of over 3 billion US dollars, why did Daniel still come to him for investment? What was he trying to do? This kind of rhetoric might be enough to fool investors who were new to the industry, but in Chen Yansen's eyes, it was just a lie full of loopholes.
Daniel's tone paused. He didn't expect that Chen Yansen would not follow the routine at all.
So he just laughed dryly and could only follow the other party's topic, chatting about the application ecology of smart speakers and the mobile phone market in Eastern Europe. He also took the initiative to state that he had some operator channel resources in Germany, the United Kingdom, France and other regions, and could provide assistance to Orange Mobile in opening up the Western European market.
"Thank you." Chen Yansen thanked calmly.
Daniel held it in for a long time, but finally couldn't help it and lowered his offer to 3.2 billion US dollars.
"Everyone takes a step back, 2.8 billion US dollars!" Chen Yansen said calmly.
Daniel was stunned. If one person took a step back, shouldn't it be 3 billion US dollars? Spotify clearly took two steps back! He thought for a while and said, "The minimum is 3 billion US dollars."
"Let's talk next time." Chen Yansen waved his hand and refused decisively.
He does not have a strong intention to invest in Spotify. If the price is low, he will invest. If the price is too high, he will give up.
The valuation of 2.8 billion US dollars is on par with Fidelity Capital and 100 million US dollars higher than Coca-Cola, so it is not a high price.
Seeing this, Daniel had no choice but to give up.
After that, he stopped talking about investment and cooperation matters and instead introduced Chen Yansen and Song Yuncheng to Stockholm's scenery, ski resorts, hunting activities, music festivals, beer festivals, etc.
The autumn breeze on the terrace was cool, and everyone chatted until noon.
As it approached twelve o'clock, Daniel invited Chen Yansen to a restaurant in the city to taste the local specialties.
In the afternoon, Chen Yansen said goodbye to Daniel and drove to the Gottstorp Hunting Ground in Godaland Province.
Logically, he and Song Yuncheng did not have a hunting license, but as long as they were willing to spend money, they could find a loophole.
Under the operation of the hunting club and led by a professional hunter, Chen Yansen easily experienced the feeling of hunting.
Song Yuncheng carried a hunting rifle and shot three hares in just two hours. He then said to Chen Yansen excitedly, "Let's go back and eat rabbits tonight?"
The little girl's eyes lit up and her cheeks flushed.
The experiences of these few days were extremely unforgettable for her. Going out to sea to catch crabs, skiing, hunting, sea fishing, etc., each of them was something she had never experienced before.
"Okay." Chen Yansen nodded in response.
"By the way, I forgot to ask you, are Universal Music and Apple really negotiating about exclusive licensing?" Song Yuncheng asked curiously, holding the rabbit.
"I don't know, I was just talking nonsense." Chen Yansen shrugged and told the truth.
"I knew it would be like this." Song Yuncheng smiled lightly, with an expression that said 'as expected'.
Her English was good, but the conversation between Chen Yansen and Daniel was mixed with too many industry terms. Although she couldn't understand it very well, she could still understand the general content.
The other side.
After Chen Yansen left Stockholm, Daniel immediately began to investigate and soon learned from an Apple marketing staff member that Universal Music staff had indeed visited the Apple headquarters building in September.
As to whether it is for copyright cooperation, it is not clear.
Daniel thought for a moment, narrowed his eyes, a hint of coldness flashed across his eyes, and he was convinced that Universal Music was doing something secretly.
After careful consideration, he decided to accept the investment from Suncity Capital and Fidelity Capital, get the money first, and get through the current difficulties.
Chen Yansen didn't know that his casual remark, combined with Daniel's own imagination, actually led to this investment.
When he was about to leave for home, Daniel called him: "Chen Yansen, I am willing to accept the investment from Sunlink Capital, and I also accept the offer of 2.8 billion US dollars."
Chen Yansen was stunned after hearing this, but he quickly adjusted his mentality and replied with a smile: "Then let's meet in the afternoon and sign the investment intention contract first. After the company's finance and legal affairs have completed the audit work, we can formally sign the equity transfer agreement?"
"OK, I have no objection." Daniel agreed readily.
Chen Yansen responded with a few words and then hung up the phone.
If you invest in overseas projects and the funds exceed 100 million US dollars, you must report to the higher authorities for approval.
Therefore, the process of investing in Spotify is very long. From core data review to phased payments, it takes at least three to five months to complete.
On the last afternoon, Chen Yansen signed an equity transfer intention agreement with Daniel at Spotify headquarters.
Exchange 5% of Spotify's equity for 140 million US dollars!
As long as he continues to invest before the listing, this equity will be able to generate more than 7 billion US dollars in profits for him in the future.
It was not until October 9 that Chen Yansen returned to Xucheng.
At this moment, the group buying, food delivery and online car-hailing markets are so competitive during the National Day holiday that even your brain is almost blown away.
Chen Yansen first went back to Room 0418, then drove a Bentley Mulsanne and sped towards the Science and Technology Park.
As soon as I entered the company building, Cheng Weixing called.
"Boss, the daily subsidy cost is about 40 million now. Do you want to stop it temporarily?"
Cheng Weixing sat in the office, his eyes bloodshot, and asked under great pressure.
Starting from October 1, the subsidy activities of Kuaidi and Didi have become more and more fierce. Now, each platform has three first-order discounts every day, regardless of new or old customers. The subsidy amount fluctuates between 10 and 14 yuan based on the differences in taxi starting prices in different regions.
At the current rate of losses, even if Kuaidi Dache has ample funds, it may not last until December.
The price war among Dongfang, Suning and Gome in home appliances has been much ado about nothing and users are unaware of it.
However, Kuaidi and Didi have actually invited tens of millions of people to take their taxis for free in five provinces in North China and seven provinces and one city in East China.
Weibo, WeChat, forums, campus and Tieba are all filled with guides on how to use free taxi apps.
Li Yanhong was in a dilemma. He knew that continued expansion would be beneficial to Didi Dache, but he did not dare to act rashly.
Therefore, every time Didi Taxi's service scope expands, the subsidy cost will increase by several million.
"How much money is left in the account?" Chen Yansen asked.
"1.94 billion." Cheng Weixing replied immediately.
"Spend this money first. I don't think Li Yanhong can hold on for too long." Chen Yansen said in a firm tone.
"Okay, boss. I understand." Cheng Weixing gritted his teeth and agreed.
"Activities such as recharge cards can be relaunched online with more efforts. At present, the most important thing for Kuaidi Taxi is to seize the market, and profitability is not a consideration for the time being."
Chen Yansen walked into the elevator and added another sentence.
He brought companies such as Penguin, Ali, Huaxia, Huake, DST and Goldman Sachs onto the Kuaidi Taxi ship in order to reduce competitors and maintain sufficient capital.
In terms of the courage and limit to spending money to occupy territory, Li Yanhong cannot compare with him.
Cheng Weixing responded and reminded Chen Yansen that there were two electronic contracts for Kuaidi Taxi in his mailbox that needed his approval.
"I understand." Chen Yansen said and clicked the hang-up button.
With a ding, the elevator door slowly opened!
Chen Yansen walked out, then pushed open the office door and walked straight in.
The money tree on the table grew extremely luxuriantly and lushly, and each leaf was round and full.
Not long after they sat down, Zhang Yinjia and Zhou Mingxuan from Orange Payment came over after hearing the news.
"Boss, the Yu'ebao project is ready, customer service training and marketing work are basically completed, and users are waiting for the release of Orange Pay 2.1."
Zhang Yinjia's eyes were bright, and he reported in a calm and powerful voice.
"What is the annualized rate of return in the past seven days?" Chen Yansen asked.
"About 5.4% to 5.7%. According to the original plan, only an actual annualized rate of return of 4.9% to 5.2% will be shown to users, of which 0.5% will be used as project profit." Zhang Yinjia replied.
This 0.5% interest rate spread is actually the management fee charged to the fund company.
(End of this chapter)
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