Chapter 48#

A successful first time? Yan Qiaosen laughed dumbfoundedly. Not to mention that Feiyan hadn’t made a profit yet, even if it made a profit and went public in the future, Chen Yuanming would still be a major shareholder. Could he withdraw his capital and cash out? The contract between the three of them was far from the kind of venture capital that truly aimed at listing.

As for venture capital, Yan Qiaosen’s understanding was actually not deep. When he first started working, the entire Silicon Valley venture capital industry was at an absolute low point. Unless it was a project with particularly profitable prospects, it was difficult to get money from stingy bankers. Starting a business alone was basically wishful thinking, and working for a big company was the proper way. Later, in the mid-1980s, the venture capital industry began to recover, but his career had already achieved some success. Coupled with his relatively traditional Chinese thinking, he resolutely chose a company based on industry and sales, rather than pinning all his hopes on the ethereal stock market.

In this regard, the stock market crash of 1987 seemed to be an excellent footnote. Those friends who made a lot of money from the stock market at the same time had absolutely no resistance when encountering a real stock market crash. They went bankrupt instantly, laid off employees, and suffered extremely heavy losses. In contrast, his own company was not listed, and the sales of several chips were also good. It survived the catastrophe smoothly without any twists and turns, and only then did it have the spare capacity to enter the research and development of the MPEG format.

Later, he hit it off with Meng Lisheng. When developing the VCD player, the two’s ideas were still largely the same. If Chen Yuanming hadn’t emerged as a new force, it is estimated that they would have chosen a low-interest loan model mainly based on mainland bank loans or government support funds, rather than throwing themselves into the arms of American venture capital companies.

However, the young man in front of him did not look like he was joking. Shaking his head, Yan Qiaosen revealed a bitter smile, “Yuanming, real venture capital is not that simple. Many people make money on Sand Hill Road, but many also lose money. Investing tens of millions, in the end, you might not even get a physical object. To get involved in this area, you need more than just a financial mind.”

“I understand this.” Facing Professor Yan’s earnest teaching, Chen Yuanming did not resist at all, because what the other party said was the truth.

For high-tech-based venture capital, the most important thing is actually not the source of money, not the financiers on the East Coast who stir the world, but the venture investors who are good at digging out rough diamonds from the gravel, carving them into shape, and obtaining a hundredfold profit. In Silicon Valley, this typical venture capitalist may be a technical expert himself or a middle-level manager from a high-tech technology company. They have a high degree of sensitivity to technology and can see the future prospects of a technology or an industry through layers of fog. Their past management experience gives them the capital to support those smart geeks, allowing those little guys who only have ideas but know nothing about anything else to slowly get on the right track and turn their ideas into billions of wealth.

The most famous example of this venture capital model in the previous life was the emergence of Netscape.

Graduating in 1994, the penniless and unknown Marc Andreessen did not find a job suitable for him at first. He just wrote Internet browsing software with a few like-minded friends. When the Mosaic browser was born, venture capitalist Jim Clark discovered him and invited him to establish a company for Internet browsing and communication software together. Facing such an experienced Silicon Valley senior, Andreessen gladly accepted the invitation, and then the two joined hands to found Netscape. The company was funded by Clark, and Andreessen led his working group to develop a new version of the Mosaic browser. Just one year later, Netscape, which had never made a profit, went public in New York. Investment banks estimated the price per share to be around 14 yuan in advance. Unexpectedly, after the opening on that day, the stock price soared all the way and finally closed at a high price of 58 US dollars. 5 million shares were snapped up.

Clark invested 4 million US dollars in Netscape, but this company transformed into a behemoth worth 2 billion US dollars overnight. Subsequently, the company’s performance rose steadily until it was acquired back by AOL for 4.2 billion US dollars in a tax-free stock swap. 4 million investment in exchange for billions of profits, this kind of story that should only exist in myths is the real charm of venture capital.

However, Netscape could not do without Clark’s support. Its success belonged to the perfect match of capital and technology, management ability and innovation ability. This model was not something Chen Yuanming could imitate at present. He lacked Clark’s background as an outstanding electronic engineer and had no experience in managing high-tech companies. Companies like Netscape and Amazon, whose founders had sufficient funds and were good at controlling everything single-handedly, were not his real goals.

For Chen Yuanming, there was another model of venture capital, a simple version that could succeed as long as one had the Midas touch. Now that he had come to this era, of course, he would not give up this potential fertile land because of temporary constraints. All he needed was time.

Looking at the other party’s confident expression, Yan Qiaosen shook his head, and finally couldn’t say anything. On the one hand, this young man indeed had extraordinary talent. On the other hand, it was also his curiosity about Chen Yuanming’s ambitious goal. In just three months, he had surprised him several times. What kind of extraordinary move would burst out this time?

The topic of venture capital did not go deep, but other things had to be mentioned. As one of the largest shareholders of Feiyan Company, Chen Yuanming rightly had the right to know about the company’s development. Since they had come to Silicon Valley, Yan Qiaosen couldn’t just let the other party sit dryly in the reception room. After chatting for a few words, he took Chen Yuanming to visit his company.

Calling it a company, Yan Qiaosen’s current team was actually more like a studio. The scale was really not large, with only a few laboratories and a dozen employees. Today, the chip industry in Silicon Valley can be described as a hundred flowers blooming, but in the final analysis, it is mainly based on industrial integrated circuits and computer chips. There are almost very few people like Professor Yan who develop MPEG compression and decoding chips. The fact that the company can have such a scale now is thanks to Chen Yuanming’s capital injection into Feiyan, which gave him the energy and spare money to expand the team and invest more scientific research power.

Now the data protection of VCD discs has begun to show results. It is difficult to directly copy the content on the disc surface with a simple CD-Rom. The development of the MPEG-2 format is also in full swing, and the dawn has been seen. No matter from which aspect, this company can be said to be operating well and has great potential.

However, after carefully visiting Professor Yan’s company, Chen Yuanming frowned slightly, “With the scale of this company, do you plan to only do research and development, not production?”

Not getting the expected approval, but instead getting such a sentence out of the blue, Yan Qiaosen was stunned and revealed a bit of a bitter smile. “Of course, we should focus on research and development. Since we have obtained the patent rights for the chip, we have grasped the lifeline of production and can effortlessly obtain profits from it. Why do we need to build a production plant specifically? Even if Feiyan starts work in the future, setting up one production line will be enough. Blindly expanding the company’s scale is not a long-term solution.”

“Hmm, generally speaking, this method is not wrong.” Chen Yuanming retorted crisply, “But for the VCD industry, the chip is also one of the core technologies. In the future, Feiyan will definitely not be the only one needing this kind of chip. If possible, there is no need to hand over this profit to others. Or rather, if we have to give it to someone, we should give it to our own people.”

“What do you mean?” Yan Qiaosen was a bit unsure of the meaning in Chen Yuanming’s words, “Could it be that you still want to build a chip factory?”

“Not just chips, but also disc production.” Chen Yuanming smiled slightly, “And the factory should be built in China.”

“Ah…” Hearing this, Yan Qiaosen suddenly came around a bit, “You mean, you are preparing to build downstream industries?”

Upstream and downstream industries are things that any company boss in this era can understand. For example, a car company may develop various car models, but they do not produce parts themselves. There will be categorized downstream factories manufacturing various accessories for them. Similarly, in the high-tech field, studios and large companies that hold intellectual property rights and have research and development capabilities are the so-called upstream industries, while the downstream industries are those that quantify these technologies for production and push them to the market.

Upstream and downstream industries are indispensable in any industrial chain. Without the raw material support and technological development of the upstream industry, the downstream industry is like cooking a meal without rice, lacking market competitiveness. Conversely, without the intensive labor and cheap production of the downstream industry, the upstream industry is like a tree without roots, unable to push products to the mass market at all. To truly occupy the market, having both lines ready is the key.

“You hit the nail on the head.” Chen Yuanming nodded gently, “Currently, the domestic technical strength is still very weak. Directly supporting high-tech industries costs too much, and the results may not be ideal. But if we start from the downstream industry, it will immediately allow those with courage and boldness to get their first pot of gold, and then invest in further research and development, to learn and improve the technology in their hands. Turning passivity into initiative in this way is a more ideal investment model.”

“But technology upgrading…” Yan Qiaosen hesitated a bit. This idea was good, but the technological soil in China and the United States was not on the same level at all, and it was difficult to achieve achievements similar to Silicon Valley, at least quite difficult at present.

“Yes.” Chen Yuanming was certainly well aware of Yan Qiaosen’s worries, “But just like those international big companies do, the industrial chain can be layered and cross national borders. What if we use Silicon Valley as the seed and the domestic market as the soil? Nurturing talents and improving technology here, and perfecting products and reducing costs domestically, then this industrial chain will have competitiveness unmatched by other countries, and also win countless possibilities for the future.”

The words were spoken with force. Yan Qiaosen felt his heart leap again. That’s right, if it succeeded, if not only the VCD project could operate like this, then what kind of opportunity and challenge would it be for China? Although as a Chinese American, he had left his homeland for too long, the more he was abroad, the more he could understand that longing and earnest expectation for the motherland. Only when the country is strong can the people be strong. This is the eternal truth. If the country is weak and everyone can be bullied, then being in a foreign land, what one can get is only insult and discrimination. And now, reform and opening up are unfolding vigorously on that land. That country will surely catch up with this era at a speed a hundred times faster than before and rejoin the forefront of the world!

“Infinite possibilities…” Yan Qiaosen smiled. If not for this, why would he cooperate with Meng Lisheng, and why would he lay the foundation of Feiyan on the land of China. “Well said! Even for this possibility, we should give it a try.”

Looking at Professor Yan’s shining eyes, Chen Yuanming exhaled gently. The partner he chose was indeed right. The development of VCD was only the first step in his plan. Establishing a downstream industrial chain was the subsequent key. Also being an OEM, he would rather those downstream manufacturers put on more domestic brands, rather than being reduced to sweatshops for multinational corporations.

Nowadays, in the electronics industry, China lost at the start, but it is actually not lagging behind too much. Looking at the number of Chinese in Silicon Valley, one knows that Chinese people are not unintelligent or incapable, but just stumbled at the starting line for various reasons. This fall was so heartbreaking, but not irredeemable. The next ten years will be the beginning for China to earn foreign exchange and open up international markets. He sincerely hoped that those people’s intelligence and wisdom would be used on a more positive and competitive level, rather than constant plagiarism and internal friction, eventually losing everything.

All thoughts were rolling in his heart, but the expression on Chen Yuanming’s face did not change at all, just a slight smile, “That’s right, let’s give it a try.”