Chapter 19: Difficulties in Starting a Business At first glance, this person is introverted and seems not good at speaking, but in fact he has the ability to inspire people. Therefore, Liu Qin was unmoved and asked a few questions in a low and powerful voice. “I agree with your predictions about these future trends, but we also have to face reality. I also know a little about mobile phone manufacturing. Let me ask you, if you are a small factory and want to make mobile phones, the supply chain alone is a big problem. Why would those top supply chain manufacturers in the first-tier cooperate with Xiaomi? If you choose a second-tier or third-tier component supplier, with no hardware advantage and no brand heritage, where is your core competitiveness? Where is your profit model? To be frank, can you sell mobile phones with your personal charm? How many people will pay for it? Thousands? Tens of thousands? Even if it is hundreds of thousands, what is the point! The mobile phone industry is an industry that relies heavily on research and development and investment, and requires a huge amount of capital. Even if Morningside agrees to the investment, 1000 million US dollars may seem like a lot, but the investment is just to see what happens, and a huge amount of capital will be needed later. This time, you are not like the startups we invested in before. If you make a wrong move, you will lose everything. Who are your competitors? Nokia, Samsung, Motorola, Apple, and China Cool Union are eyeing them. Have you thought it through? " Liu Qin's questions came like a string of cannonballs, each one hitting Xiaomi's sore spot. Core competitiveness, profit model, etc. were all questions that Lei Jun used to ask others as an investor. Unexpectedly, he became the one being asked, and these became the most difficult questions he faced. Xiaomi has encountered difficulties in recent times, and Lei Jun has heard many similar remarks. He was silent for a while, took a big bite of celery, chewed it with a crunching sound, swallowed it, and lowered his head to look at the delicacy in front of him. He chose not to give a direct answer because he hadn't thought clearly about the answers behind these questions in half a year. But these could not extinguish the fiercely burning fire in his heart. “I really can’t answer these questions for you now, but I can say that at present, domestic counterfeit mobile phones are rampant, and domestic mobile phone manufacturers have become synonymous with counterfeit phones, while the high-end mobile phone market is occupied by foreign giants.
It is not easy to break through, but this is not a reason for me to retreat! Some things must always be done even though you know they are impossible. You cannot give up when you encounter risks or difficulties. Everything depends on your own efforts! This is like skiing. When faced with a steep snow track, people's instinct is fear, but the more afraid they are, the more they want to rush down. Because fear will make people instinctively want to lean back, and the more they want to lean back, the more likely they are to fall. Now that we have slid out, we can only rush down, we have no other choice!" After listening to Lei Jun's speech, Liu Qin took the teacup and drank tea instead of wine, looking a little touched, "Mr. Lei, I admire your courage and responsibility. Xiaomi wants US$500 million in financing. From Morningside Venture Capital’s perspective, I cannot agree to this at the moment. Morningside Venture Capital needs to carefully evaluate and consider this. But I personally can invest $100 million in Xiaomi, mainly because I think highly of you, Mr. Lei." Lei Jun put down his teacup, smiled bitterly and waved his hands, "Forget it, I hope Chenxing and Mr. Liu recognize that what Xiaomi does has value and benefits and invest in it, rather than relying on me, Lei, to get recognition. Let's discuss this later." He pointed at the delicacies on the table with his chopsticks. "This chef's Hubei cuisine is very authentic. I had a hard time finding it. Eat the food. If it gets cold, the taste will be off." The business was at a standstill, and since the two were from the same hometown, they started chatting about local customs and culture. Lei Jun sighed inwardly, as expected, all things are difficult at the beginning. In fact, as of now, there are only four founders of Xiaomi including himself, him, Lin Bin, Li Wanqiang and Huang Jiangji. In order to form a community of interests, Xiaomi's initial capital was jointly invested by several of them, which was only 500 million US dollars. Among them were his own 400 million, Lin Bin’s 75 US dollars, and some cash from Huang Jiangji and Li Wanqiang. But they did some calculations and found that the angel round financing would require at least 1000 million US dollars, which is why he approached Morningside Capital to join. In fact, Lei Jun has money. He cashed out hundreds of millions of yuan from the sale of . In recent years, he has invested in several companies, all of which have been very successful. Why not invest in Xiaomi instead of going around raising funds for Xiaomi? In fact, there are two considerations. First, starting a business is risky and investment needs to be cautious. This is not just talk. In the technology circle, there is a new survival model called entrepreneurial investors. On the one hand, these people focus on their own entrepreneurship and company operations, and on the other hand, they obtain investment returns in the capital market through investment. In fact, many companies also play this way, focusing on their core business while actively investing in the industry, such as BAT in China. As the saying goes, don't put all your eggs in one basket. In IT industry terminology, this is called disaster recovery. Secondly, he not only attracted funds, but also investors' connections and circles, integrated resources, and helped the company develop better.
Take the supply chain issue for example. If Xiaomi’s investors have connections and can say a few words, it would be more helpful than for him to run around on his own. Therefore, we will definitely give priority to investment institutions with relatively strong capital strength, such as Morningside, IDG, Sequoia, etc. Don’t be fooled by the fact that he has invested 400 million US dollars and looks very confident. In fact, that is all for the investment circle to see. I have no idea whether Xiaomi will eventually succeed. If he really cannot raise funds, he will invest in Xiaomi himself, transferring money from one hand to the other. Of course, this is a helpless backup measure. In fact, Lei Jun had already set a bottom line in his mind, which was to invest 1 million US dollars, thinking that if Xiaomi failed, he would just lose. Lei Jun joked that his advantage over ordinary entrepreneurs is that the cost of trial and error is relatively high. At worst, he can start over again and try a few more times. That's all. He is already very lucky. Ordinary people may only have one or two such opportunities in their lifetime, and if you miss it, you’ll miss it for the rest of your life. Just then, Lei Jun's cell phone rang. "Yes, we are discussing it. Is that true? Okay, I will go back to the company later and we can meet together." Seeing that they were almost done eating, Lei Jun suggested, "There is an interview for a technical manager this afternoon. I heard from Lin Bin that the applicant has great potential. Mr. Liu, please come to our company for an on-site visit. You can also conduct further investigations and use it as a reference for investing in Xiaomi." Liu Qin's eyes lit up and he answered irrelevantly, "Lin Bin? But he is the director of the research institute that worked at both Microsoft and Google before?" "You still know him?" One is an investor and the other is a technician, so they should keep to themselves. This made Lei Jun a little strange. "I happened to witness his speech at a communication forum before. His speech was profound and impressive. I am a little curious about the potential people he mentioned. I have a presumptuous idea. I wonder if I can sit in on the interview of your company?" (End of this chapter)