Cutting-edge technology: Starting with individual stealth equipment

Chapter 64 Venture Capital Firms Flock to Get on Board

Amidst the soaring stock price of Henghui, a financial media outlet published an article titled "Henghui Group's Bold Gamble: Buying the Future with at Least One Billion Yuan Every Year."

Details of the collaboration have also been revealed one after another.

The article analyzes the cooperation agreement between Henghui Group and DeepBlue Technology, and believes that Henghui pays one billion yuan annually for procurement, which puts pressure on the company's cash flow in the short term.

However, in the long run, the three-year exclusive cooperation rights for the plasminogen lysate technology will bring Henghui a huge competitive advantage.

At the end of this article, there is a passage:

The surge in Henghui's stock price is not an endorsement of its existing business, but rather an endorsement of its plasticizer-based microbial culture technology. The capital market is voting with real money; the solution to plastic pollution is worth far more than this price.

Henghui has taken off, but its competitors are in a rather unfortunate situation.

The other two listed companies in the same industry experienced sharp declines in their stock prices during this period, with a large outflow of funds.

The reason is that Henghui has partnered with DeepBlue Technology to obtain a three-year exclusive license for the "Plastic-Eating Bacteria" solution.

This applies to both industry insiders and the capital market.

It is now believed that this industry will undergo a major reshuffle due to the emergence of the "plastic-eating bacteria" solution.

This solution is too competitive.

It's environmentally friendly, efficient, and most importantly, inexpensive, making it uncompetitive with traditional treatment methods.

Henghui Group is already a leader in the industry. Obtaining a three-year exclusive license is equivalent to keeping its competitors stagnant for three years, while Henghui gets a three-year head start.

The magnitude of this advantage is self-evident.

……

During the same period, DeepBlue Technology's doors were practically worn down by investment institutions.

Shen Yuxin arrived at Lin Chuan's office with a stack of documents, knocked on the door, and then pushed it open to enter.

At this moment, Lin Chuan is discussing company finances with Jiang Miaolan.

After placing the documents on the desk and seeing that the two of them had finished talking, Shen Yuxin said, "Senior, these are all letters of intent for investment from venture capital firms."

"This is Sequoia Capital, this is IDG Capital, this is Matrix Partners, this is SoftBank, this is Shenzhen Capital Group, this is Jinsheng Capital..."

Jiang Miaolan looked through the documents, then turned to Lin Chuan and smiled, "Deep Blue has become a hot commodity in the capital market, with all of them being well-known VCs."

Some were formal letters of intent for investment, while others were invitations to meet and talk with Lin Chuan.

Shen Yuxin added, "The people from Sequoia Capital have already arrived in Xin'an. They say they absolutely must see you. Should you meet them or not?"

Lin Chuan replied without hesitation: "I won't see you."

He didn't even glance at the documents, and immediately said to Shen Yuxin, "Reject them all."

DeepBlue Technology doesn't have much financial pressure right now. The cost of its backdoor listing is borne by Shenhong Group, and Henghui Group will have 15 billion yuan in revenue next year, so there's really no need for financing.

Jiang Miaolan, sitting next to him, seemed to be deep in thought for a moment, then looked at Lin Chuan.

"I do think we could raise some funds. Although we don't lack money, we're at a crucial juncture where everyone is focused on us. At this point, we have the upper hand and can raise more funds with fewer shares. More cash reserves will also significantly improve the company's ability to withstand risks."

Jiang Miaolan thought for a moment and added, "Besides, financing is not just about raising money, but also about raising intangible resources such as connections and channels."

Lin Chuan looked at Jiang Miaolan with approval after hearing what she said.

Immediately, Lin Chuan said in a deep voice, "The money Henghui has is indeed not enough. I plan to get the company headquarters settled ahead of schedule next year. It will cost a lot of money to plan ahead."

Shen Yuxin casually mentioned, "Can't we get a bank loan?"

Lin Chuan said, "Going to a bank is indeed a solution, but I agree more with Miao Lan's view. Financing is not only about raising money, but also about raising connections and resources, and it can also reduce some potential enemies."

With the capital of profit at DeepBlue Technology, potential obstacles can be turned into advantages.

Lin Chuan added, "Of course, you have to be careful when dealing with capital to avoid being devoured. If you leave a loophole for capital, it will not hesitate to eat you up until there are no bones left."

Lin Chuan now possesses the rich experience and knowledge accumulated from his previous life.

When dealing with capital, Lin Chuan is confident that he can control it and make it work for him.

Jiang Miaolan looked at Lin Chuan and asked, "How will you proceed with the financing? Will you conduct a private placement after a backdoor listing?"

Upon hearing this, Lin Chuan thought for a moment and said, "Yes, but it's similar to a disguised debt financing arrangement."

"Equity investment disguised as debt investment" refers to an investment method that is nominally equity investment but is actually debt financing.

Its core lies in the fact that the return on investment is not linked to the operating performance of the invested company, but rather provides investors with a guarantee of principal and interest, and the invested company redeems the equity or repays the principal and interest after certain conditions are met.

To put it simply, for example, if you invest 1 million in me, I will give up 10% of my equity, but you cannot sell this equity to a third party. Several years later, I will buy back this 10% equity from you for 2 million, and you will exit with your principal and interest.

Lin Chuan is 100% confident that he can develop DeepBlue Technology into a world-class giant.

Equity disguised as debt is undoubtedly the most suitable option, even if it means giving investors a premium of 5 or 10 times, which may seem like a huge profit for investors and indeed they do make a profit.

But Lin Chuan is not at a loss either, because the value of the company's shares will increase hundreds or even thousands of times in the future.

They raise funds through a disguised form of debt financing, but do not guarantee principal or returns to investors, and do not impose any specific restrictions on themselves when redeeming equity.

They won't sign any performance-based agreements; instead, they'll add restrictions to the investors.

If the investors don't agree, then just drop it.

DeepBlue Technology has already achieved profitability and can survive without relying on financing from the capital market. Moreover, it is currently supported by military personnel, so Lin Chuan naturally has confidence.

Shen Yuxin looked at Lin Chuan and asked, "So, should we reject these letters of intent from VCs?"

Lin Chuan replied without hesitation, "Of course I refuse, and I will refuse repeatedly."

Jiang Miaolan understood his meaning, then glanced at Shen Yuxin: "Deep Blue Technology is a hot commodity right now. Even if we have the idea of ​​raising funds ourselves, we have to keep turning away investors."

She then smiled and said, "In this way, it makes the investors understand that getting on board is not so easy, and it also makes them continue to make concessions in order to get on board, thus maintaining the initiative in the game."

Shen Yuxin suddenly realized: "I understand."

However, this strategy is not something everyone can do; most startups don't have the resources for it.

Instead, in order to secure funding, they treated investors like royalty.

But DeepBlue Technology can operate in this way, and it's now a hot commodity, with various investors showing a strong desire to get on board.

Moreover, it is not absolutely necessary to raise funds, nor does it mean that the company will go bankrupt if it does not raise funds. This gives DeepBlue Technology a great deal of initiative and bargaining power in the face of capital.

……