Chapter 81: Chapter 78 Difficult Negotiations. (2nd Update)
"Breaking through other technological barriers?"
Upon hearing Xu Yun’s words, Tian Liangwei’s expression hardly changed, but Zheng Zu was slightly taken aback:
Good heavens.
Does this kid really think that breaking through technological barriers like Imidacloprid is that easy?
One must understand.
Even for the fund’s various leaders, the company’s functional positioning is just a professional biological pesticide manufacturing enterprise.
However, even this so-called ’just’ represents an incredibly vast market!
Though Zheng Zu inwardly belittled Xu Yun for overestimating himself, he managed his facial expression well and provided a highly professional solution:
"This issue is actually quite straightforward, Dr. Xu. If the patent lists you as the first inventor, then you can choose to draw an additional licensing fee after obtaining the current dividends.
For example, draw 3% or 5% of the sales profit; many companies like Google and Microsoft operate this way.
Besides that, you can also choose a one-time buyout for a number of years, licensing, and so on. There are at least seven or eight specific options.
So, if there is a new technology that emerges, the company—or rather Ke Da—definitely won’t let you hand it over for free. Business is business, after all."
Xu Yun nodded thoughtfully.
Though his question might appear overly ambitious or unrealistic to Zheng Zu, potentially earning a poor impression as a result, he understood that with the mysterious halo, breaking through other technological barriers wasn’t out of the realm of possibility.
Hence, if he couldn’t get an answer to this question, he wouldn’t feel at ease to discuss subsequent matters.
Seeing that both parties had no objections to the technical stock investment plan, Zheng Zu smoothly transitioned to the next stage:
"In that case, let’s talk about the equity distribution, which is the most critical part."
As he spoke, he pulled a form from his briefcase, which clearly recorded a lot of data:
"Dr. Xu, the company we’re establishing will undoubtedly be in the biopharmaceutical sector, do you have any objections to this?"
Xu Yun responded with a hum:
"No objections."
Imidacloprid is a type of biological pesticide, so the nature of the company will only likely be biopharmaceutical, at least for the time being.
Then Zheng Zu continued:
"As for the equity distribution...
The school’s opinion is that our New Creation Fund will lead the investment with 8 million in cash flow and other supplementary items.
These include, but are not limited to, the group office location, equipment, and executive headhunting lists, accounting for 43% of the shares.
The School of Life Sciences will co-invest 2 million in cash flow and some supplementary items, accounting for 14% of the shares.
An employee option pool is reserved at 20%, and Dr. Xu will share the remaining portion."
"43 + 14 + 20 is 77...100 - 77 is 23%..."
Xu Yun quickly did the math and quickly shook his head:
"Secretary Zheng, this percentage is too low; I cannot accept it."
Prepared for a lengthy negotiation, Zheng Zu patiently explained:
"Dr. Xu, you might not realize this, but this percentage is not low at all, and is even a bit higher than the general market trend.
The revenues of patent owners are primarily in subsequent dividends, not dependent on the extent of its prospects.
For example, Lipitor, have you heard of this drug?
Pfizer applied for five patents for it in total, and the single item value of US4681893 was up to a hundred billion US Dollars, but its R&D team held even less than 0.1% of the shares at Pfizer.
Another example is Larry Page’s PageRank patent; he is the founder of Google.
This patent’s actual value is nearly 5 billion US Dollars, but the technology only accounted for a little over 1% when it was added to the company, and later an entire buyout cost 1.8 million shares of Google’s stock."
As he spoke, Zheng Zu sighed and earnestly said:
"Dr. Xu, if you want to sell this technology on its own, then there’s not much to say.
Not to mention tens of millions, we can afford to pay even four or fifty million.
But if you want to invest it as equity, it must be discussed from the perspective of stock shares.
It’s the same with other institutions, and the percentage might even be shrunk to single digits.
This isn’t about undervaluing or undercutting—it’s just a different model."
Xu Yun maintained a tight-lipped, serious expression.
Though what Zheng Zu said was reasonable, Xu Yun had also looked into some investment matters over the past few days.
Generally, technology shares in equity are around 20% - 30%.
And they are mostly not intellectual property, which is likely to be easily outplaced.
Legally protected intellectual property is typically around 10% - 15%.
So it wasn’t deceitful of Zheng Zu to say it’s higher than the market price.
Unless, like President Lei, who had tens of billions when Xiaomi was founded, served as CEO of Kingsoft, and invested in Vancl and Cheetah, one wants to hold 40% shares.
However, understanding is one thing, and whether Xu Yun could accept it was another.
At least, the current number of 23% was far below his bottom line.
After a moment, Xu Yun looked up and said:
"Secretary Zheng, the minimum percentage I can accept is 40%, and dual-class shares should be employed.
I need to hold over 50% of the voting rights, meaning the management rights belong to me, and if this can’t be agreed upon, we have no reason to continue the discussion."
Dual-class shares, as it is often called AB shares, fundamentally mean same shares with different rights.
Simply speaking, it separates voting rights from dividend rights.
For example, Class A shares might have 1 vote per share, while Class B shares might have 10 votes per share.
Class A shares are typically held by investors and public shareholders, while Class B shares are often held by the founding team.
In this way, even if the founding team does not hold a high percentage of shares, they can still retain decision-making power in the company.
This is also the same ownership structure of :
Brother Dong holds only 15.8% of the shares, yet has 80% of the voting rights, thus firmly grasping control over .
Similarly, B of BAT has an extraordinary 53.5% voting right with only 15.9% of the shares.
The storyline of protagonists holding 80%, 90% shares when going public in some novels can’t possibly happen in reality.
The case of Zhong Shuangshuang is already one in a million, with his holding just over 60% before increasing after going public.
Thus, Xu Yun was clear:
Simply relying on one technology to take the largest share was clearly impossible, but he could gain control through AB shares.
Control.
This was the bottom line of his bottom line.
The share ratio could be discussed, even dragging for ten days, half a month would be fine, but there couldn’t be any compromise on the AB share mode.
The former at most means earning less money. With the halo, Xu Yun wasn’t too worried about revenue.
But the latter was about whether he could potentially be ousted.
"Dual-class shares are no problem."
Zheng Zu responded swiftly, evidently the fund had long considered this aspect:
"Ke Da itself does not participate in corporate decision-making, as this is one of our principles.
The main goal of the school’s industries is nurturing and supporting, after all, strictly speaking, this is a political task related to social influence and economy.
As for the shares...Dr. Xu, let me give you a number.
28%, it really can’t be higher unless you can put in more cash alongside, otherwise there’s really no way."
Raising shares by 5%, and estimating another 3% increase would hit Ke Da’s limit.
Having reached this stage, the ceiling for technological equity investments was essentially set.
Yet, regardless, Xu Yun still wanted to try to negotiate:
"Secretary Zheng....."
But just as he spoke half a sentence, a hearty laughter sounded from outside the office:
"Secretary Zheng, how can you discuss equity distribution with Xiaoxu without including our Physics College?"
...