[MIT CEO Law Series] Season2: Entrepreneurship, legal matters
The story of a company can be told from the legal answer sheet it handed over.
The waters of equity are deep. Sina, Youku, Vanke, Uber—the founders behind these familiar companies all quit the stage after losing control. Now that information is more and more developed, many people have heard advice from the first day of starting a business not to sign a gambling agreement with investors. It seems that the loss of equity is a mistake made by inexperienced predecessors, and it is also a minefield that we will never touch. But the process of starting a business is rarely right or wrong. Faced with different incentives, or whether the capital chain is tight, talents are robbed, competitors burn money to seize the market, or shareholders with the same goals have divergent interests, entrepreneurs are always in danger of stepping into the same river.
What Makes Entrepreneurs Go Wrong?
Let's take a look at Alibaba's story. In 2000, after successfully securing $25 million in financing from SoftBank and Goldman Sachs, Jack Ma studied eBay's business model under the advice of Masayoshi Son. What frightened him later was that in addition to serving self-employed individuals, eBay's backend could also be easily connected to enterprises, which is the scope of Alibaba's business. So in 2003, Jack Ma decided to take offense as defense and began to erode the Chinese C2C market coveted by eBay, leaving them no time to expand their B2B business. The money-burning war between the two sides is no less than the Meituan and Ele.me, Mobike and ofo we have seen today. The main backer of the cash burn is SoftBank, which already held a 30% stake in Alibaba in 2004.
The siege of the city needs to accumulate food, but the funds obtained by Ali began to bottom out in this war of attrition. In the same year, eBay issued an offer to buy shares of up to 1 billion US dollars to Masayoshi Sun, Alibaba's largest shareholder, and Ali's early venture capitalists were also there. Press around to find exit opportunities. For a time, Jack Ma faced the dilemma of his own funds drying up and competitors trying to force acquisitions. Once acquired by eBay, Jack Ma will lose his right to take the helm and become an accessory to his former rival. This is what entrepreneurship is all about. Entrepreneurs pay a price to get the resources they ask for, and all stakeholders force you to make decisions before you're ready.
In this situation, how to introduce funds to repel competitors, while maintaining their own right to speak in the company?
For entrepreneurs, a little more legal awareness can avoid detours on the road of entrepreneurship. Equity allocation, company structure, tax attempts, etc. in the process of entrepreneurship are all very knowledgeable. Therefore, in order to enhance the legal knowledge of entrepreneurs, better In response to the difficulties encountered in the process of starting a business, we hereby invite Mr. Liu Xiaoxiao, a corporate lawyer from Silicon Valley, to become a legal mentor for all our MITCEO communities! For you to answer those things you must know on the road to starting a business.
