August 13, 2016
“On August 31, 1999, an article written by my colleague Ted Dean appeared in Hong Kong’s leading English-language daily, the South China Morning Post.1 Ted had first met Jack a year or so earlier when Jack was still working for the government. In the article, Ted predicted that Alibaba “may turn out to be a global powerhouse” in B2B e-commerce. Jack laid out his ambition: “We don’t want to be number one in China. We want to be number one in the world.”
August 13, 2016
“In his article, Ted had quoted Jack saying, “If you plan, you lose. If you don’t plan, you win.” After working in Beijing, the land of the five-year plan, I found Jack’s spontaneity refreshing. ”
August 13, 2016
“Meanwhile, in Hong Kong, shortly after their unsuccessful fund-raising trip to Silicon Valley, Joe had started negotiations with Transpac, a Singapore-based fund, about investing in Alibaba. Soon they had agreed to a term sheet that would value Alibaba at $7 million.4 But Transpac insisted on an onerous provision5 and Joe wanted to walk away.”
August 13, 2016
“He then called up a friend at Goldman Sachs. Like Joe, Shirley Lin was born in Taiwan and educated in the United States.”
August 13, 2016
“ Shirley had left after a few years for Goldman Sachs to start making investments in technology and Internet companies across Asia.”
August 13, 2016
“Goldman had given Shirley and her team a lot of leeway, provided she kept the investments below $5 million. This was peanuts to Goldman, whose Principal Investment Area (PIA) unit would make $1 billion in investments in tech companies from 1995 to 2000, one-quarter in companies based in Asia.
With so few funds already on the ground in Asia, Shirley was bombarded with requests for investment from her Harvard classmates and other friends pursuing the new wave of dot-com riches.”
August 13, 2016
“But scouring through China start-ups had its drawbacks. Traveling on unpaved roads in provincial cities, Shirley felt more like a loan officer with the Asian Development Bank than an investment banker. She also had a hard time being taken seriously: “Even though we were at Goldman, people in China didn’t know who we were. They asked, ‘Are you Mrs. Goldman? Are you married to the owner of this business?’ They thought Goldman and Sachs were two people who owned the company, and I must be married to one of them.”
August 13, 2016
“Jack, she recalled, was “as local as it gets.”
“I went up to the apartment, where they were all working twenty-four/seven. . . . The whole place stank. ”
August 13, 2016
“Jack’s ideas were not entirely original—they had been tried in other countries. But he was completely dedicated to making them work in China. I was moved by what I saw.”
August 13, 2016
“ Shirley was less impressed by the business itself than by the team, the real reason she would decide to invest: Who were they? What was their history? Knowing Joe checked one box. Seeing Jack and the team in action checked another. “Really, it was all about Jack and his people.” Shirley remembers being impressed by how hard Jack’s wife, Cathy, was working. She and Jack toiled away, she recalled, like “revolutionary comrades.”
August 13, 2016
“If Goldman took a controlling stake in his company, he explained, he couldn’t feel like a true entrepreneur. Jack told her how he’d put everything into the venture. “This is my life,” he said. Shirley replied, “What do you mean this is your life, you’ve only just started?” Jack explained, “But this is my third venture already.” Jack finally convinced her. The term sheet for the investment had been drawn up, but there were brackets around the numbers so it would be an easy change. Goldman would invest the $5 million for 500,000 shares, half the company, while retaining veto rights over key decisions.”
August 13, 2016
“having already given out a lot of equity to his cofounders and now 50 percent to investors, he ended up with a much lower share of his company than many of his peers. Jack would later joke, only half-kidding, that it was the “worst deal I ever made.”
August 13, 2016
“If Goldman invested the full $5 million, the fund would need to gain the approval of their investors. “Please get rid of some,” they told her. So, Shirley reduced Goldman’s stake to 33 percent. Now she quickly had to find investors for the other 17 percent.”
August 13, 2016
“Some of the investors, including Venture TDF and Fidelity, held on to their stakes all the way through Alibaba’s 2014 IPO, generating returns of billions of dollars.”
August 13, 2016
“When the Goldman-led round was finalized on October 27, 1999, the investment cemented Joe’s authority as Jack’s right-hand man.”
August 13, 2016
“Caught up in the excitement of Hong Kong, Alibaba also announced that it would move its headquarters there from Hangzhou. Jack had been spending most of his time in Hong Kong, working with Joe and some new recruits out of a conference room in Goldman’s office. The contrast couldn’t have been greater between Alibaba’s humble, second-floor Lakeside Gardens apartment in Hangzhou and its new perch atop the gleaming Citibank Plaza skyscraper with breathtaking views over Victoria Harbor.”
August 13, 2016
“By October 1999, Alibaba had signed up more than forty thousand users. Now it had to go for a much higher quantity of users, while maintaining the quality of the messages tacked ”
August 13, 2016
“Having grown up among them and served them as clients of Hope Translation and China Pages, Jack had a keen sense of what these small firms needed: “Most SMEs [small and medium enterprises] have a very changeable dynamic. Today they might sell T-shirts, tomorrow it could be chemicals.”
August 13, 2016
“To attract buyers, Alibaba needed to ensure vendors’ listings were translated accurately into English. Drawing on the talent pool of university graduates in Hangzhou, Alibaba started to hire English-speaking editors to ensure that the posts on the bulletin board were complete, intelligible, and properly categorized.”
August 13, 2016
“Posting on the site, for buyers and sellers, was free—a central tenet of Jack’s approach throughout his career. His “if you build it, they will come” approach helped him pull clear of any rivals. If visitors to Alibaba.com were able to make new trade leads, he figured, they would demonstrate increasing loyalty, or “stickiness” to the website.”
August 13, 2016
“But while free was great for users, it was a tough business model. Alibaba was vulnerable to any downtime in the Internet funding frenzy. Also, as traffic grew dramatically on Alibaba’s website, maintaining the quality of postings was a big job. If Alibaba wasn’t careful it could be overwhelmed.”
August 13, 2016
“As a “second tier” city real estate was cheaper in Hangzhou, too. Even after Alibaba moved into a 200,000-square-foot office in early 2000, its total rental bill was just $80,000 a year, a fraction of what it would have been in Beijing or Shanghai. Jack liked the distance from Beijing: “Even though the infrastructure is not as good as in Shanghai, it’s better to be as far away from the central government as possible.”
August 13, 2016
“When building up his team Jack preferred hiring people a notch or two below the top performers in their schools. The college elite, Jack explained, would easily get frustrated when they encountered the difficulties of the real world. For those who came aboard, working for Alibaba would be no picnic. The pay was low: The earliest hires earned barely $50 per month. They worked seven days a week, often sixteen hours a day. ”
August 13, 2016
“From the outset, Alibaba has been driven by a Silicon Valley–style work ethic, with every employee issued share options in the company, vesting over a four-year period. This is still a rarity in China, where the traditional setup in private companies was an emperor-like boss who treated employees as disposable and salaries as discretionary.”
August 13, 2016
“But wedded to its “customer first” tenet, Alibaba resolved to respond to every email within two hours.”
August 13, 2016
“Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night. They won’t be able to see the sunshine the day after tomorrow. Aliren11 must see the sunshine the day after tomorrow.”
August 13, 2016
“Buyers overseas were concerned about fake or defective goods, or shipments that never arrived.
Alibaba couldn’t wave a magic wand to make these risks go away, as Jack emphasized to the media: “We are just a platform for businesspeople to meet, but we do not take legal responsibility.” Alibaba kept its focus as a bulletin board for businesses.”
August 13, 2016
“n January 2000 we were both invited to speak at a student-organized event13 at Harvard. I met up with Jack before the conference. As we walked along an icy pathway on the banks of the Charles River I noticed one of his entourage was filming the scene, something I later discovered she had been doing for years already.”
August 13, 2016
“But Jack quickly emerged as the star of the show, ”
August 13, 2016
“especially when he confessed to the audience that he really had no idea what Alibaba’s business model was, adding “and yet I got investment from Goldman Sachs!”
August 13, 2016
“Jack has always been dismissive of business schools: “It is not necessary to study an MBA. Most MBA graduates are not useful. . . . Unless they come back from their MBA studies and forget what they’ve learned at school, then they will be useful. Because schools teach knowledge, while starting businesses requires wisdom. Wisdom is acquired through experience. Knowledge can be acquired through hard work.”
August 13, 2016
“n October 1999, Jack was one of several entrepreneurs invited to meet Masayoshi Son in one of a series of “speed dating” sessions between the Chinese start-ups and the Japanese billionaire arranged by Chauncey Shey, president of SoftBank China Venture Capital. The two men met at the wedding cake–styled Fuhua Mansion in Beijing. The venue turned out to be a fitting one, their meeting the start of an enduring partnership that would eventually make Son the richest man in Japan. ”
August 13, 2016
“Masayoshi Son, known to his friends as “Masa,” shares some similarities with Jack. Both are short in stature and known for their outsize ambitions.”
August 13, 2016
“At the age of sixteen, Son moved to Northern California in search of a brighter future. Staying with friends and family, he attended Serramonte High School in Daly City, just south of San Francisco, before gaining acceptance to the University of California, Berkeley, where he started his entrepreneurial career. His most successful venture was building a voice-operated translation device to be sold at airport kiosks.”
August 13, 2016
“After moving back to Japan in the early 1980s, Son started a software distribution company. At the launch of the venture, in a scene echoing Jack’s own irrepressible optimism, he famously climbed on top of a shipping box in front of his employees—just two at the time, both working part-time—and vowed that their new venture would make 50 billion yen ($3 billion) in revenues within ten years.
By the time he first met Jack, Son had become a billionaire many times over. ”
August 13, 2016
“Meeting Son, Jack knew he had found a kindred spirit. “We didn’t talk about revenues; we didn’t even talk about a business model. . . . We just talked about a shared vision. Both of us make quick decisions,” Jack recalled.”
August 13, 2016
“A few weeks after their first meeting in Beijing, Son invited Jack to Tokyo to finalize terms. Joe Tsai joined him on the trip.
As soon as they entered Son’s office, the negotiations began. Jack would later infuse his description of their meeting with martial art imagery: “Masters of negotiation always listen, don’t talk. Those who talk a lot only have second-rate negotiation skills.”
August 13, 2016
“A true master listens, and as soon as he moves his sword, you pretty much collapse.”
August 13, 2016
“Instead he offered to take in $20 million for 30 percent, adding, “If you agree, we will go ahead; if not, that’s it.”
August 13, 2016
“In less than a year after the company’s founding, Jack and Joe had reeled in $25 million from two of the largest and most prestigious investors in the world.”
August 13, 2016
“Shirley Lin at Goldman Sachs had been attracted to Alibaba for its “localness.” John Wu saw the same merits: “There are a lot of Internet companies started by people who studied in the U.S. and came back to China. . . . Jack Ma is different. He has been in China all his life.”
With fresh capital, new recruits, and more than 150,000 members in 188 countries signed up on the website, things were looking up for Alibaba. But the bubble was about to pop.”
Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks.
