In 1986, Microsoft went public, marking the rise of a colossal software empire. As shareholders, Nasdaq, and Wall Street erupted in excitement, Microsoft's stock soared like a rocket! At that moment, the youngest billionaire in America was born!
Microsoft's stocks were fervently pursued by investors and shareholders like eager admirers. Even Henry regarded it with greedy eyes (though, let's be honest, his 'capital' was a bit lacking). However, Henry's current financial situation barred him from purchasing a substantial amount of Microsoft stocks, while Bill Gates, like a protective guardian, tightly held on to his shares without showing any intention to sell. Of course, this cautious approach stemmed from his belief in Microsoft's future growth and significantly higher stock prices!
Since its inception, Bill Gates has rarely sold shares—when he did, it was to acquire technical support from other parties. The implication was clear: selling shares in exchange for technology revealed Gates's large ambitions!
Henry contemplated that he should take a leaf out of Bill Gates's book, holding on tightly to stocks and never selling them off cheaply!
Cisco's development was very encouraging, but funding constraints had kept the company's growth on a steady and conservative path. Henry felt hesitant to mention financing again. If he sought to refinance, the Posacks' shares would be further diluted, essentially turning them into workers for Henry. However, Sequoia Capital, the investment giant, took the initiative to approach them.
The course of history seemingly remained unchanged by Henry's arrival. Sequoia Capital was still the first investment firm optimistic about Cisco and even sent an executive director to engage in direct talks.
When Henry received the news, his heart raced.
Despite his reservations toward venture capital firms, it was becoming apparent that Cisco could swiftly evolve into a giant, and Sequoia Capital had notably contributed towards that success. Anyone who had knowledge of Cisco understood its tumultuous history, which resonated with the term "barbaric." This designation stemmed from the numerous companies it had acquired during its development, rightfully earning the title of "Acquisition King."
Sequoia Capital served as a strategic matchmaker in this context. For instance, if Cisco eyed a company or a competitor's firm, attempting a direct acquisition would often yield unsatisfactory results, with potential sellers reluctant to engage. Sequoia Capital would intervene, leveraging their position as a venture capital institution with lower vigilance. They would secure control over the target company through a series of financial maneuvers, ultimately facilitating its sale to Cisco. This strategy allowed Cisco to acquire necessary technology while erasing competitors that posed a threat, thus preserving its global dominance!
Henry couldn't help but wish for control over Sequoia Capital.
The notion that such thoughts flitted through his mind struck him as amusing. Here he was, a mere fledgling, trying to navigate a space swarming with capital giants, yet somehow dreaming of controlling one!
On May 1, the board members of Cisco (comprising Henry, Bosak, and another member) formally convened with Sequoia Capital.
Ford Brook, an executive director at Sequoia Capital, was astonished to find that Cisco's major shareholder was a child. A prominent, promising high-tech company, and its majority owner is just a kid? Oh, my God!
Henry greeted him with a smile, "Welcome, Mr. Ford Brook. I'm Henry, Henry Williams! Haha, perhaps you've heard of my other identity—Henry Potter, the author of Harry Potter!"
Ford Brook was taken aback once more but quickly collected himself, "Oh! 'Harry Potter'? The American genius writer? Of course, I've heard of you! However, I never imagined you were also a major shareholder of Cisco!"
Henry chuckled, "Not a big deal. Uncle Posak and I are neighbors, and he's my computer teacher. When Mr. Posak wanted to start a company, I invested some money."
Ford Brook exclaimed, "Oh, that makes sense!" He couldn't help but admire Henry's luck, wishing he could be in the same position. His jealousy was quickly replaced by relief; a child being the majority shareholder meant their acquisition plans would likely go smooth! Ford Brook began to smile at the thought.
As the two shared a laugh, Ford Brook realized that Sequoia Capital aimed to acquire a stake in Cisco. He figured they might as well bleed out a little in the process!
With everyone settled, Ford Brook presented his intentions: "Sequoia Capital, as a premier investment firm in the United States, aims to help innovative high-tech companies grow and develop. Cisco is one of them! Thus, I'm here on behalf of Sequoia Capital to formally propose our financing intentions. Here are our plans; take a look!"
Henry took the proposal from Ford Brook, opened it, and scanned it closely. The plan primarily detailed the benefits of Sequoia Capital's investment in Cisco. Beyond financial support, it also promised assistance in management, networking, promotion, and eventually helping the company go public. While the proposal had merit, one aspect deeply troubled Henry: Sequoia Capital was proposing an investment of $5 million in exchange for 45% of Cisco's shares!
Henry frowned, falling into silence after reading.
Ford Brook continued, eagerly detailing Sequoia Capital's strength and influence. He touted, "Established in 1972, we have focused on the venture capital industry for over a decade. We have invested in pioneering high-tech companies like Apple and Oracle, developing and aiding their growth. In the U.S., Sequoia Capital partners with many prominent corporations, including IBM, General Electric, Compaq, and others. Leveraging our relationship, I'm confident Cisco can achieve rapid growth!"
Internally, Henry shook his head, though he had to concede that Sequoia Capital's acumen was impressive. Both Apple and Oracle had become formidable players, renowned in the U.S. for their networking capabilities. Their founders were the inventors of the Ethernet patent, and recognizing the internet's potential would undoubtedly lead to substantial profit!
"Mr. Brook, Cisco faces no financial pressure at the moment, so we have no need for financing!" Henry firmly responded, deeply unsettled by Sequoia's conditions.
Ford Brook smiled and countered, "But you surely lack sufficient funds to expand the market, right? Before your industry encounters competitors, it's vital to seize market share swiftly and assert dominance. With our resources and connections alongside your technology, the two together are an unbeatable combination!"
Damn! Henry thought to himself. It was indecent how Ford Brook had prepared thoroughly before arriving here!
"What does Mr. Brook project as Cisco's future market value?" Henry asked, attempting to gauge Sequoia Capital's estimates.
Deep down, Henry acknowledged the merit in collaborating with Sequoia Capital. While its financial power was notable, it was its influence that could prove invaluable. Sequoia could assist Cisco in many aspects—relationships, management skills, and more. Such expertise was simply beyond the reach of a newly established company. Still, if Sequoia Capital's proposed price was unreasonable, Henry would prefer for Cisco to develop at a slower pace than to capitulate to their demands!
Ford Brook, acting deep in thought, replied, "Cisco's development potential is undoubtedly present..." Then, in a façade of contemplation, he stated, "Despite this, market conditions suggest Cisco's future market value will not vastly exceed its current value. Presently, Cisco's valuation remains under $10 million. Therefore, with our investment of $5 million, we are seeking a 45% stake!"
"Mr. Brook, if that's the case, I'm afraid we may not have much to discuss!" Henry coolly retorted.
"Oh? And how much do you believe Cisco should be valued, little genius writer?" Ford Brook asked with feigned amusement. He suspected Henry wouldn't be a formidable negotiating player, assuming the young author lacked practical knowledge and experience. In his mind, he thought Cisco's value likely sat around $100 million. Ford Brook felt confident; before arriving, the board conducted a rigorous analysis, concluding Cisco had remarkable growth potential and would be the catalyst for an immense networking revolution!
Sequoia Capital's historic focus on investing in computer technology companies had broadened their sensitivity to routers and networks. They comprehended Cisco's future more clearly than ordinary companies. The board had strongly urged securing a stakeholder position in Cisco!
Henry's estimation of Cisco's worth at $100 million could be agreeable! Thus, they could invest an additional $10 to $20 million, aiming nonetheless for the most shares possible.
However, Ford Brook was unprepared for what ensued. Even the Posacks were taken aback; Henry divulged an astronomical figure.
"More than $50 billion..." Henry mentioned nonchalantly.
Ford Brook nearly choked on the water he had just drunk.
"More than $500 billion!?" Ford Brook exclaimed, grappling with disbelief.
"Are you joking?" he asked, a look of shock written across his face.
"I never joke; my jokes aren't even funny," Henry shrugged and replied, "I understand if you find this hard to believe, but this is my assessment of Cisco's worth, and I believe it's worth that price. Consequently, I won't readily risk selling Cisco shares; if Sequoia Capital isn't sufficiently genuine in acquiring them..."
Henry left a vague but present thread hanging for Ford Brook.
Predictably, the negotiation fell apart.
After Ford Brook exited, Henry summoned the Posacks to discuss blocking Sequoia Capital from maneuvering around them.
"Uncle Posak and Aunt Lerner, don't you believe what I just shared?" Henry asked with a smile.
"That's impossible! The highest-valued company now is merely over $100 billion. How can Cisco possibly be valued at $500 billion?!" Bosak shook his head stubbornly, with Lerner echoing disbelief.
"If I weren't a traveler from the future, I wouldn't have believed it either!" Henry mused internally.
Although the Posacks remained skeptical, that was alright. The key was preventing them from liquidating their shares at a loss. Therefore, Henry advised them, "Sequoia Capital sees potential in Cisco, and I believe that even if its market value isn't $500 billion, it is definitely in the range of several billion to tens of billions. You must not sell your shares carelessly! If you do wish to sell in the end, I encourage you to offer them to me first!"
"Don't worry; we won't sell our shares lightly!" Lerner said as she ruffled Henry's hair.
Still feeling uneasy, Henry pressed the matter further. After several more pleas, he couldn't help but request they sign a simple agreement. The agreement stated that he held the right of first refusal for any Cisco shares they might consider selling. Unless Henry expressly declined or couldn't meet the price, they wouldn't entertain offers from others!
Once the ink dried on the agreement, Henry smiled to himself, feeling a sense of relief wash over him.
Ha ha, just wait for Sequoia Capital to come back and witness how I "cut him!"