Chapter 41: The Pig Standing in the Gale

Johnson saw Old Tan acting like a sycophant and secretly chuckled. In truth, it wasn’t so bad—living authentically, daring to grovel before the strong, was a kind of skill in itself.

He waved his hand casually and said, “Just got back to the country, haven’t made any concrete plans yet. Tell me what’s going on?”

“No problem, it’s an honor!” Old Tan called for a waiter to bring a bottle of red wine, opened it, filled two glasses, and handed one to Johnson. “A lot of people like to say that early-stage investment is all about backing entrepreneurs, sizing up the founding team and so on. But in reality, more often the focus is on being number one in the sector.”

“To put it plainly: the leading trend comes first, concepts are king!”

Johnson’s eyes brightened; he listened closely. This was exactly why he’d come out to meet—after all, the other man had been in the investment circle for years, and learning from him wasn’t anything to be ashamed of.

Old Tan took a sip of wine and continued, “Venture capital loves to hype concepts and create trends. A good concept can stir up a massive entrepreneurial investment market.”

“For example, the sharing economy—an incredibly successful concept. In essence, it’s just time-sharing rentals, but calling it ‘sharing’ makes it sound lofty.”

“And look at the stock market. All those stocks that once suffered heavy losses can still soar, because they have the ‘restructuring’ concept. Many stocks that nobody cared about suddenly become hot, like so-called concept stocks in certain fields.”

“So, when VCs invest, they hype the concept—that’s the industry’s survival logic.”

“But since we’re not investing in listed companies, and there are no standardized financial reports, it’s hard to accurately judge a company’s future prospects. All we can do is cast a wide net—invest in a hundred companies, and even if ninety die, as long as ten succeed, it’s profitable.”

“In reality, it’s gambling—betting on vision, luck, even fate. Every venture capital firm here prefers projects with rapid growth, hoping to recoup in a year, double in two, go public in three.”

“Big funds all have time limits—typically five plus two: five years to liquidate and settle with investors, maybe two more years at most. No one invests indefinitely.”

He poured himself another glass, grinned, “Take me, for example. I’ve played dozens of projects, and most investments go to those born in the eighties. Seventies-born founders are rare.”

“Young people have more energy, can pull all-nighters for days, have strong material desires, are willing to endure hardship, and are more persistent about getting rich.”

“It’s not just me—the entire VC industry prefers youth. Sixties-born founders don’t get any attention; even seventies-born don’t have much time left.”

Seeing Johnson frown, as if he’d realized something, Old Tan explained, “Brother, the situation here is different from abroad. You deal with top-tier listed companies, holding Apple or Exxon stock for retirement, enjoying dividends while lying back without a care, right?”

“What are we dealing with? At the end of the day, it’s trading startup projects!”

“Only fools expect year-end dividends from startups. For founders, their project is everything. But for VCs, a startup is just one out of a hundred.”

“Fatten it up, find a buyer, then wait for the right price—slice it off and walk away!”

Johnson suddenly understood—so this was how everyone played the game?

Old Tan refilled his wine, fully grasping Johnson’s confusion. The ‘hand of God’ invested only in the top listed companies, not even the Fortune 500 might catch his eye, let alone these fledgling local startups.

“I’ve seen so many entrepreneurs brimming with confidence, launching into endless speeches about their so-called dreams. I can’t stand those idiots!”

Old Tan scoffed, “My money doesn’t grow on trees, and you haven’t even figured out what a VC fund is, yet you have the nerve to ask for cash?”

“The purpose of investing is crystal clear: sell the shares and cash out. There’s no second option. Whether you cash out after an IPO, after acquisition, after the founder buys back shares, or another fund takes over…”

“Even if you run into a big fund with deep pockets forcing a sale, as long as there’s money to be made, you smile and hand it over, doing everything you can to cling to their leg—that’s a proper VC.”

“I once invested in two internet companies. The businesses had entered a healthy cycle, profitable every year, but you know the nature of internet—long-term low margins, sometimes no profit at all. Still haven’t recouped, like a chicken bone—hard to swallow, hard to spit out.”

He sighed deeply, resignation in his tone. “There are too many cases like this. When you try to raise another round, no one gives you money. If someone does, they end up locked in as shareholders, just scraping for dividends.”

“Even then, you worry about someone cooking the books, maybe even ending up in a fight. Most crucially, you lose liquidity for your large capital.”

Johnson chuckled—it was like buying a financial product that only paid interest, couldn’t touch the principal; who would want such a trap?

“Of course, in traditional industries—say, copper mines—investors go for dividends. That’s a different story.” Old Tan looked at Johnson seriously. “I’ve said all this to make one point: the model of domestic VC is such that profit comes only from cashing out. There’s no other way!”

“There’s a cycle of fundraising, investing, managing, and exiting, so the pressure to cash out quickly is huge. Forget about dividends—it just doesn’t work.”

“So, if you want to invest here, you have to be fast, sharp, and ruthless, or else it’ll be tough…”

Johnson smiled and clinked glasses with Old Tan. It wasn’t a wasted trip—he’d heard some honest words. He pondered a moment, then pressed, “What kind of projects do you invest in?”

Old Tan grinned—that was business confidential, and anyone else would have pushed back, but Johnson was exactly the man he’d waited for.

He sat upright, full of sincerity. “It’s very simple: two things—companies that can be sold quickly, and for a high price!”

“The reason is straightforward: early-stage investment means low valuation, cheap price. Invest for a year or two, the company grows fast, the future looks bright, so it becomes valuable.”

“In a sense, anything that can be sold, can usually fetch a good price. If it can’t be sold, odds are it’ll go under.”

“The companies that can go public, or attract acquisition by big players—those are the VC treasures. Only those who can take a strategic position in key fields and have broad market prospects might get picked.”

Afraid he wasn’t clear enough, he continued to analyze, “For example, there was once a vinyl record community app seeking investment. They went around to dozens of firms, but struggled to attract VC attention—the target market was just too small.”

“Vinyl has all but vanished from mainstream music, hardly any influence, the pool is tiny—even if you dominate it, how much can you earn in a year?”

“Take Douban, for instance—why is it so hard to turn a profit? First, they didn’t do group buying. Second, their movie ratings have little impact on the film promotion market; IMDB and Rotten Tomatoes are far more authoritative.”

“And some films, no matter how bad the ratings, audiences will still watch—like ‘Batman v Superman.’ In a place like this, where imported films are restricted, audiences really have no choice.”

“Couples on a date are always going to see a movie. If the guy starts fussing about Douban’s low score, isn’t he just asking for trouble?”

“So, in the grand scheme, Douban is a product that doesn’t matter much—its presence or absence is inconsequential. Such things could never earn a high valuation.”

“Then there’s a certain kindergarten management solution provider—two thousand brick-and-mortar clients nationwide, strong cash flow, but their market share still lags behind competitors.”

“Investors won’t back the third player in any sector, even if their cash flow lets them live well, but so what?”

Old Tan smiled, “Especially with early-stage projects like this—look around, it’s full of competitors. It’s almost hopeless, isn’t it?”

He leaned closer to Johnson, speaking in a low voice, “Recently I spotted a promising project—‘QuickHire.’ Its core selling point is that anyone can become a product manager, plus internet firms have huge demand for operations and product roles.”

“The project’s still early, invest two million, get forty-five percent equity. What if, someday, all the PMs nationwide rely on this site to find jobs?”

“Heh heh…”

With a sly grin, Johnson couldn’t help but see Old Tan as a madam at a brothel, stumbling upon an orphan—feeding, pampering, raising her up, all in hopes she’d become a star courtesan, worth a fortune in a single night of passion.