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English|A Startup in the Shadow of A Giant( 二 )


In early 2016, due to its exponential growth, the company received term sheets from a number of institutional investors.  
“At this crucial moment, Ant Group’s investment department offered to add US$100 million to lead that round of financing, which amounted to US$180 million,” said Zhao.
Ant Group’s investment department remitted US$10 million as a bridge fund to Zhao’s personal bank account, which turned out to be a problem in the future. Ant Group explained that it would take a much longer time to transfer money to a corporate account, which may delay the progress of the business.
Before February 8, 2016, all investors completed their internal approval process for their investment into Dianwoda, except Ant Group, which failed to receive a green light from Alibaba’s Investment Commission.
A small move made by a giant could change the landscape of a sector. Zhao and his Dianwoda got stuck for a second time.
On February 29, 2016, Zhao decided to withdraw from 17 cities of the 21 cities his company had presence in. 1,300 persons were laid off in a single day without receiving any compensation. If the company had compensated its employees, it would be insolvent right away.
“1,300 employees left quietly, without accusing, protesting or demanding a compensation, which left me moved and ashamed,” Zhao told TMTPost.
(Three years later, on March 1, 2019, Zhao contacted them and paid each of them a month’s salary to show his belated gratitude.)
On the brink of bankruptcy, Zhao had no time to lick his wounds. On March 1, he turned to Meituan for help. Meituan said they could buy shares at a 40% discount but Alibaba must exit as a shareholder. Zhao returned to Hangzhou, asking Ant Group to divest all its shares.
In a few days, Alibaba’s Investment Department contacted Zhao, saying they would continue to support Dianwoda. But due to changes in the competitive landscape, Alibaba would buy shares at a 40% discount of the original valuation, the same as Meituan had offered.
He returned to the original investor after a brief flirt with Meituan. In fact, he had no choice because Ant Group had the veto right in the Board.
A Long Wait
On April 4, 2016, Zhao received a phone call from Alibaba. “All terms have been approved. It is just a matter of an internal process. It should be done in about a week,” he was told.
However, by May 15, there was still no reply. Zhao was disappointed. “It is time to close the company,” he murmured.
Zhao remembered clearly that it was a Sunday. He had quitted smoking for some time but he bought a pack of cigarettes. He lighted a cigarette and went through the accounts.
Suddenly, he realized the $10 million bridge loan from Ant Group was sent to his personal account first and next transferred by him to the company's. It was his personal debt now.
He was wondering whether he should divorce his wife in order to prevent the entire family from going broke. He deeply regretted his acceptance of the money to his personal account.
In a reversal of fate, he received a phone call from Alibaba and was told that “they would carry out the investment”.
“Does the phone call mean the dust settles?” asked Zhao. He shook his head in retrospect.
The investment was injected to his startup by September 2016, about four months after the call.  
“No matter what, we survived,” said Zhao. In 2017, the company thrived. Business grew by 9.7 times year-over-year in terms of revenues.
“We would rather die on the path of expansion than stay alive in a retreat,” Zhao said. He realized that he could attract investments as long the business was expanding.
Dianwoda had cash crunches constantly during its fast expansion. By June 2017, the company had over 100,000 delivery men. Often the cash flows were enough only for 24 hours, Zhao told TMTPost.
In order to support business expansion, Zhao raised money again after consulting Alibaba. On June 6, 2017, it received a Term Sheet from express delivery firm Yuantong. In October, institutional investors, including Goldman Sachs and China's insurance giant Ping An, offered term sheets. By December, Dianwoda reached a share purchase agreement with the investors.

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