These "bracing to death, hard bracing" entrepreneurs: "routine" by angel investment?

For more than ten years of entrepreneurship, Li Cheng has lost the spirit of the past, and has become a "hit worker" who emphasizes stability and low-key every day.

He once founded a brand with a market value of more than 100 million yuan and was ready to hit the IPO, but in the period of rising confidence, he suffered the tragedy of the compulsory enforcement of real estate, cars and deposits, the bankruptcy of the company and the debt of the family.

In the investigation and visit of the first financial reporter, there are not few entrepreneurs who have similar experiences with Li Cheng, or are suffering from similar experiences. Staying up late, sleeping late, and overdrawing their health are just the hardships that can be overcome by gritting their teeth, and more experiences of mediating with capital are the beginning of their discouragement and heavy blows.

What twists and turns have these entrepreneurs experienced in working with investors? How did these entrepreneurs' companies go from highlight to decay, or even end?

Entrepreneurs who are "propped to death"

Li Cheng has always believed that he is not short of experience and practical combat ability. The first project he made was sold to a Beijing company and successfully listed in the United States, which also made him and his team tens of millions; the second project quickly grew from a store to more than 100 franchise stores across the country, with a market value of over 100 million - it can be said that under the high risk of entrepreneurship, he has been successful in almost every venture. The inflection point that made him fall from a high place was the first introduction of angel investment.

"The biggest experience of entrepreneurship is that most of the enterprises are not starved to death, but are supported or urged to death by investors." Li Cheng sighed like this.

He told First Finance and Economics that the second entrepreneurial project he founded in Shanghai was related to children's art. Before introducing any funds, he successfully achieved more than 100 franchise stores in the country, which was quite large 12 years ago. Li Cheng, who does not have any financing, adds 3 to 5 stores every year, and can make millions of yuan in profits just by joining, and the days are "actually very comfortable".

This speed of development and profit model quickly attracted the attention of angel investors. These include Zha Li, founding partner of The Beginning Venture Capital Fund/Start Venture Camp (hereinafter referred to as "Start venture capital").

"Charlie came to us many times, and I didn't think about financing at the time, but he persuaded us that we could give resources to help the company accelerate its development." We signed a $10 million investment deal, and they gave $3 million first, and then urged you to take big steps, expand fast, and push you to go public. Li Cheng told First Financial Economics, "At that time, our steps were big, and indeed we took too big." In one year, we expanded 7 to 8 stores. Originally a company of 20 to 30 people, it suddenly expanded to 300 people, and every morning when I woke up, it was a lot of salary and rent pressure. ”

In the period of rapid expansion of the enterprise, the 7 million yuan waiting to be cashed has not been recorded. At that time, Charlie did not give money on the grounds that the financial report was not good enough and the development was not compliant. When the funds were not in place, he introduced us to the mortgage of the property and asked me to mortgage my house to CreditEase Wealth. When signing the investment agreement, he also made my wife and I take on unlimited guarantee liabilities. Li Cheng admitted that although the lawyer reminded him not to let his wife do the guarantee, he still decided to follow the investor's words, "at that time, he was very confident, felt that there was no problem, and did not expect to be tricked."

Soon, the start-up company, which has taken a big step, began to decline, and the capital hole continued to increase. The loan obtained by following the advice of investors to mortgage properties and cars did not make up for the holes, nor did it make the company survive until the moment when investors' funds came.

When the company was on the verge of bankruptcy, Starting Point Venture Capital, as an angel investor, demanded that Li Cheng repurchase the equity he had invested in accordance with the agreed double-digit interest on the grounds that one of the exit options in the investment agreement, "equity repurchase", and quickly turned himself from an investor into a creditor through arbitration - the assets mortgaged by Li Cheng quickly entered the enforcement stage, and the entrepreneur who fell from a high place to the bottom became homeless with his wife and children and became homeless with debts of more than 20 million yuan.

In order to rationalize the aftermath, Li Cheng borrowed money from relatives and friends to liquidate and close more than a dozen stores in Shanghai one by one, and compensated the implicated students and parents so that the incident would not affect more people.

Li Cheng said that after the incident, in addition to the cold lawyer's letter and the ruling issued by the Shanghai Arbitration Commission, he has never seen the original enthusiastic angel investors, and he is still in a state of fruitless contact.

After all his assets were auctioned off, he became a dishonest man because he had not paid off the money of investors, was restricted from high consumption, could not travel by high-speed rail, airplane, and could not restart a new business. Currently, he can only work at a relative's company to support himself and his family.

Entrepreneurs who are still "hard-bracing"

Unlike Li Cheng, who has been "urged to death", Shi Liangrui, the founder of Bobo.com, is still struggling to support the company's operation.

He also accepted investment from the starting point investment fund, and he was not much luckier than Li Cheng. In November 2020, he received an arbitration notice from the Shanghai Arbitration Commission, and the applicant for arbitration was also the entity of the starting point venture capital operation, Shanghai Qiandian Kun Venture Capital Partnership (Limited Partnership) (hereinafter referred to as "Qiqian Dian Kun Venture Capital").

Like Li Cheng, when Shi Liangrui accepted the funds of the angel investor Cha Li, the exit clause was stipulated in the "Capital Increase and Share Expansion Agreement", one of which was "repurchase", that is, the investor had the right to submit a repurchase request under certain conditions, and the company and the original shareholders should cooperate.

With this clause, On August 26, 2020, Starting Point Venture Capital submitted an application for arbitration to the Shanghai Arbitration Commission, bringing together three shareholders of the Company, including Shi Liangrui, and its company (full name is "Shanghai Modisi Information Technology Co., Ltd.", hereinafter referred to as "Modisi Company") as the respondents. After the case was accepted, The Starting Point Venture Capital quickly submitted the "Application for Property Preservation", and the Arbitration Commission submitted the "Property Preservation Application" to the Shanghai Pudong District People's Court in accordance with the regulations, so that Shi Liangrui's company account entered a frozen state since December 1, 2020.

As a direct consequence, employees' salaries cannot be paid normally, and many employees have left their jobs due to this influence. App operations have also experienced a decline in user activity.

Seven months later, Shi Liangrui waited for the verdict on July 2, 2021.

According to the outcome of the arbitration, the Arbitral Tribunal supported that the three founding shareholders, including Shi Liangrui, should bear the repurchase obligation in accordance with the repurchase clause, and ruled that Shi Liangrui and the other three founding shareholders should jointly pay 7.5 million yuan to the applicant within 10 days from the date of this award, and use 7.5 million yuan as a base of 7.5 million yuan at an annual interest rate of 10% to repurchase 16.67% of the equity of Theodis Company held by the applicant, but at the same time rejected the applicant's arbitration claim for the company.

However, the company's account, which has been frozen for 7 months, cannot be unfrozen.

Shi Liangrui told reporters that after the starting point venture capital invested in Modisi Company, another Ningbo SoftBank Tianwei investment institution also increased its capital. But the actual controller behind these two investment institutions is actually the same. After the application for arbitration by Starting Venture Capital, Ningbo SoftBank Tianwei Venture Capital Partnership (Limited Partnership) also filed an arbitration application in November 2020 and submitted the Property Preservation Application as followed.

"The company's account will not be unfrozen until the outcome of the arbitration of this company comes out and the arbitration claim of the company is also rejected." Shi Liangrui said that this means that the company will have to survive until at least September this year, "I also borrowed nearly a million yuan from friends to pay employees living expenses, before June, there were 10 or so employees who insisted, but then they couldn't hold on."

Shi Liangrui believes that this is not the first toss of investors to the company in recent years, with the adherence to the belief in entrepreneurship, Bobo has always maintained the leading position in the industry.

So, he is still trying to hold on, looking forward to starting over after the company's account is unfrozen.

"Just cash, no equity"

Xu Zheng, an entrepreneur who won the first place in a number of entrepreneurial competitions, did not expect that the glory of his award that year and the angel round of financing attracted by it would become his nightmare after 9 years.

At the end of 2012, Xu Zheng, who founded Shanghai Zhaofu E-commerce Co., Ltd. (hereinafter referred to as "Zhaofu Electronics"), received 2 million yuan of angel investment from the starting point venture capital after winning the award. At that time, Charlie said in an interview with the media that the investment in Trillion Electronics was based on three reasons: excellent team combination; reliable business model based on market demand; o2o in the mobile Internet is a hot spot for entrepreneurship, where subversive innovative start-ups may be born.

At the end of 2016, Zhaofu Electronics not only failed to achieve the exit conditions expected by the starting point venture capital - it was listed at the end of 2016 at the latest, but the company also entered operational difficulties. In the past 3 years, the company has not received any new round of investment, the founder's original capital and 2 million yuan of angel investment have also been exhausted, and the company has entered a zero filing period after the business stagnation.

During the period, Xu Zheng and his partners negotiated with the starting point venture capital many times whether they could cancel The Mega-Electronics Company, and the other party replied that "it will operate in accordance with the withdrawal agreement in the capital increase agreement", but there is no clear statement on how to operate, and the cancellation is also shelved.

On April 9, 2021, Xu Zheng found a ruling resolution about himself on the Qichacha app, which was filed by the Shanghai No. 2 Intermediate People's Court for the first time on April 8 of the same year. After xu Zheng consulted by telephone, he learned that starting point venture capital applied for arbitration in July 2020 and submitted a request to repurchase shares, but in the case of the defendant's repeated absences, an arbitration resolution had been formed in January 2021.

The Arbitration Commission resolved that Zhaofu Electronics shall bear the repurchase obligation and Xu Zheng (accounting for 37.5% of the shares) shall bear the personal guarantee liability. In the end, the Arbitral Tribunal ordered the second respondent (i.e. Xu Zheng) to pay rmb2 million and the principal amount of RMB2 million to the claimant for the share purchase, calculated from 15 May 2013 to the date of actual payment, with interest calculated at an annual interest rate of 12% for the repurchase, while paying 120,000 yuan in legal fees and 110957 yuan in the arbitration fee in this case.

Since April 19, Xu Zheng has been restricted from high consumption. On May 29, the case entered the final stage, and the subject matter of enforcement and the amount of unfulfilled performance were 2.23 million yuan.

"I don't know about the application for arbitration, the arbitration at the hearing." Xu Zheng was quite helpless.

After being restricted from high consumption, Xu Zheng was unable to take high-speed trains and planes, and his bank cards and equity stakes in other companies were frozen. If you want to get rid of the hat of the current executor, the only way to reconcile with the starting point venture capital. Xu Zheng had proposed whether it was possible to exchange the equity of other companies for equity? The lawyer of The Starting Point Venture Capital replied: "We only want cash, not equity." ”

Why sign an "unfair" agreement

The above cases are only part of the judicial litigation related to the starting point venture capital, and the first financial economy checked Qixinbao and found that there are currently 8 judicial litigation cases related to the starting point venture capital. And Xu Zheng, they are also invested in dozens of projects by the starting point venture capital.

A week ago, the first financial reporter called Zha Li, the founder of Starting Point Venture Capital, and his assistant Bao Qingheng. In the only phone call, Bao Qingheng said that the starting point would give a certain reply, but was not sure when and in what way, it would be possible to communicate with his partner in the United States, Charlie. Subsequently, Bao Qingheng's phone and WeChat were always in a state of rejection or no answer.

Li Cheng has rarely shown a sense of blame for investors in his narration. He said that he looked down on it and would find more reasons for failure from himself.

For him, if he had not let his wife guarantee it together, and separated the family assets from the company's assets, the situation would not have been so bad.

When asked why such an unfair agreement was signed, Xu Zheng admitted that as an early young entrepreneur, it is easy to underestimate the trap of terms, but the practice of starting venture capital is not common in the industry.

Sushi has been doing early venture capital in China for many years. He told First Finance and Economics that whether to sign such an agreement is actually the same as doing business, depending on supply and demand. Initially, if there is more money and less projects, such repurchase agreements will be removed in the game between the two sides. "If there are more projects with less money, or if institutional brands have endorsements for entrepreneurial projects, they may submit strict terms."

However, Su Xi said that although signing such "unfair" agreements is not a minority in the venture capital circle, in reality, it will be recovered through arbitration, and the situation of chasing entrepreneurs to repay money is very rare.

Another venture capitalist, Jiang Qi, also said that doing venture capital is a very professional and high-risk thing, investors can not bear the risk of do not come to do, and as an entrepreneur, experienced or strong, generally will choose industrial investors or investors with sufficient strength.

As for the VAM agreement, according to his observation, about 70% to 80% of entrepreneurs will sign it, but the interest rate of the buyback will not be as high as double digits. In reality, most cases will not trigger a buyback agreement to exit, and a very small number will cause arbitration or court.

In addition, entrepreneurs are also waiting for the introduction of domestic personal bankruptcy laws.

As an inseparable part of the modern bankruptcy law, when China promulgated the Enterprise Bankruptcy Law in 2006, it did not introduce a personal bankruptcy legal system at the same time, which also made the existing bankruptcy law known as the "half bankruptcy law".

On July 19, The ruling on China's first personal bankruptcy case came into effect, becoming the first case concluded by the Shenzhen Intermediate People's Court since the shenzhen special economic zone's personal bankruptcy regulation, the Shenzhen Special Economic Zone's Personal Bankruptcy Regulations, were officially implemented on March 1.

Liu Shengjun, the lead lawyer of the bankruptcy administrator of the case, said that when ordinary people fail to start a business or encounter some unfortunate events, the whole family is often implicated, in this case, the personal bankruptcy law provides a legal way for "honest and unfortunate" people to "get regeneration", which also means that credit will become an increasingly important asset for individuals. (Due to the interviewee's request, Li Cheng, Su Xi and Jiang Qi are pseudonyms)