Chapter 368: The Protagonist's Awareness

Loans are also a form of financing!

Entrepreneurs with backgrounds and help from others really do find it easy to obtain large amounts of capital and resources.

Without Liu Tianxian, Fang Hong's start would have been very slow. Even with the United States pumping in money, given the size of Chang'e Technology, the transfusion simply wouldn't be enough.

That evening, Fang Hong, Liu Tianxian, and the leadership of Chang'e Technology treated her uncle's banker friends to a meal.

They'd handed over so much money, so a bit of hospitality was in order—at the very least, a meal had to be had.

After the food and drink were done, her uncle, Liu Tianxian, and Fang Hong found a small private room to talk alone, while the bankers checked into rooms to stay—this would take a few days of talks.

What had been discussed before was only the broad outline; once the details were settled, they'd sign the loan agreement.

The Chang'e Technology leadership also dispersed.

"Thank you, Uncle," Liu Tianxian said, grabbing her uncle's arm and looking very cheerful.

This had solved a big headache for her and Fang Hong.

"I was only the middleman. Whether you achieve anything still depends on you two yourselves," her uncle said, looking at Fang Hong seated across from him.

Those words were meant for him.

"I won't let you down," Fang Hong promised.

Her uncle asked, "So have you figured out what to do with the money yet?"

"The plan to acquire Shengda Literature stays unchanged. Software development, tech R&D—all of that needs top talent, so I'm thinking of starting with talent first." That was all Fang Hong had come up with for now.

With so much money all at once, he didn't really know what to do with it either, for the moment. Mostly, he'd pour it into expanding the Data Center and building up the network infrastructure.

Bilibili, Chang'e Video—these are all video-based software, so they definitely need investment in tech R&D, Recommendation Algorithms, video generation, Artificial Intelligence models, and so on.

All of this is preparation for short video: for instance, when filming a video, whatever effect you want, you can generate Best Special Effects, or generate a certain type of video.

And the Recommendation Algorithm logic, Artificial Intelligence R&D—all of it needs capital.

ByteDance's success wasn't just the success of its Recommendation Algorithm, but of applying Artificial Intelligence technology to mobile application scenarios.

The beauty filter feature—surely no one is a stranger to it—that falls under Artificial Intelligence.

So technology is a link that must keep receiving investment.

Actually, developing a software platform isn't hard. What's hard is data maintenance, platform operations, Big Data algorithms, R&D, marketing, and other costs.

How to make videos play without buffering, with high clarity and smooth playback at the same time—that tests the underlying network infrastructure and also tests technical optimization.

So what he's short on is top-tier talent—the kind of highly specialized, independently capable technical people.

Programmers are everywhere; with money you can find people to do the work. But those top-tier talents really are few.

"So how do you plan to recruit?" her uncle asked again.

"From schools, from society—recruit on both fronts," Fang Hong said.

"It's good that you have that awareness, but those aren't the best talents. Let me tell you—school talent ultimately lacks experience. If you want experienced people, go poach from the major companies, poach from abroad, poach domestically too. That's the fastest way," her uncle told him.

He had no choice either; to keep his niece from becoming a debtor down the road, he could only give this man pointers.

"I've been doing that all along, but it's hard. Every company is recruiting these people. To get them to come willingly, you have to be attractive enough—and it's also hard to keep them. You poach them, but they can poach you too." Fang Hong understood a bit of the psychology of those senior talents.

But how to make a move, how to create that attraction—that's the hard part. Chang'e Technology's salary level isn't higher than the big factories', so its appeal is limited.

So this is what troubles him quite a bit: even with a forward-looking vision, without good talent to do the work for you, it's all for nothing.

Those programmers can't play a decisive role.

What really plays a role is: top-level planning that leads the direction; mid-level coordination of resources to achieve goals; and bottom-level folks just writing solid code.

So don't be fooled by Chang'e Technology's headcount—they're all code monkeys; mid-level senior talent is very scarce.

"There are a few methods. One is an Option Pool. You can put in 100 million shares of Option Stock, earmarked for those mid-level managers and technical staff, as well as people who've made certain contributions. After three or five years, once the company has grown, you can buy them back at a set price—it's essentially giving them money."

Her uncle went on: "This kind of Option Stock has no impact whatsoever on your decision-making, and it gives employees a sense that they are the owners of this company. It's a way of binding employees with interests, and it's also a form of attraction."

Fang Hong listened, dumbfounded. He knew this move existed, but had never known the details.

"If you plan to go public, this kind of option can be sold as stock, but it has to reach a certain number of years before it automatically converts to stock. Of course, the option has to be more favorable than the stock. For instance, if the stock is 2 yuan, you can sell the option to your employees at 1 yuan. Once the stock rises, the option rises with it. This is also a form of financing."

Her uncle taught him: "You can also have option employees sell their Option Stock back to the company at a certain point in time, or pay a certain amount to convert it into stock after the company goes public—the price is pre-set. For example, if your stock price is 10 yuan, you let them pay 5 yuan, and then they sell on the market. That way they make money, and the company doesn't have to spend any." In other words, he could set up a 100-million-share Option Pool, designate only certain employees to buy, sell it to them at 1 yuan, and raise 100 million in financing.

Later, when the company makes money or goes public, the option price can rise accordingly. They can choose to sell back to the company, or choose to pay a bit more to convert into shares and hold them, then cash out on the market.

Financially speaking, Fang Hong could fully use the Option Pool to incentivize employees—agree to go public in three years; if the issue price is 10 yuan, they only need 5 yuan to buy company stock.

Then whether they hold or cash out is up to them. It's equivalent to Fang Hong not only retaining talent but also getting money, without spending a thing—he just needs to grow the company.

If he doesn't go public, the company definitely has to buy back the Option Stock to protect the employees' interests.

But this is also a kind of risk. If your company goes under, or can't go public, what happens to the Option Stock in the employees' hands?

"If I don't go public, is this something I price myself—can I put as many shares as I want into the Option Pool?" Fang Hong asked.

"If you don't go public, you can operate that way, but it still has to be based on your company's scale. You can't have a 1-billion company and set up a 10-billion Option Pool—people won't believe you either. Confidence is very important," her uncle said.

This kind of thing is completely an unrealistic pie-in-the-sky. Some even make employees buy on their own, but if the company is half-dead, employees definitely won't buy.

This is equivalent to confidence in a company.

"And it also has to be based on your company's revenue, to make sure you have enough funds to buy back the shares in the Option Pool. If you really don't know how, you can hire a third-party evaluation agency to design an Option Pool for you."

Her uncle said again: "Actually, to put it simply, as long as you can guarantee that employees with Option Stock can cash out and make money, that's the best system design."

Some companies design a flawless Option Stock, but the company underperforms expectations, revenue is poor, and when the time comes to cash out, they can't come up with the money—what's the use of that?

So this thing only needs to guarantee that employees can cash out and make money after getting the option—who cares how you do it.

Fang Hong roughly understood. This method suits startups—a form of incentive for employees, a sense of belonging, a way to retain them, a way to attract people.

If only Yutu had been designed this way back then, it could have benefited more people.

He'd made Yutu's profit-sharing model too complicated. If he'd simply put 100 million shares into the Option Pool, anyone who wanted to buy could buy at 1 yuan.

1 yuan was just symbolic—only insiders could buy. After all, Yutu was already very profitable back then; everyone knew buying at 1 yuan was a sure profit.

A year later, he'd buy back from them at 2 yuan per share—how high it rose depended on how profitable the company was—and each person could buy at most 1 million shares. That way at least a hundred people could benefit.

Of course, top management couldn't buy—only mid-level staff or technical personnel with certain expertise.

This design is much better — it lets more people make money. His design benefits too few people, and isn't conducive to the needs of development.

Stock options are the most powerful tool for letting a group of people grow prosperous together; of course, the risk is shared as well.

Liu Tianxian had been listening quietly at the side. She didn't really understand these things either, but she knew it would surely benefit Fang Hong's development.

"The second is the Partner System. Look at the people you think will play a decisive role in your future development, and you can bring them in as partners. Partners need to be allocated equity, have decision-making power in company decisions, and of course also bear the company's responsibilities. You can consult others on this approach."

The uncle said again: "The earlier you give out equity, the better. That way the decision-makers will have a sense of urgency and avoid dragging their feet. Of course, you also need to make clear who the core founder is — and that's you."

Tonight the uncle said a great deal, laying out clearly all the company systems and development models he knew.

And he also pointed out his problems!

This company can't rely on Fang Hong alone — not for any other reason, but because his ability is insufficient. Apart from his eye for things, he doesn't know jack about anything else.

He doesn't understand technology, doesn't understand development models, doesn't understand the specific operating rules of the industry — every single thing needs a team.

Jack Ma had his Eighteen Arhats, Tony Ma had his Five Tiger Generals — what does Fang Hong have? Just Liu Tianxian?

Take this round of financing and loans, for instance. Not a single person from Chang'e Technology stepped up to help Fang Hong find investors or solve the problem with the bank — it was all him fumbling around on his own.

Not a single person helped him brainstorm either. He busied himself back and forth without getting anywhere, and in the end it was Liu Tianxian who solved the problem for him.

The senior staff at Chang'e Technology don't show an ounce of initiative — they all just go through the motions at work. Whatever the Principal says, that's what they do. Doing nothing is no mistake, doing less is fewer mistakes — that kind of attitude.

After all, they're just drawing a salary. Does it really matter to them whether the company makes more or less? At most their paychecks are a bit higher.

Put simply, they have no sense of ownership. In this company, Fang Hong is the only owner — everyone else is just a hired hand.

This is the old Jade Rabbit approach carried over. In the beginning Jade Rabbit was also on her own, working hard with all her might, without many people helping her.

Chen Zhixi only got her shares later on, and only then did she fully prop up the film and television business and develop a sense of ownership.

Projects like "Beijing Love Story" and "Lost in Thailand" were ones she brought in herself — simply because when Jade Rabbit made money, it was she who was making money, and she gained status and standing as well.

When it comes to evaluating the major leaders in the film and television circle, Chen Zhixi is also on the list. Once she had money and status, her initiative picked up a bit.

Before that, it was all Fang Hong alone, busting his hump and grinding out movies.

(End of chapter)