[Chapter 43: Mortgage Loan (2)]
"So why did the number of internet users explode in just over a year? I think we all know the biggest advantage of the internet is convenience. Whatever information is online, as long as you have a URL, you can find it. But at first, searching for information on the internet was pretty cumbersome. Jerry and David felt this most acutely, which meant the number of early internet users was quite small."
Everyone looked at the two men, who smiled and nodded in agreement.
"It was exactly this frustration that led Jerry and David to create the predecessor of Yahoo! while still in college. At that time, Yahoo! became the go-to choice for many internet users -- they could find useful information through Yahoo!. That was also my first impression when I went online and saw Yahoo! With such a massive user base, it meant there was a huge market."
It's a simple truth -- why do newspapers and TV sometimes offer free viewing even though many charge subscriptions? It's because they have a large audience. The same goes for Yahoo!.
TV and newspapers earn revenue through advertising, and internet advertising on Yahoo! was bound to succeed.
With this mindset, I used my understanding of Yahoo!'s business model and $500,000 in cash to approach Jerry and David. I was honored to become a shareholder."
After John finished speaking, everyone applauded. It was clear -- the victors write history. Now that Yahoo! was booming, John's initial investment was widely praised.
"So when we first got on the internet, what did we do? Most people's first thought was a web browser -- specifically, Netscape Navigator, which is what I want to talk about next.
Before browsers existed, surfing the web was a hassle. The browser's arrival made searching for information much easier and faster, which was one reason internet users exploded.
Among the many browsers, Netscape stood out and quickly became the leader.
Has anyone looked into what browsers internet users mainly used? From what I've been able to find, Netscape had a market share of about 70%, meaning it essentially monopolized the browser market. It basically is the gateway to the internet for millions.
With tens of millions of users and a growing population, combined with nearly a monopoly on browsers, Netscape was set for success.
I heard Netscape was preparing for an IPO. The reason I'm asking to borrow money from you is to invest in Netscape. I want to see if I can acquire some shares before the IPO and make some profit.
Based on my estimates, within 3 to 5 years, the number of internet users in the U.S should reach anywhere from 50 million to 100 million, and globally it could be several hundred million. Netscape's reach would be the same worldwide.
By the way, the same applies to Yahoo! As long as Yahoo! seizes the chance to expand internationally first, it will achieve great success.
So besides the loan, I also plan to contact Netscape through Sequoia Capital to see if I can purchase some shares.
As for 3 to 5 years from now, I think the internet will only grow faster. As long as the economy develops and people have disposable income, internet adoption becomes inevitable."
"So according to your estimate, if Netscape goes public, how much return can you make? Remember, you're promising to pay a 20% return." Don Valentin smiled and asked.
Don Valentin clearly preferred a direct loan through Sequoia Capital, given Yahoo!'s shares as collateral, and 20% returns were quite attractive.
"I'm personally expecting a 100% to 200% return."
Everyone was shocked by John's confident reply.
"Why are you so sure, John?" David couldn't help but ask. Everyone else also looked at John with some skepticism.
"This is based on my own analysis. Of course, until it actually happens, no one can be certain. But I'd say there's a 70% chance of achieving that. As for the IPO's success, I'm betting 100% on it."
In his heart, John thought that even a 2-3 times return would be conservative -- the history from his previous life already proved it. He didn't mention to them that Netscape was eventually acquired, dissolved, and disappeared.
"I know a bit about Netscape," Don Valentin said. "An old friend of mine invested in the company. If Mr. Leighton's projections hold true, looks like KPCB is sitting on a goldmine. Forget about the loan for now -- I'll check out Netscape's situation to see if they're willing to sell you some shares. Then we can talk about the loan."
---
Without waiting for a reply, Don Valentin picked up the phone. Everyone knew he was making inquiries about Netscape.
Hearing Don Valentin, John realized this should be the moment to call John Doerr. Valentin had said KPCB was onto a goldmine. If John had known KPCB owned Netscape shares, he would have gone straight to John Doerr. Now that Sequoia was taking the lead, who knows how it would turn out?
As a reincarnated person, John admitted he was a bit out of touch -- anyone with even a little internet knowledge knew KPCB was a major Netscape investor. Netscape was a famous name, but John was still just a "jack of all trades" in the internet world.
"Hey, John, how are you?"
"Oh, really? I wanted to talk to you about something."
"Yes, I heard Netscape is about to go public?"
"Hey, Silicon Valley is small, so it's not hard to find out about Netscape's IPO. Looks like KPCB is going to make a big profit again."
"Have you finished your roadshows? I can introduce some investors to you."
"Yeah, you know them well, but I'll keep their names under wraps for now."
"Alright, let's chat later. By the way, what's your offering price?"
"OK, we'll talk on the Netscape line later."
---
After hanging up, Don Valentin looked around at everyone waiting expectantly, then smiled and said, "All right, John, you have a good nose for this. John Doerr said they just reached an agreement with Morgan Stanley and submitted their S-1 filing to the SEC. Didn't expect you to already have your eye on it. In principle, I agree to the loan -- no need to go to the bank. I think your 20% interest can just come to Sequoia Capital."
The other partners nodded and smiled in agreement -- business is business. It wouldn't make sense to turn down collecting $10 million in interest out of nowhere.
Besides, no one worried about default -- it was almost hoped that John wouldn't be able to repay so that Sequoia could take over Yahoo!'s shares. Everyone at Sequoia was confident about Yahoo!'s future.
...
Afterward, John asked Zach Johnson to work with the Sequoia lawyers to draft the loan agreement.
Getting the loan so smoothly was a relief for John. He thought this was the moment to shine -- after all, with capital, he could set his internet plans in motion early.
John was very satisfied with this trip -- first, he secured the loan; second, he attached himself to Netscape's network. Whether or not he could buy shares was another matter.
---
What John didn't know was that although Netscape was starting its IPO journey and had reached a deal with Morgan Stanley, internet IPOs were still a new thing. Netscape was not yet profitable and was actually operating at a loss, so there were concerns that the IPO might fail.
Before the roadshows even began, having investors willing to commit money was a great advantage for Netscape, its shareholders, and Morgan Stanley.
Once investors made early commitments, it would inspire more confidence during the IPO process and boost the chances of a successful launch.
John Doerr understood this well -- KPCB was a major Netscape shareholder and had already been in contact with Morgan Stanley, who shared the same concerns.
So when Don Valentin said there was an investor ready to buy shares now, John Doerr readily agreed.
What John and the others didn't know was that after hanging up with on Valentin, John Doerr immediately contacted Netscape's two founders and Morgan Stanley. All parties agreed to meet at Netscape and connect with the investor Valentin mentioned.
At that moment, John Doerr didn't realize the investor was none other than John -- the so-called "Saint."
Yes, John's nickname had spread throughout Yahoo! and among investors, earning their respect.
Only 17 years old and an orphan, he had put all his capital and courage into investing in Yahoo!, giving people the feeling of "the new generation surpassing the old."
*****
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