Lesson 8 of CTO Training Camp: See what happened to these founders and partners in their startups?

[51CTO.com original article] Starting a business is a difficult and unknown road, but no matter what the result is, entrepreneurs and even entrepreneurial partners can have different experiences, such as feelings. Like Luo Yonghao's words "I don't care about winning or losing, I'm just serious", even when Steve Jobs first founded Apple, he expressed his feelings to the president of PepsiCo, "Do you want to sell sugar water for the rest of your life, or do you want to follow me and change the world?" These feelings are almost necessary for every entrepreneur. As the saying goes, "No feelings, no entrepreneurship", Mr. Wang Ye, the founder and CEO of Yaohe Technology, also started his business with feelings.

Wang Ye, Founder and CEO of Yaohe Technology: The Story of a Technology Entrepreneur

Dr. Wang Ye holds a master's degree in electronic engineering from Tsinghua University and a doctorate in computer science from Yale University. He was responsible for the innovation and development of advertising products at Google's headquarters in the United States. He has in-depth research on A/B testing systems, large-scale complex systems, data mining and analysis, and Internet infrastructure. He has served as an expert reviewer for IEEE Mobile Computing, GLOBECOM Internet Protocol and Vehicle Technology, an external reviewer for ACM, the 2009 International Symposium on Peer-to-Peer Networks, and the 2010 and 2011 International Conferences on Ultramodern Communications and Control Systems TPC. He has published many academic papers in globally influential academic journals such as IEEE and ACM. His main research areas are computer network system design and optimization.

Teacher Wang Ye said with a smile: "My passion is to 'make money while standing'". Because he wants to "make money while standing", he will consider more. From discovering some historical data to expand human science, and discovering the importance of AB testing in his work at Google, he realized the vacancy in the domestic AB testing market, which made Teacher Wang Ye resolutely return to China to start a business. This is due to his passion, although this passion is very practical.

The original intention of starting a business

Start a business selling pain relief cream

Starting a business starts with passion, but you need to do very practical things and make sufficient preparations for starting a business, such as researching the market, exploring pain points, understanding competition, recruiting a team, and the founder must have a clear goal, which is to sell painkillers rather than stimulants. Taking Yaohe Technology as an example, AB testing is done because it has commercial value and is suitable for technical people to do. Those who are suitable for technology can realize and improve products as soon as possible, and can better adjust products. AB testing is the demand of the current market and can better bring benefits to users. This is the painkiller.

Risks of Starting a Business

At the beginning of a business, you will encounter signals from the market from 0 to 1. Some users have a demand for your product and are willing to accept new things. Then entrepreneurs see hope and look forward to an explosion, but at this time a large part of the company will face weak growth. At this time, it is necessary to use the advantages of technical people's optimization and iteration methods to adjust, but you must be firm in your goals. When facing a situation where the team is not in harmony, you must actively adjust, let professionals do professional things, quickly stop losses, and produce efficient cooperation. When encountering personal bottlenecks, you must first enhance your strategic awareness, then make up for your execution capabilities, improve the company structure, and supplement team roles. If you are led by the business, it is easy to have a messy task. At this time, the founder must focus on one point and understand what to achieve at this stage. For the problem of insufficient funds, you should tighten the cash flow from the beginning, maintain a good rhythm, and play a rational advantage.

How to build a team

As a CEO with a purely technical background, Mr. Wang Ye's biggest feeling is the change in thinking. In the past, he liked to delve into technology, but now he has to focus on the team and put his ideas into practice. He wants to make the right pain-relieving ointment product that is beneficial to users and valuable to himself. This is something that has higher value than solving a technical problem.

Wang Yue, Partner of Baker Tilly International Accounting Firm: Financial Lessons for CTOs

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Wang Yue , partner of Baker Tilly International Accounting Firm, deputy chief accountant; founder of Maker CFO project; member of the Audit Expert Committee of Listed Companies of Beijing Institute of Certified Public Accountants; member of the Registration Management Committee of Beijing Institute of Certified Public Accountants, expert management talent of Beijing Institute of Certified Public Accountants. She has rich experience in finance and auditing of NEEQ companies, listed companies and large enterprise groups. Listed companies: BlueFocus, China Resources Double Crane... and nearly ten other listed companies; NEEQ companies: Tuomei Media, Greenland... and more than twenty other companies; central enterprises: China National Chemical Corporation, COFCO Corporation,... and other central enterprises.

Accounting is not a financial statement in the traditional sense, but an important part of economic management activities. Accounting is not only a technology, but also a kind of financial art and magic. Finance refers to the activities of raising funds and using funds to achieve established goals. Entrepreneurs must understand finance, which controls the lifeblood of the company's funds. Therefore, if you want to understand finance, you must also understand financial statements, learn to avoid financial and tax pitfalls, and understand the capital market.

Understanding financial statements

Corporate Activities

Financial statements are the result presented after accounting, and are also a direct reflection of the company's business results. There is an identity in accounting: Assets = Assets and Liabilities + Shareholders' Equity. Assets include biological assets (which can be fair valued), fixed assets or investment properties (investment properties can be fair valued), and the price paid to purchase the company exceeds the fair value of identifiable net assets. The balance sheet reflects the financial status of the company on a certain date, including how many assets, liabilities, and shareholders' equity there are. Assets and liabilities are usually the most important basis for evaluating a company's debt repayment ability, and the purpose of a company's operation is to maximize shareholders' equity.

Balance Sheet

The increase of net profit will lead to the increase of shareholders' equity, so it can be said that the purpose of business operation is to strive to obtain profits and increase shareholders' equity. The income statement is a report reflecting the operating results of an enterprise in a certain accounting period. It is a dynamic report that reflects the ability of an enterprise to create profits. The income statement is derived from the formula of income - cost - expense - tax = net profit. Net profit, that is, profit after tax, is the final result of the enterprise's operation and measures the economic benefits of the enterprise. The balance sheet is closely related to the income statement. Changes in period data in the income statement affect changes in point-in-time data in the balance sheet. The cash flow statement reflects the inflow and outflow of cash of an enterprise over a period of time. Although it is the same as the income statement, it shows the inflow and outflow in a certain period, but the income statement reflects the income and expenditure determined according to certain rules, while the cash flow statement reflects the receipt and expenditure of cash. For start-ups, it is more reliable to control cash flow than to focus on profits.

Avoiding the pitfalls of finance and taxation

Startups and even mature companies will encounter financial and tax problems to a certain extent. However, how to avoid financial and tax pitfalls is also a big deal. Teacher Wang Yue shared some financial and tax experiences with us and summarized common financial and tax problems so that entrepreneurs can avoid these problems more clearly.

1. Lack of standardization : We must lay a good foundation for basic management and standardize finance and taxation

2. Insufficient business model planning : tax planning and contract signing planning, etc.

3. Inadequate equity incentive planning : Planning equity incentives in advance can prevent the IPO process from being affected

4. Do not illegally evade taxes : Illegal tax evasion is equivalent to illegal behavior. Once reported, there will be a tax audit, which will cause major risks to the company.

5. Two sets of accounts : Finance and taxation should have two sets of accounts, the internal account for personal use and the external account for tax reporting. This can effectively avoid the cost of tax payment and the time cost of account merging, as well as the risk of being investigated.

6. Income and expenditure management issues : Financial accounting can be less standardized, but the company's daily income and expenditure management must be clear to provide a basis for later standardization.

7. Account management issues : It is necessary to distinguish between the use of company funds and personal funds. If necessary, a personal account should be opened and used exclusively.

8. Issues with building a financial team : You need to grasp the rhythm. In the early stage, you can outsource finance, which requires professionals. After the A+ round, investors pay more attention to finance and need dedicated personnel to connect with them.

9. Tax-enterprise relations : Maintain communication with the tax bureau and the special administrator, respect each other, and start-ups are less likely to be regulated, so there is no need to worry too much.

10. Tax incentives : strive for tax incentives, such as policies for high-tech enterprises and industrial parks, and seek professional guidance for deductions of R&D expenses and losses in previous years

11. Project management issues : Each project needs to be separately aggregated for cost statistics, and financial accounting is also calculated by project.

12. Financial budget issues : Pay attention to the financial budget so that the decision-making will not be irrational. The main thing is to make a good budget for income, expenditure and financing.

Understanding the Capital Market

The capital market is multi-layered. The exchange market includes the main board, small and medium-sized board and GEM, and the over-the-counter market includes the national over-the-counter market and the regional over-the-counter market. As the company grows, the financing method it chooses also varies greatly.

Overview of corporate financing methods

Teacher Wang Yue suggested that start-ups generally choose angel investment, private equity venture capital and listing on the New Third Board for financing; medium-sized enterprises can choose to list on the Growth Enterprise Market or the Small and Medium Enterprise Board; more mature companies can choose to list on the main board, additional issuance, convertible bonds, preferred stocks, warrant financing, as well as corporate mergers and acquisitions or industry integration financing.

Yang Ge, Founding Partner of Xinghan Capital: Technology Entrepreneurship and Equity Distribution

After experiencing many ups and downs, Teacher Yang Ge realized that technical personnel can easily be deprived of their rights, so in the eighth lesson of this CTO training camp, Teacher Yang Ge talked to the students about some things about equity distribution.

Yang Ge graduated from the Department of Engineering Mechanics of Tsinghua University with a bachelor's and master's degree. Since 2004, during his university years, he has successively founded seven entrepreneurial companies, including CAYE, Beijing Eastcom Digital Technology Co., Ltd., which are engaged in community Internet, Internet of Things and digital medical services. During his time at school and in entrepreneurship, he won the National Enterprise Award for the 30th Anniversary of Reform and Opening Up, obtained a national invention patent, and published academic papers in national academic journals as the first author. In 2009, he joined KPMG (China) as a consultant, was appointed as the vice president of Dajiang Investment in 2011, and served as the investment director of Beiguo Investment in 2014. In early 2015, he founded Xinghan Capital to engage in venture capital, and has served as an entrepreneurial mentor for more than 100 enterprises, institutions and institutions such as the Talent Center of the Ministry of Science and Technology, Tsinghua University, Chaoyang District Phoenix Project, Zhongguancun Entrepreneurship Street, and Venture Capital Circle.

Basic knowledge of equity

Equity and options, equity refers to existing rights, while options are rights that are only available after a period of time. Options are a type of equity; ESOP is an employee stock ownership plan, which is a method of holding shares that can make the company's employees more stable; holding shares on behalf of others is also called entrusted holding, which is a method of equity disposal in which the actual investor exercises shareholder rights in the name of another person; there are many ways to value equity, but most of them refer to measuring the intrinsic value of stocks or equity, and many equity valuations are inflated.

Equity distribution before and after corporate financing

In a well-run company, the CEO holds the majority of the equity before financing, but the equity he gets after financing is reduced. This is a healthy model. If a CTO has the opportunity to distribute equity, he must not be dictatorial and learn to distribute equity to people who have made contributions. For CTOs, they should not be in a passive position to get equity. There is no iron rice bowl in the world of equity. Qualifications cannot affect the division of equity. In the distribution of equity, resources are king. The amount of resources brought to the company can affect the distribution of equity.

Equity Questions Answered

Mature exercise terms are related to time and have a very close relationship with KPI; the separation option agreement should pay attention to the effectiveness of time; personal rights protection should be strived for through various legitimate means, and it also depends on whether the company has mature equity incentives, but as a company contributor, you must lead the team and dare to talk; for the interests of the technical team, if they do not get equity incentives, you must use bonuses to encourage the team.

Many years ago, Mr. Xu Xiaoping told Mr. Yang Ge that "entrepreneurs should run in the wilderness" and be bold in trying new things when they are young. It was this sentence from Mr. Xu Xiaoping that led Mr. Yang Ge to embark on the road of entrepreneurship.

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