28: Chapter 28 Negotiation and Game Theory

Over the next two weeks, Chairman Wang Shunyi's life revolved almost entirely around investment negotiations.

Shinhan Investment was pushing hard; Lee Seung-hwan called every other day, asking, "How is President Wang considering it?" The other two firms—Korea Venture Investment and Mirae Asset—also scheduled meetings. With the terms from all three firms laid out, each with their own agenda, Chairman Wang Shunyi read through them repeatedly until his eyes grew blurry.

Shinhan Investment quickly arranged a second round of negotiations. This time, Lee Seung-hwan brought a partner named Zheng, about fifty years old, with graying hair and gold-rimmed glasses, who looked much more composed than Lee Seung-hwan.

Both sides sat down in the conference room, with mineral water and several samples of fire chicken noodles on the table. When Partner Zheng entered, he picked up a packet, examined it, said nothing, and placed it back on the table.

"President Wang, we have discussed it internally and are willing to make concessions on the valuation," Lee Seung-hwan started. "A valuation of 15 billion, an investment of 2.5 billion, for a 16.7% stake."

Chairman Wang Shunyi didn't rush to reply; he wrote a number in his notebook. 15 billion was higher than the previous 13.3 billion, but it was still near the lower limit of his expectations.

"What about the valuation adjustment mechanism?" he asked.

"The target can be lowered to 20 billion," Lee Seung-hwan said. "20 billion KRW in total sales for next year. If it's not met, the equity compensation ratio will be reduced accordingly."

20 billion. Chairman Wang Shunyi did the math in his head. 5 billion was expected this year, and 20 billion next year—a fourfold increase. Although it was still a bit high, at least it wasn't as outrageous as 30 billion. He glanced at Zhang Junhao sitting next to him, and Zhang Junhao nodded slightly.

"Liquidation preference, I hope to cancel it," Chairman Wang Shunyi shifted his gaze back.

Lee Seung-hwan frowned and turned to look at Partner Zheng. Partner Zheng didn't speak, just picked up his water glass and took a sip.

"President Wang," Lee Seung-hwan said carefully, "Liquidation preference is an industry standard. If we cancel it entirely, it will be hard to justify to our risk control department. We can lower the multiple, for example from 1x to 0.5x. That way, if the company runs into trouble, we can at least get back half of our principal."

0.5x. Chairman Wang Shunyi thought about it; this condition was acceptable. 0.5x meant the investor could only get back half of the principal, and the rest would be distributed according to equity, so the founding team wouldn't be wiped out.

"0.5x, that's fine," he nodded. "Also, I want to retain veto power for board seats. Major matters require approval by more than two-thirds of the board."

"That's no problem," Lee Seung-hwan said. "We will send one director, but we won't interfere with daily operations. For major matters like financing, mergers and acquisitions, and executive appointments, you need board approval, but you have veto power."

"Anti-dilution clause, use the weighted average method, don't use the full ratchet method," Chairman Wang Shunyi added.

Lee Seung-hwan and Partner Zheng exchanged a look. The full ratchet method was too harsh on the founder—if the company's valuation dropped later, investors would get a large amount of shares for nothing, and the founder might be forced out. The weighted average method was much milder, a compromise for both sides.

"Agreed," Partner Zheng finally spoke, his voice not loud, but firm.

Chairman Wang Shunyi stood up and reached out his hand. "I will compare with other institutions and give you an answer as soon as possible."

Next was Korea Venture Investment. This firm was much larger than Shinhan, managing assets exceeding 500 billion, and had invested in many famous consumer brands. The person coming to negotiate was Investment Director Park Jeongmin, in his forties, wearing a dark gray suit, his tie tied tightly, and he liked to tap the table with his fingers when speaking.

"President Wang, we have studied the business model of Shunyi Foods," Park Jeongmin got straight to the point, speaking quickly. "You have great growth potential. We are willing to invest 3 billion for a 20% stake, a valuation of 15 billion."

3 billion for a 20% stake. Chairman Wang Shunyi calculated it; it was about the same valuation as Shinhan's, but the surrendered equity was nearly four points higher.

"What about the valuation adjustment mechanism?"

"We don't set valuation adjustment mechanisms," Park Jeongmin said, "But we need to see a detailed development plan—financial forecasts for the next three years, expansion plans, team building—all must be clearly written."

No valuation adjustment mechanism; this attitude was much friendlier than Shinhan's. But Chairman Wang Shunyi noticed there was something else Park Jeongmin said afterwards.

"Additionally, we require a one-vote veto. For major matters, we have the power to veto with a single vote."

Chairman Wang Shunyi's brow twitched. A one-vote veto, not two-thirds approval, not majority approval, but a single vote from the investor could veto it. This meant that if he ever disagreed with the investor, the company could be deadlocked.

"Director Park, the one-vote veto..." Chairman Wang Shunyi said carefully, "Isn't that too strong?"

"This is our standard clause," Park Jeongmin's tone left no room for negotiation. "We have invested in so many companies, and we have always done it this way."

Chairman Wang Shunyi said nothing more, just nodded and wrote this point down in his notebook.

The last one was Mirae Asset. This company was the largest, managing assets exceeding 2 trillion, and was a top-tier asset management company in Korea. Chairman Wang Shunyi went to their office in Yeouido to talk. The building was very tall, and there were dedicated receptionists in the elevator to help press the floor buttons.

Investment Vice President Choi Yeong-jun was waiting for him in the conference room. Choi Yeong-jun was in his mid-thirties, wearing a well-tailored dark blue suit with silver buttons on the cuffs, looking like he stepped out of a magazine. He spoke quickly and didn't like to beat around the bush.

"President Wang, to be honest, the current scale of Shunyi Foods is too small and does not meet our investment standards."

Chairman Wang Shunyi was stunned. Then why did you call me here?

"But I am interested in your background," Choi Yeong-jun leaned back in his chair, crossing his legs. "A Chinese student starting a business in Korea, reaching this scale in half a year, is indeed not simple. I want to see for myself what kind of skills you actually have."

This sounded a bit condescending, but Chairman Wang Shunyi wasn't angry. He just looked at the other person calmly, waiting for him to continue.

"After seeing me, what skills do you think I have?" Chairman Wang Shunyi asked.

Choi Yeong-jun smiled; the smile wasn't contemptuous, but it wasn't respectful either. "You do have ability. But with Shunyi Foods' current business model, I don't see very high barriers. The instant noodle market is fiercely competitive, and the cost of imitation is very low. Why do you think you can maintain an advantage for a long time?"

This question was very direct and sharp. Chairman Wang Shunyi didn't answer immediately, thinking for three or four seconds.

"Vice President Choi, you are right, the barriers in the instant noodle market are indeed not high. But our core competitiveness is not a single product, but the ability to innovate continuously." He paused. "We can launch a new product every two months, and each product has a unique positioning and selling point. This speed is something traditional companies like Canhe Foods cannot achieve."

Choi Yeong-jun raised his eyebrows. "Continuous innovation? That's easy to say. Why do you think you can keep up this speed?"

Chairman Wang Shunyi didn't answer directly, but asked a question instead: "Vice President Choi, what do you think will be the biggest change in the convenience food market in the next ten years?"

Choi Yeong-jun thought for a moment. "Health-oriented, personalized, and convenient—these three trends will become increasingly obvious."

"Exactly," Chairman Wang Shunyi nodded. "We have already launched light spicy fire chicken noodles in the health-oriented direction, and we will launch more products that fit these trends. Moreover, we are not just making instant noodles; in the future, we will expand into the entire convenience food field—instant porridge, instant soup, instant rice are all in our plans. Our goal is to become Korea's leading comprehensive convenience food brand."

Choi Yeong-jun looked at him, and the conference room was quiet for a few seconds. Outside the window were the dense high-rises of Yeouido, and sunlight shone through the floor-to-ceiling windows, casting a long strip of light on the conference table.

"Quite ambitious," Choi Yeong-jun said. "But ambition requires strength to support it."

"I am accumulating strength," Chairman Wang Shunyi said. "If Mirae Asset is willing to support us, we can move faster."

Choi Yeong-jun was silent for a moment, then stood up and reached out his hand. "I've changed my mind. Mirae Asset is willing to invest in Shunyi Foods. We will discuss the specific terms next time."

The negotiation lasted for a whole month. Comparing the terms of the three companies back and forth, Chairman Wang Shunyi's notebook was filled with numbers and annotations, some pages scribbled out and rewritten several times.

In the end, he chose Shinhan Investment.

There were three reasons. First, Shinhan focused on the consumer sector and could provide industry resources, such as channel docking and brand promotion, which were most useful for Shunyi Foods. Second, after multiple rounds of games, Shinhan's terms had been polished to be relatively reasonable: the liquidation preference was lowered to 0.5x, the valuation adjustment mechanism target was lowered to 20 billion, the weighted average method was used for anti-dilution, and the board veto power was retained. Third, Shinhan's team had a sincere attitude, unlike the aggressive Korea Venture Investment or the arrogant Mirae Asset.

Chairman Wang Shunyi never felt comfortable with the one-vote veto from Korea Venture Investment. He discussed it with Zhang Junhao several times, and Jun-ho said, "It's easy to give away the one-vote veto, but hard to take it back. If there is a disagreement with the investor in the future, the company could be paralyzed." After hearing this, Chairman Wang Shunyi decided to give up on Korea Venture Investment that very day.

As for Mirae Asset, Choi Yeong-jun later sent an investment letter of intent; the terms weren't harsh, and the valuation was high—18 billion. But Mirae Asset required a 25% stake, and their attitude of not investing in small projects made Chairman Wang Shunyi feel uneasy. He chatted with Park Min-ji once, and Minji said, "If they think we aren't big enough one day, will they just throw us away?" Chairman Wang Shunyi thought about it and decided not to take that risk.

On the day of signing, Chairman Wang Shunyi went to Shinhan Investment's office alone. Lee Seung-hwan and Partner Zheng were both there, with a thick stack of documents that needed signatures on every page. Chairman Wang Shunyi flipped through them, signed the last page, and capped the pen.

2.5 billion KRW for a 15% stake, a valuation of 16.7 billion. It was much better than the initial terms.

"President Wang, happy cooperation," Lee Seung-hwan smiled and reached out his hand. "I hope Shunyi Foods develops smoothly, and we can also get a good return."

Chairman Wang Shunyi shook his hand. "We will work hard."

Returning to the company, he called Zhang Junhao, Park Min-ji, Choi Min-ju, and Li Dongxu into the conference room and explained the core terms of the investment agreement.

"After the money arrives, we need to do a few things," Chairman Wang Shunyi walked to the whiteboard, picked up a marker, and said while writing.

"First, expand production scale. Buy a new production line to increase capacity further. Brother Jun-ho is responsible for this."

Zhang Junhao nodded.

"Second, expand sales channels. We have already entered GS and CU; next, we need to enter Lotte Mart, Homeplus, and emart. Minji and Li Dongxu will coordinate on this; Minji is responsible for negotiations, and Li Dongxu is responsible for the supply plan."

Park Min-ji and Li Dongxu both nodded.

"Third, increase marketing investment. Social media, TV commercials, offline activities—spread it out in all directions. Choi Min-ju, go back and discuss with Xiuyan to make a detailed plan."

"Okay, President," Choi Min-ju quickly took notes in her notebook.

"Fourth, continue to recruit. R&D, marketing, operations—all lines need to be filled. Kim Tae-min, you are responsible for recruitment."

Kim Tae-min nodded.

"Fifth, we cannot spend all the money in the account; leave a portion as an emergency reserve."

After writing these five points, Chairman Wang Shunyi put down the pen and turned to look at everyone.

"The next few months will be very busy. But I believe that as long as we are united, Shunyi Foods will definitely be able to reach a higher level."

After the meeting, Chairman Wang Shunyi sat in his office alone. Outside the window was the night view of Seongdong-gu. Under the pitch-black sky, a few residential buildings had sporadic lights on, and there was the sound of traffic in the distance, muffled, surging like ocean waves.

2.5 billion had arrived, and the company was valued at 16.7 billion. A year ago, he was still worrying about the 300,000 monthly rent in a semi-basement. Now, someone was throwing 2.5 billion into his company without blinking an eye.

But he didn't feel relaxed. Instead, he felt the burden on his shoulders was heavier. The investors' money wasn't given for free; they wanted a return. If Shunyi Foods didn't meet the valuation adjustment mechanism target next year, he would have to give up a lot of shares. If it didn't work for several years in a row, he might not even be able to keep control of the company.

And there was Park Chan-hyeok. That old fox wouldn't sit idly by and watch him grow, he must already be thinking about his next move.

Chairman Wang Shunyi leaned back in his chair and stared at the ceiling for a while. There was a fluorescent lamp on the ceiling with two tubes, one of which was slightly blackened, as if it were about to break. He watched for a few seconds, then sat up straight, opened his notebook, and wrote two words on a blank page—"New Product".

The pen tip stopped on that word, he thought for a moment, and added another word—"Kimchi Soup". Kimchi Soup fire chicken noodles? Or Kimchi Soup ramen? He put a question mark after that word.

The sound of traffic outside the window was still ringing, and someone was setting off fireworks in the distance, a "bang" sound, which sounded muffled through the glass. He didn't go to look, but continued to write and draw on the paper.