Chapter 94: Thrice Chaste, Ninefold Virtuous

"500 yuan for half a month's worth, 600 starting for judgments…"

"War God set pieces 150 each, premium items negotiated individually, cash before delivery. Those with Alipay can get delivery first…"

"Level 30 accounts wanted urgently at 4000 yuan, high-grade gold ore 20 yuan per piece, buy as many as available, add Alipay…"

What lay before Sun Zhengyi was a series of game screenshots, videos, and the corresponding Alipay server-side transaction records.

Since the start of summer vacation, Gu Cheng had opened up ordinary user registration for the MAC-physical-address-bound version of "Alipay." His original goal was to develop at least one million ordinary bank-card-bound users by the end of the year, but in just one month, that number had already surpassed two hundred thousand.

Of these people, eighty percent were "Legend" players. Only the remaining twenty percent—around fifty thousand—were non-gamers who had come purely for the legitimate audio-visual discs on Dingdangwang or the legitimate books on Dangdangwang.

These 150,000 Legend players would also buy "Meteor Shower" records, but their primary purpose in opening Alipay accounts was still to save themselves the hassle of going to a newsstand or internet cafe to top up game cards. And in less than a month, this crowd had discovered another clever use for Alipay.

In the first three or four months after "Legend" began charging fees, there was no trade between real currency and game equipment or game accounts. At that time, everyone's levels were still low—no one had exceeded level 27—and no one needed particularly difficult high-level premium equipment.

Starting in May, the first batch of players around level 30 began to appear. With a minor version update of the game, the opening of Shabak City, and the growing popularity of siege and defense warfare, real-currency trading of premium equipment gradually began to heat up.

The initial equipment trades were extremely painful. Both parties sat in front of their computers, total strangers who had never met. Whether it was cash-first or goods-first, neither was safe, so trades could only happen between players in the same city, face to face.

After nearly two months of this lingering pain simmering, "Alipay" appeared at just the right moment, allowing ordinary users to bind their devices and register.

The in-game success stories loaded with amazing equipment, and the real-world tycoons who needed premium gear, immediately discovered this wonderful tool that could provide mutual guarantees—"Alipay" even seemed to encourage this kind of virtual item trading between players, specially developing a "third-party escrow payment" feature plugin.

In the "Virtual Item Sales" module, the money paid for equipment did not immediately reach the seller's account. Instead, it was held in Alipay's official interim escrow account. Only after the buyer received the equipment in-game and clicked "Confirm Receipt" would the money actually be transferred. When the seller delivered the goods, they could also upload valid screenshots of the transaction delivery in a timely manner. If a buyer tried to maliciously request a refund after clearly receiving the equipment, as long as the seller had the delivery screenshots, the transaction would be submitted to Legend Entertainment's official team for manual review to determine who was right and who was wrong.

The problem of game equipment–real currency trading security, which could otherwise have plagued Chinese netizens for three or four more years, was solved by Legend Corporation in this way.

Legend's official team didn't sell equipment themselves, but they didn't prohibit players from trading with each other. In fact, they very officially and graciously declared:

"For the sake of game fairness, we do not encourage the sale of equipment and accounts. However, considering that this behavior cannot be technically prohibited, we provide players with a safer trading platform.

Additionally, given that Legend game accounts and equipment increasingly hold hard-currency value in RMB, Legend Entertainment kindly reminds players to pay attention to account security. Please promptly download and update your 'Alipay security plugin,' and watch for our upcoming SMS password binding feature."

This declaration—all the fine words were spoken by Legend's officials themselves. That paternalistic concern was like saying, "We've stated that prostitution is wrong, but for the sake of social safety and preventing the rampant spread of AIDS, we'll also hand out free condoms. Those who simply must engage in such transactions are urged to take a free condom and wear it."

Truly compassionate and pitying.

Sun Zhengyi, upon reading all of this, was thoroughly convinced.

…

"You… have indeed persuaded me. A game can easily die out quickly due to advances in technology and art design. But when a game can carry so much social comparison and status-hunting, even hard-currency transactions between its virtual items and real-world money, then it truly can no longer be simply treated as a game.

I believe the social attributes behind it will keep it relevant for three years, even four. Even if it can't sustain itself, the massive vested interests within the game will unconsciously find ways to extend its life, unwittingly becoming allies of the operator."

After reviewing the materials Gu Cheng had given him, Sun Zhengyi was slightly impressed.

Backward technology could, in theory, indeed cause a game to decline rapidly. But with so many layers of social honor and status-seeking vested interests mixed in, the situation was completely different.

Upon hearing Sun Zhengyi's initial approval, Gu Cheng didn't show much delight—he simply felt it was only to be expected.

After all, he wasn't particularly eager about whether Sun Zhengyi would hold his convertible bonds. It wasn't as if Sun Zhengyi was the only one in the world offering convertible bonds. If not, he could go to Goldman Sachs or Sequoia. His mindset at this moment was exactly the same as Zuckerberg's in another time and place, meeting Sequoia in pajamas and slippers.

So he simply waited quietly, letting Sun Zhengyi and Cai Chongxin play off each other, laying out all their assessments—praise or criticism—until they'd said everything thoroughly.

Then Gu Cheng finally spoke up: "So, President Sun, are you prepared to approve a 2 billion RMB convertible bond quota for us?"

"Of course I can." Sun Zhengyi rose from the sofa, walked around to the window, and paced a few steps, as if lost in thought.

This ethnically Chinese Japanese man was barely over 1.5 meters tall. Viewed from behind, he was wiry and lean, his bearing not much better than the Monkey Regent's. But he truly stood at the top of the food chain in Asia's internet venture capital world—something those unfamiliar with him could scarcely imagine.

After a long while, having settled on a new line of argument, Sun Zhengyi finally continued: "But not in the way you proposed. 2 billion RMB is too little. I don't take orders that small."

For the first time that entire afternoon, Gu Cheng was caught off guard. There were people who lent money yet complained that the borrower was borrowing too little, with the collateral unchanged?

What kind of logic was that?

"President Sun, if you have something to say, say it all at once. I'm not entirely clear on your meaning." Gu Cheng adjusted his collar as he spoke, undoing the top button of his T-shirt, as if the gesture might make him appear more relaxed.

Sun Zhengyi lit a cigar and said in a candid tone: "I think the holding company you're putting together has a very bright future. I'd say it's no exaggeration that its valuation could exceed Alibaba's by three times. When I entered Alibaba over two years ago, I invested 20 million US dollars for 40%, when Alibaba's valuation was only 50 million. Now that number is around 200 million. And I believe your company is worth 300 to 400 million today. Two years from now, I'd believe it growing to a billion."

Gu Cheng had to interrupt: "President Sun, today we're discussing convertible bonds, not venture capital. I wouldn't mind if you undervalued my company, because I'm 100% confident I can repay the full amount when it matures. So whatever you estimate doesn't matter to me. There's no need to dwell on this."

"Nothing is absolute. Hear me out." Sun Zhengyi didn't mind the interruption and continued amiably, "I'm willing to lend you 400 million—US dollars, that is—or 3 billion RMB. And all I need as collateral is 40% equity of your new holding company. In other words, I'm valuing your company at a billion dollars two years from now!"

"You're certain you mean convertible bonds? Not venture capital?" Gu Cheng could hardly believe his ears and confirmed one last time.

He hadn't expected Sun Zhengyi to have such boldness. Even though Gu Cheng thought he'd anticipated every possibility, he was still caught completely off guard.

Sun Zhengyi said proudly, "Convertible bonds, not venture capital. When the time comes, if you repay the money, I'll take my interest and leave. I won't take equity in your company—is that clear enough?"

Gu Cheng swallowed. "I want to know why. And besides, I don't need that much capital at the moment."

"Hear me out," Sun Zhengyi said, seeing Gu Cheng somewhat at a loss. He raised an eyebrow, evidently pleased with himself for regaining the upper hand. "I have additional conditions. First, I said I'd lend you 3 billion RMB, and you must borrow the full 3 billion—not a single yuan less. In other words, 24 months after you receive the money in September, by September 2003, you'll repay 4 billion, at a two-year term with a 17% annual rate."

Two-year term, total interest of 34% of principal, not including the extra two points given as a finder's fee to Ma Feng and Cai Chongxin.

This Gu Cheng understood completely, and it was all within his expectations, so he didn't interrupt, waiting for Sun Zhengyi to finish.

"Second, of this 3 billion, your reserved working capital ratio must not exceed 20%. At the same time, within the next two years, until your convertible bonds are repaid, all subsequent financing by your company must come from SoftBank—not from any third party. If you still need more money, I'll only enter through venture capital equity investment; I won't give you another chance to raise convertible bonds.

Finally, we'll also stipulate in the financing agreement that any business your company invests in during these two years must not be sold or have equity transferred without authorization. If you absolutely must sell equity in some business, SoftBank Group will have the right of first refusal under equivalent conditions—meaning, if you truly can't repay this money and want to offload some peripheral ventures for cash, you can only sell to me."

Sun Zhengyi's three-pronged conditions were finally fully stated.

Gu Cheng savored it for a moment, feeling these terms were utterly outlandish, something he'd never heard of before.

He turned and looked suspiciously at Cai Chongxin: "Old Cai, does a convertible bond financing contract even allow stipulations like these?"

Cai Chongxin cleared his throat: "Well, whatever isn't prohibited by law is permissible. These clauses are all legal, though quite unusual. But if the capital provider demands them to safeguard the value of the 'collateral equity,' they're all justifiable."

After all, the collateral held by the convertible bond provider was the financing company's equity itself. So legally speaking, the capital provider could indeed impose very detailed operational constraints on the financing party's business operations, ensuring its own rights and interests.

Therefore, the scope within which Sun Zhengyi could dictate terms to Gu Cheng was naturally far greater than that of banks that only accepted hard-currency collateral.

"So that's how it is… I underestimated Sun Zhengyi. I clearly hadn't done enough homework on convertible bonds." Gu Cheng mused inwardly, quickly untangling Sun Zhengyi's calculations.