Raising the Stake (2)
I asked David, “What’s the best way to keep acquisition costs as low as possible?”
“First, you bring down the company’s value itself.”
For example, if you file for an injunction against the use of the company’s core program along with a lawsuit for intellectual property infringement, and then make it public in the press, the company’s value is bound to fall.
“And second?”
“You reduce the stake you’re actually acquiring. If you buy 80 percent instead of 100, you cut the cost by that much.”
Sid had to stay with me to the very end anyway. So once I took over Cooloud, I planned to give him equity.
But what if Sid managed to squeeze as much stake as possible out of the two of them right now? That would lower the acquisition cost accordingly.
No matter how I looked at it, it was a good idea.
David asked me, “Why twenty percent, though?”
“If they ask for more than that, wouldn’t you just tell them to get lost?”
“I think there’s another reason, too.”
So he’d noticed after all.
“You’re probably thinking of the same thing I am.”
If the demand went through, Sid’s stake would rise to 20 percent. That would bring about a very significant change in ownership.
“Do you think they’ll accept the proposal?”
“In negotiations, the side with more to lose is the one that gives in.”
Sid had nothing to lose by leaving Cooloud, but Cooloud stood to lose a great deal.
In the end, they’d have no choice but to hand over as much equity as needed to keep him.
And if Alex and Rolf refused to accept the terms and Sid walked away, that was fine too. At that point, I could just acquire Cooloud myself and put Sid in the CEO seat.
Either way, neither Sid nor I had anything to lose.
As I was thinking that, my phone rang from an unknown number.
I answered it.
“Hello.”
The moment I hit the call button, a curse slammed straight into my ear.
“You son of a bitch! What the hell do you think you’re doing?”
I didn’t even need an introduction to know who it was. The fact that he was calling me meant he must have kept my card instead of throwing it away.
“You start off a call by swearing at me? That’s pretty rude.”
“Rude? You’ve got the nerve to talk about manners when you’re trying to steal someone else’s employee?”
“That’s a bit much.”
Rolf Buchi was, in fact, famous for having a foul temper. He cursed and exploded without restraint even in front of cameras and at official events.
If an ordinary person had that kind of personality, people would be lining up to tear into him. But when a genius acted that way, it was often just accepted as part of the package.
“What the hell did you say to Sid?”
“I simply offered to set up a company for him.”
“So who the hell are you to go making that offer to one of my employees?”
“Why shouldn’t I?”
“What?”
“Sid isn’t under some slave contract with Cooloud. Whether he accepts or not is his own decision, isn’t it?”
“You filthy con artist!”
“A con artist?”
Hearing that from a real con artist made me laugh before I could stop myself.
“We’ll see who the con artist is soon enough.”
“You bastard— I swear, I’m not going to let this slide!”
“Do whatever you want.”
I wasn’t planning to let it slide either.
I hung up, as if I’d heard all I needed. David, who had been listening beside me, asked, “Who was that?”
“Rolf Buchi.”
David nodded as though he’d expected as much.
“If he’s calling to throw a fit like that, then he must be pretty desperate.”
* * *
After hearing Rolf’s account, Alex was stunned.
“Continue Capital made Sid an offer to start his own company?”
“I’m telling you, yes. They went after him from the beginning with the goal of poaching him.”
Alex ground his teeth in silence.
That one landed clean.
He couldn’t make sense of it.
Han Miru and David had never even seen Sid before.
So how on earth had they found out about him, approached him, and offered to set him up with his own company?
“It was that David guy who set the whole thing up, right?”
“Probably.”
There was no way that plan had come out of that young Asian’s head. He’d probably just been acting on instructions.
“Is that Korean guy backing him with money?”
“Doesn’t seem like it.”
“What? Then what the hell is he?”
After their first meeting, Alex had felt something off about Han Miru and done a little digging.
The other man wasn’t American, just Korean, but thankfully the Preston Group could still turn up a decent amount of information.
“He studied economics at Korea University. Then he worked at some IB firm in Korea called DA Securities, exposed a private equity scandal, quit, and seems to have come over to the U.S.”
“A private equity scandal?”
“There was something called the Primus incident.”
The Primus Fund fraud had been big enough to make the news in the U.S. too. Anyone working in finance had at least heard of it.
He spotted a scam like that and blew the whistle as just a rookie employee.
Once a fraud is exposed, it’s usually one of those things that makes people wonder how anyone ever fell for it. But discovering the truth while everyone else is still being deceived is no easy task.
“What’s his family background?”
“There’s nothing showing up, so probably just ordinary.”
“What, so he’s broke?”
“Most likely.”
“Then how the hell did a guy like that come to the U.S. and team up with David?”
“That’s the question.”
They had no idea what had happened in the meantime.
Did David call Han Miru over to the U.S., or did Han Miru go looking for David?
Even trying to trace the link between the two men, there was nothing to find.
The size of Continue Capital’s funding was also a mystery. Had they made a $70 billion acquisition offer because they actually had capital on that scale?
Where the hell are they getting the money?
They were lacking too much information.
In investing, information was life. The one with more information always held the advantage.
He didn’t know much about the other side, but for some reason, it felt like they knew plenty about him.
Still, the deed was done. They had to clean it up.
“Did you try talking him down?”
Rolf shook his head.
“I tried several times. Didn’t matter. He said he’d quit unless we gave him an additional 15 percent stake.”
“That’s strange. I thought Sid didn’t care about money.”
If he’d cared about money, he would have asked for something long ago. But Sid had never done that.
The stake he had now was something they had practically forced on him because they were afraid he’d leave. He hadn’t asked for it once.
Rolf couldn’t hold back his anger and shouted, “That’s because those bastards got in the kid’s head!”
Alex was angry too, but he forced it down.
“Getting mad won’t solve anything. If Sid says he’s leaving, the other employees are already rattled. Some of them look ready to follow him.”
At first, the staff had looked down on Sid as some high school graduate who was too young to take seriously, but now they were all watching only him.
Rolf remembered one incident in particular.
Early in the company’s history, the entire system had suddenly gone down.
It had happened in the middle of the night, so Rolf and the staff had rushed in and worked frantically to find the problem, but nothing had helped.
Unfortunately, Sid had been asleep and unreachable, and everyone, Rolf included, had been running around in confusion.
They eventually managed to reach him.
Rolf immediately ordered him to come to the office or at least boot up his computer and start working.
But Sid, newly awake and too lazy to get up and turn on the computer, just asked what the error was and fixed the code with his voice.
He solved by phone what every employee together had been unable to fix after more than an hour of fighting with it.
Alex asked, “Could Cooloud still run the way it does now without Sid?”
Rolf shook his head without needing to think.
“Sid understands every system in the company from start to finish. The company wouldn’t stop working without him. But it wouldn’t run this well.”
The reason Cooloud had been able to grow so fast was that it met client demands at a low cost.
In a comparable company, the staff alone would number more than a thousand. The reason Cooloud could handle the same workload with only ninety employees came down to two things.
One was the AI program Minerva, and the other was Sid Lucas.
Because of those two, they needed only a tenth of the manpower other companies did.
Fewer employees meant lower labor and management costs. Those savings allowed them to cut expenses even further, win even more clients, and create a virtuous cycle in which more clients led to even lower costs.
In fact, Cooloud had cut its costs twenty times since its early days. It had all been modeled after AMZ’s Flywheel strategy.
Could they really keep that strategy going without Sid?
“Just leaving is bad enough, but becoming a competitor would be even worse. What are the odds Sid could make a program similar to Minerva?”
At Alex’s question, Rolf grimaced.
“Pretty high, I’d say.”
No one understood the cloud industry as well as Sid. And no one was as troublesome as a man who turned from a reassuring ally into an enemy.
“Sid is a genius.”
“I know.”
“Not the kind of genius you see every day.”
Having watched him up close, Rolf knew better than anyone what Sid really was.
Maybe he’s one of those once-in-a-century geniuses like Isaac Newton, Albert Einstein, Alan Turing, or Richard Feynman.
When he’d first seen Sid come in for the interview, he’d thought the kid might be useful if he was taught properly, so he hired him.
But within a year of working together, Sid had surpassed him.
Rolf still didn’t fully understand what kind of program Minerva was. But Sid had looked at it once and immediately understood exactly what it was and how to handle it.
If Sid hadn’t been there, Rolf probably wouldn’t have even dared to start the company.
And because Rolf believed himself to be a genius, he felt real fear at Sid’s talent.
If he couldn’t become a greater genius himself, then he had to keep Sid beneath him. That was why he had brought Sid out of his previous company.
“He’s already a genius who’s hard to compare to anyone else, but what’s scarier is how fast he grows.”
No matter how gifted someone was, growth usually slowed with time.
Take the 100-meter dash. Those with talent and effort can get under ten seconds without too much trouble. But after that, it becomes a war to shave off hundredths of a second.
“Sid is different. He keeps growing as if today were still his first day.”
Alex nodded.
“Give him a few more years, and he’ll be a complete monster.”
After the IPO, they’d have to disclose the company’s condition publicly, and then everyone would understand the value of Sid Lucas.
In any case, only a few years remained on the five-year noncompete-style restriction. That was why they had planned to grant him additional stock options before then.
Alex shook his head.
I was thinking two or three percent at most, and now he wants fifteen.
Cooloud’s current enterprise value was at least $100 billion.
Even giving away 0.1 percent would bring every Silicon Valley genius running. But even if a hundred of them came, there was no guarantee any one of them could do what Sid did.
The two men evaluated Sid Lucas’s value with brutal clarity. No matter how they ran the numbers, they came to the same conclusion: they had to keep Sid at the company.
In the end, they would have no choice but to give in to his demands.
But...
Alex gritted his teeth and said, “We need to make absolutely sure this never happens again.”
If they were going to grant his demands, then they had to make sure he spent the rest of his life working for Cooloud.
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