8 painful failures that Alibaba Ma Win overcame

 

8 painful failures that Alibaba's Ma Win overcame

[caption id="attachment_4297" align="aligncenter" width="382"] Jack Ma[/caption]

 

‘Failure is the mother of success’

This is a famous saying in the story of inventor Edison, who invented the light bulb after 2000 failures.

Alibaba's Jack Ma (马云, Jack Ma) was also able to build an e-commerce empire through numerous failures.

Let's take a look at the eight failure cases that Ma suffered.

1. Beginner entrepreneurs drink the bitter cup of their first startup.

Hangzhou in 1992.

Ma Win, a successful 28-year-old university English teacher, started an English interpretation and translation company called ‘Hope Translator’.

In the aftermath of Deng Xiaoping's opening up of the Chinese market to foreign capital. At that time in China, talented people who were fluent in English and trade were highly treated. Ma saw this as a business opportunity.

Was it too naive to start a business?

With an office rent of 1500 yuan per month, the company's initial monthly sales were only 1000 yuan.

However, Ma believed in the potential of a translation company at the time. Ma got through difficult times by buying gifts from nearby wholesale markets and selling things on the streets of Hangzhou.

In addition, Ma, who has no knowledge of accounting, entrusted a female employee to manage the money. But there he encounters cases of habitually extorting money in the middle.

Ma learned a lesson from such experiences that a company, no matter how small, must have a solid system.

2. The second start-up that awakened the coolness of capital

In 1995, Ma came to the United States at the request of the government and met a new world called the 'Internet'. Ma, who returned home with a 486 computer, which was the latest model at the time. Ma informs Chinese people of the existence of the Internet and challenges his second start-up with ‘China Yellow Pages. Which then goes on to create an Internet website with a capital of 50,000 RMB.

When the business was on track, Hangzhou Telecom, with a capital of 240 million yuan, entered the market. After a year of competition, Ma decided to cooperate and establish a joint venture.

Hangzhou Telecom 70% stake, Ma Yun 30%

However, Ma's business plan, which had a 30% stake in the joint venture, which had no special conditions for management rights, was always dismissed.

Hangzhou Telecom was only interested in securing the technology of China Yellow Page, which had preceded it.

In the end, Ma says that his second startup failed, and he came to this realization.

“Capital cannot control one company to the end” he said. The power of capital helps start-ups but does not control the company.

3. A third challenge blocked by government walls

1997. Although China Yellow Pages failed, Ma Yun, who played a pioneering role in the Chinese internet industry, became a celebrity in the industry.

The Ministry of Foreign Affairs and Trade of China sets up a company to build a website related to China's investment attraction and foreign trade. They scout Ma Yun and his team for a 30% stake.

Since then, the “Online Chinese Merchandise Trading Market” created by Ma became the first website created by a Chinese government agency. Although successful, Ma soon runs into conflict with government officials

“This site should only be used by large state-owned enterprises”

"no-no. It should be open to small and medium-sized enterprises (SMEs).”

In the end, Ma realizes the limitations of doing an open internet business with the government and decides to set up the company again.

1999, 7 years since the first founding. Together with 18 co-founders who share a vision with them, they raised 500,000 yuan to finally establish ‘Alibaba’.

After 7 years of challenges and failures, Ma received an expensive management class that required team members to share the vision, selection of startup items, management system of the company, investment capital, and the role of entrepreneurs.

4. Failed to attract investment 40 times

Ma established 'Alibaba' with the goal of connecting B2B (business-to-business) transactions through the Internet for small and medium-sized enterprises with import and export demand, and recruited Choongshin Tsai, who was the chief investment manager of Investor AB, as the chief financial officer (CFO). do.

Choongshin Tsai, as an investment manager, was reviewing Alibaba's investment and, convinced that "Alibaba is a dream team that has all the conditions for success," gave up his large salary and joined Alibaba.

At that time, Cai's monthly salary was 500 yuan or less than 100 dollars. The current vice president of Alibaba Group, Cai Chongshin, has since served as Ma Yun's right-hand man, contributing enormously to Alibaba's growth.

After recruiting Chai Chung, Ma moved to San Francisco, USA to attract investment.

Ma, who was already a famous person in China at the time, received investment proposals from various places. But Ma, who wanted to grow Alibaba into a global company, wanted to attract investment from the United States to provide a publicity effect and a business foothold at the same time.

However, at the time, Alibaba attracted more than 20,000 companies as members. But to American investors, Alibaba was just an overseas company with only a vision and no clear profit model.

In the end, Ma went to 40 investment companies that he wanted to attract investment, but all were rejected.

“Finding an investor is harder than finding a life partner”

You can’t just look at your beauty. Saying 'I want to be with you' in the most difficult moments is the most important thing

Ma's efforts to find like-minded investors eventually paid off. When he succeeded in raising $5 million from Goldman Sachs and $20 million from Softbank.

5. Excessive overseas expansion, low investment

Ma Win is one of those entrepreneurs who do a lot of media interviews and public lectures. Among the many verses he left behind are these words:

“If you're doing something wrong, the more you do it the right way, the sooner you'll go bankrupt.”

These are the stories he left behind regretting the early days of his entrepreneurship, which he dreamed of entering the wrong country.

He established local offices in Hong Kong and the UK, and joint ventures in Japan, Taiwan, and Korea.

Also, in Silicon Valley, about 20 elites were hired to set up a research institute. They were treated with respect with an annual salary of at least $100,000.

Ma's strong will to open up the global market pushed him to work. But he experienced a painful failure by doing too much work in the wrong way.

At that time, before Alibaba found a core revenue model called 'intermediate supplier'... Branches around the world were just money eaters.

In addition, the MBA (graduate school of business) elites recruited ambitiously did not fit in with Alibaba's corporate culture and only promoted chaos within the company.

At that time, Chungshin Tsai proposed a drastic restructuring, and Ma was late but implemented harsh cuts for overseas branches and high-paid workers.

In addition, the advertising budget was eliminated, and the budget was strictly limited to three-star hotels when traveling on business trips.

From this experience, Ma learns expensive lessons that he must first establish a 'correct business model' and enter overseas markets, and that elites who are not assimilated into the company lower the morale of existing hard-working employees and adversely affect the company.

After that, Alibaba revised its strategy to take over the Chinese market first, and put all efforts to solidify its corporate culture.

6. Entering the search business that ended in failure

Since October 2000, Alibaba has succeeded in successive successes such as ‘China Supplier’ and ‘Cheongxintong’, which laid the foundation for B2B service.

In 2003, Taobao, a C2C (consumer-to-consumer) e-commerce service, and Alipay, a simple and secure payment system, launched a decisive battle with eBay, which was dominating the global e-commerce market.

Alibaba has been on the rise, winning a big deal in 2005, attracting $1 billion in investment from Yahoo.

With this decision, Yahoo will acquire a 40% stake in Alibaba, and Alibaba will take over the Yahoo China portal site, search technology, communication, and advertising business.

At that time, Ma thought of the four elements of e-commerce service as market, credit, payment system, and 'search'.

Alibaba acquires Yahoo! China and ambitiously tries to enter the search business, the goose that lays golden eggs while securing an investment of $1 billion by acquiring a 40% stake in Alibaba.

However, this decision ultimately ended in a “great failure” when Yahoo China ended the service in September 2013.

Wang Lifen, the author of <Ma Win in Sneakers>, points out that Ma's choice at the time was an obvious mistake and was the biggest failure in Alibaba's history.

In the context of fierce competition with eBay in the e-commerce market...

It is analyzed that the battle with Google and Baidu by forcefully expanding the front line to the search area was a battle with very low odds.

Ma's Acknowledgment:

Although Ma acknowledged this part, he emphasized that not only himself, but all Internet companies should study this case.

“The merger with Yahoo China is clearly our mistake. At that time, we had no experience of merging Internet companies.”
“If we went back in time, we would have bought Yahoo China in a smarter way, and other Internet companies have not learned from Alibaba’s example, but sooner or later they will face another challenge.”

Perhaps he was referring to the transfer of too much stake (40%) to Yahoo.

Yahoo, which invested $1 billion in 2005, sold about half of its stake in 2012 for $7.1 billion.

Yahoo ate at least 14 times left.

 

7. Alipay VIE Incident...

Public opinion deteriorated at home and abroad Ma was an entrepreneur who was very friendly with the media and the government, but as the company grew, he faced many criticisms at home and abroad.

The most notable case was when Alipay (Zipubao) was spun off from Alibaba and became a 100% Chinese-owned company without informing its major shareholders, Yahoo and Softbank. This is widely known as the Alipay VIE (Floating Equity Entity) incident.

Ma 100% owns the company, so in theory, Ma owns all Ali pays assets.

In 2010, the Chinese government promulgated a decree that only grants 100% of Chinese-capital companies permission for third-party payment businesses such as Alipay.

However, the Chinese media, which was friendly to Alibaba, also pushed Ma as an ignorant entrepreneur who betrayed the investor, and foreign media poured follow-up reports every day as a representative case of Chinese investment risk.

"I'm the major shareholder, so why don't you see it? Are you crazy?" In addition, Softbank and Yahoo have overtly expressed their displeasure with Ma Win. As a result, the stock prices of all Chinese companies listed on the global stock market plummeted.

Ma explained that it was not possible to seek the consent of the board of directors and the majority shareholder under the urgent circumstances at the time, but it was already insufficient to reverse public opinion.

Unlike the past, where venture companies succeeded in reckless challenges, the world's standards for viewing Alibaba are already very high.

8. 'Credit' is threatened

The year after the Alipay VIE incident, Ma received the biggest shock since its founding. Among Alibaba’s core products, there is a B2B service called ‘China Supplier’.

It is a model where Alibaba guarantees the credit of small and medium-sized enterprises, helps export by distributing information around the world, and receives a membership fee of 60,000 to 80,000 yuan from these companies.

However, in February 2011, it was revealed that 2326 Chinese suppliers were involved in allegations of fraud. Ma noticed signs of fraud in January earlier than that and conducted his own investigation.

In anger, Ma fired 100 employees, and Alibaba CEO Weizer and COO Li Shihui were also held accountable and resigned.

However, the following year, another B2B service, ‘Rat Volcano’, was caught on corruption.

It was a disaster for Alibaba, which had not been well-received at home and abroad due to the Alipay VIE incident.

However, since the Alipay VIE case, Ma, sensing a cold public opinion, found the people involved in the fraud from the inside and reported it to the authorities, and both cases revealed themselves to the media. Conversely, Yahoo announced the Alipay VI

E to the world.

While humbly accepting the criticism from public opinion, Ma said, “No one can guarantee that such a thing will not happen to any large Internet company But Alibaba is the only one who voluntarily shows his wounds.”

 

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