Chapter 97: People Who Can Never Be Friends

Shenzhen City, Tengyun Corporation, President’s Office.

CEO Ma Teng had been feeling constantly on edge lately. In the three years since Tengyun's founding, each year felt like the company was on the brink of collapse. Starting in June, major shareholders such as IDG, Yingke Digital, and Sequoia Capital, hit by the internet winter, began losing faith in Tengyun’s “QQ without any visible path to profitability” and clamored to withdraw their investments, dragging on for two to three months each time.

“I feel like a baby: when well-fed, I think I control the entire world and sleep peacefully. But every two hours, without warning or reason, I wake up crying uncontrollably.”

This was Ben Horowitz’s vivid depiction of the neurotic entrepreneur, a description that fit Ma Teng perfectly.

When QQ's registered users and daily active users sharply surged, they briefly felt a thrill; but the moment the growth slowed—even if Tengyun did nothing wrong, merely caught in the lull of a busy holiday season nationwide—Ma Teng and Zhang Dong would start to panic, fearing they had written some “fatal flaw” into the software that would doom QQ.

Living each day with a metaphorical sword hanging overhead was unbearable. He wished for a clean break—either leave decisively or welcome whatever came.

Lost in such chaotic thoughts, his female secretary entered, handing him two TC-OFFERs.

Tengyun was still a makeshift troupe; aside from the CEO and CFO, who were iron-willed, the rest of the COO and CFO positions were filled with mediocre personnel. So Ma Teng had to personally oversee all matters related to investment.

“Has IDG found a buyer? MIH and Chengpin Holdings are both interested in taking over… Chengpin Holdings?!”

Ma Teng suddenly stood up, studying the offers carefully, sensing danger and resistance.

MIH was not to be feared—they were financial players, not from the internet sector. Even if they invested, they would likely delegate voting rights back to the founding team and not interfere with operations.

But Gu Cheng was a completely different matter.

At Tengyun, the founding team of Ma Teng, Zhang Dong, and others held just over 35% equity combined. This time, the shares IDG and Yingke Digital wanted to sell accounted for over 40% of the company. If Gu Cheng took them all, control and the company’s steering wheel might change hands.

Most founders, when accepting venture capital, desired not only money but also resources from investors. By that logic, because Gu Cheng had Alipay, a valuable channel resource, Tengyun should have prioritized cooperating with him under equal price conditions.

But Ma Teng’s ambitions and mindset were not normal.

For example, years later, before he and Zhou Hongyi had a falling out, Zhou advised him: “If you want to do download tools, just invest a bit in Xunlei. If you want antivirus, invest in 361. You don’t have to personally handle everything.”

Ma Teng replied: “No need. Xunlei or 361 aren’t worth their valuations. I can just copy QQ Cyclone, copy QQ Butler, and save a lot of money.”

These words later triggered the “Three QQ Wars.”

Ma Teng was the only entrepreneur in the entire Chinese internet scene who disliked “investors bringing their own channel resources.”

Because if investors had channel resources, it meant they could press down on him and cling to those channels. But Ma Teng aspired to control the entire Chinese internet channel and did not want any channel to become his “mother-in-law” whom he couldn’t evict later.

In Ma Teng’s dictionary, people or things that lost their utility value should be abandoned at once, ruthlessly discarded—like Liu Bang cheekily asking for a share when Xiang Yu threatened his father.

Without such cold-bloodedness, one could not become a peerless schemer.

“We absolutely cannot let Gu Cheng, this ambitious man, enter comfortably. I’m not sure about MIH’s funds and confidence… No, I must talk to MIH properly and hold them back,” Ma Teng pondered, then called the secretary back in. “Xiaolin! Set up a meeting with Mr. Johnson from MIH.”

“All right,” the secretary replied and went to arrange it.

...

Ten days later, the agreement for the three old Tengyun shareholders to exit finally came to fruition. MIH and Chengpin Holdings, egged on to compete fiercely, bought out the shares at prices far above the floor.

In another timeline, Tengyun’s valuation at the peak before the internet bubble burst was roughly $200–300 million. After the crash, it steadily declined and by the second half of 2001, when IDG and Yingke exited, the deal closed at just over $80 million (600 million RMB).

Now, due to the competition between Gu Cheng and MIH, they couldn’t bully the seller, so the valuation naturally rose.

It must be said that even in the winter, some had the vision to recognize Tengyun’s future value. MIH’s president, Johnson Chris, was quite optimistic. Plus, Ma Teng had recently fed him some unknown “magic potion” and promised some benefits.

After multiple rounds of bidding, they pushed Tengyun’s valuation to nearly double before closing the deal.

Chengpin Holdings invested over 400 million RMB to acquire 24% equity, mainly from IDG, Sequoia, and some exiting founders. MIH invested 300 million RMB for 17% equity.

After the transaction, the founding team led by Ma Teng and Zhang Dong held 38%, remaining the largest shareholder and retaining decision-making power. Gu Cheng held 24% as the second largest, and MIH’s 17% was third. The remaining 21% was scattered among small shareholders.

When MIH entered, Ma Teng asked for no extra conditions.

When Gu Cheng came in, Ma Teng made one explicit demand: Chengpin Holdings must integrate future QQ paid membership sales into Alipay’s sales scope.

Gu Cheng agreed, and only then was he allowed entry.

It seemed this was destined to be a mutually wary transaction from the start.

Seeing Gu Cheng’s arrogance, Ma Teng set his own tone internally: “If you don’t play fair, I won’t provide any follow-up funding. I’ll hold onto my shares for three years, then cash out completely after you list in Hong Kong.”

Fortunately, this equity change involved no new capital injection, as Tengyun did not issue new shares.

Gu Cheng’s and MIH’s money went entirely to pay off exiting shareholders IDG and Yingke, not a penny reached Ma Teng’s hands.

So Gu Cheng need not worry, for now, about “his butterfly effect causing Tengyun’s liquidity problems to ease and growth to surge.”

...

When investing in Tengyun, Gu Cheng personally brought his cousin and spent a week in Shenzhen. After finishing everything and returning to Qiantang, it was already late September.

Sun Zhengyi’s initial fund still had over 200 million RMB unspent.

In a winter downturn, bottom-fishing required ruthless decisiveness; hoarding money for even a month was bad.

Pan Jieying didn’t understand Tengyun’s future and was critical of Gu Cheng’s lavish spending. On the plane home, she kept muttering, “You’ve spent 800 million already, all on businesses that earn traffic and users, none with short-term real profits. If three years later you can’t pay back Sun Zhengyi’s 4.5 billion, how will you manage?”

Gu Cheng remained calm: “No rush. If we really want profits, it won’t take 3 billion in capital. Sun Zhengyi just wants to back us to the hilt; we can’t be led by the nose. When the next 2 billion arrives, I’ll arrange faster, real profit-making investments.”

“Do you have ideas now? Don’t be careless. We need at least three cash cows as money-making as ‘Legend’ to plug Sun Zhengyi’s gap.”

“Of course I have ideas, but we can’t rush.” Gu Cheng had pondered a lot and had a rough plan, though immature. Now, worn down by his cousin’s nagging, he revealed some to reassure her.

“Sun Zhengyi and Cai Zhongxin’s prediction of ‘Legend making 1.5 billion in three years’ is a bit low. If we aggressively overhaul Legend from three angles, we can squeeze more value by burning its lifespan.

First, crack down on cheating software. Second, secure internal data and prevent account theft, regulate trading of game items and currency. Finally, fight private servers—over the summer, we broke with WEMADE’s Park Young-kwan, who’s surely now furiously developing knock-offs. We must block that. With these three measures, 2 billion in profits is achievable.

For the remaining profit gap under 2 billion, I plan to expand sales of licensed music, film, and literature. Invest more in hit movies and artists to build a platform several times larger than now. This can’t be explained in a few sentences; I’ll share more later.”

Gu Cheng’s plans to prevent Legend account theft, regulate equipment trading, safeguard Alipay’s payment security, build new online content sales platforms, and gradually lift Alipay’s physical address binding next year—all hinged on one bottleneck: payment and account security.

Months ago, Gu Cheng had instructed Chen Shoufu and Wen Huiying to start working on this, allocating a 20 million budget to develop a secure login scanning plugin and Trojan removal tool. Chen Shoufu worked overtime but progress lagged; completion was expected only by year-end. Full antivirus software development would take at least a year.

With 200 million RMB remaining, Gu Cheng planned to acquire a top domestic antivirus company, absorb their achievements, and release the software free to the market—not announcing “free antivirus forever” like Zhou Hongyi’s 361 later.

That concept was too ahead of its time; antivirus companies were among the few still profitable during the internet winter besides online game firms. If Gu Cheng entered and crushed their market, he’d face nationwide resentment and hostility.

His plan: develop a fully featured security suite and antivirus software but offer it free only to Alipay-registered users, requiring an Alipay account login. No card binding, no free antivirus.

His reasoning was principled: this software was to protect the funds of online account users, not to wage war on paid antivirus companies, making diplomatic negotiations easier.

He scanned the industry and targeted Jinshan Corporation’s CEO Lei Jun—the very person to whom, just over a year ago before the bubble burst, Gu Cheng had tried to sell data-fraud services.

As for Zhou Hongyi, who later created 361, Gu Cheng had no intention of dealing with him due to his past betrayal when they competed for business.

Moreover, Zhou Hongyi had spent a fortune developing the Gray Pigeon botnet and zombie network, but before he could profit from traffic manipulation, the bubble burst; his first client, Zhang Long, committed suicide. Zhou’s energy was drained, and his Gray Pigeon network was left useless. Now, the 3722 company had become the leading group behind domestic account theft.

Gu Cheng’s “Alipay-tied anti-theft antivirus” would primarily antagonize Zhou Hongyi. Cooperation between the two was simply impossible.