Stock Markets. Ipos. Capital raising. Entrepreneurship. These are the buzzwords that keep rattling the ears of all those who are related with financial markets, be they mbas, ca.s,c.s etc. We are in that phase of globalization and we are so intermingled with other factors in the world that a sneeze in Eastern Europe and the Bombay sensex and nifty catches cold.
Entrepreneurship….Entrepreneurship is the factor that makes all this possible. In this world, on any given days, thousands of companies are incorporated, liquidated and set up and closed. We have dreams of owning a business, boss others and earn a place of repute in the society. Some succeed in gigantic proportions, some excel, some achieve so so progress and some fail. This is the rule of the world. At any given point of time, not all can succeed. Some have to concede defeat.
For all my fellow chartered accountant, company secretary and cost accountant friends, I pose a simple question. Answer that in your mind and then proceed to the next question.
1) Do you remain abreast of all the recent financial market news? (If yes proceed, else stop).
2) Have you heard of ali baba? (If yes proceed)
3) Have you read anything about its ipo that is about to hit the market?
If you have not read about (stopped at question no 2 /3) then you need to be more aware of your surroundings. Here is the reason why
Alibaba, an e commerce company founded by jack ma, an English teacher has filed for an ipo on the New York stock exchange for raising a staggering $15 billion dollars (900000000000 rs) by diluting a mere 10 % , therefore valuing the post issue company @150 billion dollars (90000000000000). The journey of alibaba is nothing but a fairy tale, and that’s why I thought it expedient to share.
1) Humble beginnings – We live in a demoacratic world, where, thankfully, there are no wars, everything is stable, going our way. There are no major rebellions, stock markets are surging, banks are healthy and fine, credit is free flowing (barring some exceptions) and no major unrest has battered the present of our country.
Imagine living in a situation, where anyone can be arrested, detained, jailed and even executed without any reason. Or imagine a situation where for months of toil, all that you get is a box of socks in lieu of your salary ( a popular description in history book). This situations existed. In the people’s republic of china, in the cultural evolution period (Those not familiar, please wiki communism, Mao Zedong, Communism and Stalinism….)
In period of such unrest, Jack ma, the founder of alibaba slowly being conceiving entrepreneurial ambitions. Graduating from an English school, he started as an English teacher tutoring in china.
Timeline of alibaba (source – Wikipedia and some other webpages
• 1999 – alibaba is founded
• 2000- funding of $ 25 million from Softbank, goldman sachs
• 2003- Alibaba becomes profitable
• 2004- Launch of alipay
• 2005 – Yahoo acquires a stake in alibaba
• 2008- Taabao , the main source of revenue for alibaba is launched.
• 2011 – alibaba makes a profit of $ 250 million dollars.
• 2013 – Plans of ipo emerge , initial value of alibaba @ $ 80 - $ 100 billion.
2) You have to be lucky to have right friends, at right time, in right stride.
There are very few, who strike the right opportunity, at the right time, have right resources and most most importantly, right companions or associates (in casual terms, friends). Steve jobs had steven wozniak, Bill hewleet had dave Packard (hewleet peckard or h.p). Jack ma had a good network of friends in United states for whom he would to prepare Chinese websites. It was from this he recognized the upcoming potential of internet.
Therefore he had all the right combinations
1) Right idea
2) At right time
3) Right sense and skills.
Although the entire journey is very difficult to state here , here is what was the condition at the start.
We waited three and a half hours and got half a page. We drank, watched TV and played cards, waiting. But I was so proud. I proved (to my house guests that) the Internet existed
(For a very detailed timeline and growth story of alibaba please google the same)
Therefore, those who aspire to be entrepreneurs should start seeing their friends as more than just friends. Think of them as strategic partners and future business associates.
3) Always remain simple. grounded and abreast of reality.
Jack ma has always insisted on simplicity and remaining grounded when it comes to alibaba. In all public appearances, addresses and lectures, Jack is always seen in a simple and grounded manner. Its hard for some people to digest success and success goes to their head quickly. This has not been the case with jack ma, and he has remained the same as he always was.
Even steve jobs, the entrepreneur par excellence believed in the same. He lived as hippy, slept on the floor, believed in nirvana and practiced the philosophy of Buddhism.
Being simple and grounded does not mean you have to become a monk or a hermit. It means you should never forget your past, but at the same time look towards the future. This might seem as a moral science lecture, but all big and successful entrepreneurs have followed the same route.
4) Always ready for challenge, think bigger.
Alibaba had always been challenged by amazon and ebay, established giants in the e commerce field. On this the attitude of jack ma was like that of a dragon or a tiger, who watches and waits for its prey and when time comes, knocks them in all out blow.
Here is what jack ma said on being threatened in business by amazon and ebay
If they are tigers (amazon and ebay), then I am the alligator of Yangtze (name of river in china).
Since starting as a small company, alibaba has grown mani manifolds to becomes the largest ecommerce company in the world. It is diversifying into online payment, credit cards, social networking and everything imaginable.
How large is alibaba?
Yahoo’s stake in alibaba, based on valuations of alibaba ipo is about $35 billion dollars. Based on yesterday’s closing price , its market capitalization is $ 36 billion dollars ($ 36 x 1000000000 shares outstanding )……Those who know sum of parts financial analysis will guess that whatever is the market value of yahoo just denotes the stake value of its holdings in alibaba. Nearly ¼ th of the market capitalization of the Nikkei listed Softbank is attributable to alibaba.
By the next week, alibaba will file prelimnary documents with the securities and exchange commission and new York stock exchange for listing, by which one will get more insight on financial metrics of the company. Its going to be a eventful event, can even become the world’s largest ipo.
(Being exam time, had to seriously shorten this article, but at the same time since alibaba ipo is nearing, had to write this with priority)
To learn ten lessons from the recent facebook- whatsapp deal see Ten lessons to learn from facebook deal
To see why cma and cs should be allowed to audit see CMA and CS as accountants
Rohit Jain
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