When Netscape went public, due to the controlling stake held by the Nicholas Group—which is not publicly listed—their shareholders remained undisclosed! Therefore, the public was unaware of Henry's position as the mastermind behind Netscape!
Conversely, this scenario could not repeat with Cisco. As a major shareholder, Henry's details needed to be transparently communicated in the prospectus during the company's public debut.
At this very moment, Henry had garnered significant fame!
Following in the illustrious footsteps of industry magnates like Apple's Steve Jobs, Microsoft's Bill Gates, Dell's Michael Dell, and Oracle's Larry Ellison—Henry emerged as the most formidable young billionaire without stepping foot in college!
In light of recent events, the media had seemingly erupted, dispatching throngs of elite journalists to pursue and intercept Henry.
At this juncture, Henry felt immense frustration—couldn't he find a moment of peace?
"Reject all interviews! All of them!!"
In his office, Henry shouted anxiously! Helen, demonstrating her attentiveness, prepared a cup of coffee for him. He had grown accustomed to her brewing skills and the pleasurable taste of her coffee; other attempts had left him feeling disoriented!
Today, Helen Wheeler seemed to radiate confidence and elegance, transforming into a more attractive version of herself as a sharp female professional!
She stood tall in a white shirt and snug black slacks, exuding a magnetic charm!
"Chairman, the media is stacked at the company entrance and refuse to leave…" Helen admitted with a sigh.
Henry sat at Cisco's headquarters for the first time since its good fortunes. It had been just a week since its initial public offering; stock prices had soared past $70, and Cisco's market cap eclipsed $7 billion! Bearing in mind that today, Cisco would hold an essential board meeting, Henry dismissed concerns of the impending media onslaught.
Following Cisco's IPO, raised capital was primarily aimed at secondary investments since it stemmed from shareholders' equity—not on behalf of the company. As was typical, a second investment was planned; however, Henry remained unsure whether Sequoia Capital would participate. At this board meeting, representatives from various corporations would gather, including those from Citibank, JPMorgan Chase, KPCB Venture Capital, IDG Technology Ventures, Goldman Sachs, and a dozen more banks or venture capital funds!
These financial entities remained optimistic about Cisco's prospects; many acquired shares shortly after the IPO launch, gaining the right to attend the meeting, simultaneously piqued regarding the secondary investment.
Ford Brook, a Sequoia Capital representative, joined the meeting proceedings as well!
John Chambers, CEO of Cisco, moderated the board meeting. Following a few opening remarks, he'd address comments and aspirations regarding Cisco's future following their public listing. The real action was about to unfold!
"This board meeting will deliberate on Cisco's secondary investment, with all interested representatives present!" John Chambers announced. "Given Cisco's market growth, valued at an impressive $7 billion, Director Mr. Henry Williams has pledged to invest 90% of his market gains—which totals $850 million! The remainder of the board shall engage in discussions regarding their individual commitments!"
Originally, Henry possessed 67.5% of Cisco's shares. After offering 20% during the IPO, of which 13.5% went to Henry, he received approximately $945 million. Thus, he would reinvest $850 million, leaving greater than $90 million to his name.
At this moment, Ford Brooke from Sequoia Capital interjected: "Sequoia Capital will not be making a secondary investment!"
Sequoia Capital had its reasoning—believing Cisco's valuation had peaked, they felt further investment would yield minimal gains. Why invest additional funds into Cisco when other portfolios could present substantial returns? Better to leverage their resources elsewhere!
Yet, no one anticipated that Cisco's future market valuation would soar to $500 to $600 billion, leaving Sequoia Capital to rue their hasty decision!
By abstaining from this second investment, Sequoia's shares would be considerably diluted!
The Posack family naturally opted to invest again, considering they were original founders and wished for the company's sustained success!
The board meeting stretched on from 9 a.m. to 3 p.m.
Henry knew he couldn't permit other venture capital institutions to usurp control of Cisco with sizable investments; he needed to exercise caution. Hence, ensuring fair coordination among the major investors while allocating shares effectively became essential during this meeting!
Following the discussions, Henry's shareholding fell to around 63.5%, while the Posacks held 10.5%, the management held 4.5%, Citibank and Morgan Bank each possessed 2.5%, with Goldman Sachs, IDG, and KPCB retaining 2% apiece. Red Shan Capital's shares diluted to 3.8%, with the remainder distributed among a range of smaller shareholders! This second investment realized $1.32 billion for Cisco!
When asked how to mobilize such substantial funds, the solution was a mere three words: "Acquisitions ahead!"
Cisco wasn't in a rush to pay back banks; Citibank and Morgan Bank weren't demanding repayment at this stage, as delay worked in Cisco's favor while accumulating interest!
Banks operate as monstrous institutions—the richer you are, the more they wish to lend!
To expand Cisco's scale, they must recommend Cisco products to users as they access the Internet!
If Cisco could provide Internet access services, they'd swiftly connect with users, promoting their products from the get-go—a perfect scenario!
Additionally, tackling AOL's Internet access services would carry immense strategic importance for Cisco's operations!
In stark contrast to AOL's rental-based service of others' networks!
Go big or go home!!
The ambition to acquire a backbone network resonated loud and clear!
Henry announced Cisco's intentions to pursue the network backbone acquisition at the meeting's conclusion. Hearing this, attendees enthusiastically raised their hands in agreement, but Ford Brook, on the other hand, appeared uneasy: "Isn't Cisco driving a stake through AOL's heart? How could the others not be aware? Yet within Cisco, he surely knew that his ventures connected back to Henry Williams and his various enterprises, including Isearch..."
Ford Brook departed Sequoia Capital in a despondent state, hurriedly informing his board of directors and briefing Steve Case.
AOL was left defenseless against Cisco's overtures for the backbone network. They were now a fractured entity, thrust into uncertainty, counting on Sequoia Capital for assistance. This strategy contradicted Sequoia's core mission as a venture capital entity—not a technology firm. Attacking Cisco while simultaneously acquiring a network backbone was, at best, a long shot! Moreover, Sequoia Capital lacked sufficient capital in hand.
Despite the reputation of Sequoia Capital, their investments spread thin, offering little cash available unless they opted to sell shares or secure loans to fund such acquisitions!
"On January 10, 1989, Cisco officially submitted its acquisition request to MCI!!"
With that announcement, once again, the nation fell into a state of shock!