Alibaba, 1001 Mistakes

By TeamKanyin

After rejecting and also being rejected by 38 capitalists and investors, Alibaba finally raised USD5 million from Goldman Sachs in August 1999, followed by USD20 million from Softbank Corporation in the first quarter of 2000. With these funds, Alibaba became the world’s largest online trading market ever in no time.

After attracting a series of venture capitalists, Alibaba began expanding globally. However, the rapid increase in labour cost, marketing, advertising and zero profits landed the firm in financial trouble in 2000. “We expanded too fast, and then during the internet bubble burst, we had to lay off staff. By 2002, we had only enough cash to survive for 18 months. We had a lot of free members using our site, and we didn’t know how we’d make money,” Ma said.

By January 2001, Alibaba had less than USD10 million in its account. The number of employees in the US office was reduced from 40 to three, and subsidiaries located in Hong Kong, Beijing and Shanghai were closed down. Salaries of the remaining staff were cut by 50 per cent while their share options went up 100 per cent. After three months of drastic cuts, the company survived with its operating cost falling from USD2 million to USD500,000.

Many years later, Ma shared, “The lessons I learned from the dark days at Alibaba are that you’ve got to have value, innovation, and vision. Also, if you don’t give up, you still have a chance. And, when you are small, you have to be very focused and rely on your brain, not your strength.

“People tend to achieve their dream during their first entrepreneurial attempt. Sadly, more often, we stray away from our dreams during our pursuit. During the internet bubble burst in 2001, I remember there were about 30 internet companies and we were the only one survived. It was because we held on to our dream and that made us what we are today.”

A couple of years after the birth of Alibaba, Ma’s wife Zhang Ying, asked her husband how much money Alibaba made, and Ma raised one finger. “Ten million yuan (USD1.6 million)?” Zhang asked, and Ma shook his head. “A hundred million (USD16 million)?” she asked, and Ma shook his head again. “One million (USD160,000),” Ma said to Zhang’s disappointment, until he added, “a day.”

Extracted from JACK MA by TeamKanyin

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