Chapter 37: Mr. Lei Handing Out Flyers, The Origin Story of Xiaomi

Seeing the balance in his account return to 200 million, Yan Fei realized that if things continued this way, he would sooner or later be crushed by the "Big Penguin." Relying solely on evasion was not enough; he had to strike back.

How to strike back? Yan Fei had no immediate ideas. After all, the gap between the two was immense—whether in social standing, capital, or the depth of influence over industry rules, they were not even in the same league.

As he pondered without success, his phone rang. Upon answering, the voice of Zhang Xiaolong came through: "President Yan, our WeChat Technology has been hit by a hacker attack. It is extremely fierce, executed by world-class experts. The 'white hat' hackers from the National Security Agency were defeated after only two hours of resistance. All our defenses have been breached, and all WeChat data has been wiped. Fortunately, we have physical backups, but even so, we have lost the last three hours of new user data and their activity logs. Furthermore, we need four hours to perform system maintenance."

Hearing this, Yan Fei was deeply shaken. He immediately said in a low, firm voice: "Seal the news, issue a maintenance notice, and restore the WeChat application as soon as possible. Open a platform for users to report data loss, and ask affected users to re-register or re-upload their content. At the same time, offer a certain amount of compensation."

Zhang Xiaolong asked with concern, "What if someone impersonates a user to claim the compensation?"

"Have the technical staff review and compare the data; that will clarify everything. Do as I say, and tell everyone in the company to keep the hacker attack confidential," Yan Fei instructed before hanging up.

Calming his emotions, Yan Fei called Zhou Xiaohong. When she answered, he asked in a low voice: "Manager Zhou, has Momo Technology been subjected to any hacker attacks?"

"No, President Yan. Why? Did something happen?" Zhou Xiaohong asked, puzzled.

"It’s nothing!" Yan Fei hung up. He understood now: Ma Teng was giving the Liu family face and had spared Momo Technology, as Liu Suxin was a major shareholder there.

Taking a deep breath, Yan Fei sat in his chair, a cold glint in his eyes. He whispered to himself: "Big Penguin, this isn't over. Just you wait; sooner or later, I will make you regret today’s dirty tactics."

A few minutes later, Yan Fei left his home, drove his GT500 straight to the Liu Corporation building, and was soon escorted by Liu Zhe’s assistant to the office. Yan Fei slumped into a chair by the tea table and gulped down a cup of tea.

Seeing this, Liu Zhe waved his assistant out. Once the door was closed, he asked, "What happened?"

Yan Fei replied, "Uncle Liu, WeChat Technology was attacked. The data was wiped and the losses are severe; the momentum of our rapid growth will likely be interrupted. Furthermore, my trading activities are being monitored and sniped by the Big Penguin in real-time, resulting in heavy losses. On top of that, the investment fund company I just set up was also attacked, delaying the launch of my private equity fund."

Even someone as experienced as Liu Zhe frowned deeply upon hearing this. After a long silence, he said, "There is no solution. The hackers must be from the dark web; it's impossible to find any leads. As for the secondary market sniping, it is merely a minor violation, which the Big Penguin can ignore thanks to its influence. In the short term, you won't be able to make money in the domestic financial market."

Yan Fei took a deep breath and asked, "I ask for your guidance, Uncle Liu. What should I do now?"

After a long silence, Liu Zhe said: "There are two paths before you. First, admit defeat and let WeChat Technology accept investment from the Big Penguin. However, given the current situation, they would certainly demand absolute control, and WeChat Technology would essentially no longer be yours, stripping you of your protective shield. Second, go down in a blaze of glory—bring in major foreign capital, such as Sequoia, Vanguard, or Rock, and use their strength to confront the Big Penguin. The advantage is that you retain control of WeChat Technology; the disadvantage is that you will bear the stigma of being a traitor, and the development of WeChat Technology will be hindered."

"Why can't I seek major domestic capital?" Yan Fei asked, puzzled. "Wouldn't domestic capital have more advantages?"

Liu Zhe shook his head and said calmly, "The domestic giants have a nasty way of doing business and no concept of a 'win-win' situation. Over time, they might even view you as a vassal. Don't look at the Liu family as being glorious; sometimes, even we are not the masters of our own destiny."

Yan Fei didn't fully understand, but he had a vague realization. He listened as Liu Zhe continued: "I don't know much about the financial markets, but one thing is certain: you are playing with your cards face up, while the Big Penguin is playing with theirs hidden, and they have far more chips than you. It's impossible to win. I suggest you stop playing or change your approach. As for how to change, you need to think about that yourself."

After pondering for a long time, Yan Fei nodded seriously. "Thank you, Uncle Liu. A single conversation with you is worth ten years of study. I think I know what to do now."

"Go then," Liu Zhe nodded, saying slowly, "I have faith in you. Although the Liu family isn't the largest clan, we have a background and will always be your final refuge. Just make sure you treat Suxin well."

Yan Fei steadied himself and said firmly, "Rest assured, Uncle Liu. I will never let Suxin down in this lifetime."

***

Leaving the Liu Corporation, Yan Fei wore a smile, his confidence renewed. Looking up at the sky, he said quietly, "Big Penguin, our real show is about to begin."

Upon returning to his office, Yan Fei and Qian Shuyi flew straight to Beijing to visit Qihoo. Upon arrival, Zhou Hong welcomed Yan Fei very courteously. Introduced by their respective liaisons, the two shook hands and began to talk.

In the conference room, Yan Fei looked at Zhou Hong and said seriously: "President Zhou, I have come here today on a whim to ask for help. My WeChat Technology and Phantom Fund have both been attacked by world-class hackers. I need your support in cybersecurity, and it would be best if you could dispatch some capable experts to station at WeChat Technology."

Zhou Hong nodded and said, "We just heard about your company's plight. Some people truly are despicable, ignoring laws and morality just because they hold power."

Yan Fei nodded, "The enemy of my enemy is my friend. The Big Penguin has had many frictions with Qihoo; helping me is also helping yourself. Don't you agree, President Zhou?"

Zhou Hong smiled and said calmly, "That is the logic, but the Big Penguin is not something we can easily fight. While we have had friction, it has been minor. If you want us to live or die together right from the start, that would be very difficult."

Both were laying their cards on the table. Yan Fei decided to play his trump card, his expression turning grave: "As far as I know, the Big Penguin is preparing to enter the free antivirus software market and may launch it as early as next year."

Once these words were spoken, not only did Zhou Hong's expression turn serious, but the other high-level executives in the room also looked grave. After a moment of silence, Zhou Hong asked, "Is what you say true, President Yan?"

Yan Fei nodded seriously: "Nothing is without a trail. If you analyze the personnel changes in the security industry or inquire about the internal projects at the Big Penguin, it will not be difficult to confirm this."

After a brief silence, Zhou Hong stood up and said, "Let's leave it at that for today. We have urgent matters to attend to. President Yan can spend a few days touring Beijing; once we handle our business, we can discuss this further."

Yan Fei stood up and shook his hand, smiling: "Very well, I will await your news."

After leaving Qihoo, Yan Fei and Qian Shuyi walked down the street. Suddenly, a young man approached them, holding a stack of papers. He stepped forward and said, "Could you spare a moment? I have a survey here. Would you mind helping me complete it? There’s a gift for you!"

Yan Fei looked at the man, his pupils constricting, though he returned to normal in an instant. He stopped Qian Shuyi from declining and smiled: "Sure, what kind of survey is it? Let me see."

The man, who looked to be in his thirties, happily pulled a sheet from the stack and handed it to Yan Fei: "It's a survey about smartphones."

Taking the questionnaire, Yan Fei filled it out earnestly. He quickly finished, filling in his name and phone number, and then smiled: "May I ask your name? I have some thoughts on smartphones that I’d like to discuss with you."

The man looked at Yan Fei deeply and said with a smile, "Sure, my name is Lei Jun. Let's get to know each other."

"I'm Yan Fei. Pleased to meet you, Brother Lei!" The two shook hands.

They found a coffee shop and sat in a quiet corner. Lei Jun asked, "Is Brother Yan here on a business trip?"

Yan Fei nodded and praised: "Brother Lei has a keen eye. Smartphones will enter a period of rapid growth starting this year. Ten years from now, the number of smartphone users in China will exceed 400 million, and global users will exceed 3 billion."

Lei Jun nodded with a serious expression and asked, "How does Brother Yan think we should enter the smartphone industry?"

Yan Fei smiled and replied, "Ever since the birth of the iPhone, the landscape of the mobile industry has changed. The future belongs to smartphones. Currently, the international players include Apple, Nokia, BlackBerry, HTC, Samsung, Motorola, Sony Ericsson, and Palm. Domestically, there are Lenovo, Huawei, ZTE, Coolpad, K-Touch, Meizu, and Dopod."

Lei Jun watched as Yan Fei rattled off the industry names with ease, his eyes lighting up. He sat up straight and said excitedly, "I would love to hear your thoughts. Please, Brother Yan, do not hesitate to share your wisdom."

Yan Fei smiled faintly: "I wouldn't call it wisdom, just my personal opinion. Although Nokia, Motorola, and Ericsson were the 'Big Three' of the previous generation, in my eyes, they are nothing more than paper tigers and decaying corpses."

Lei Jun was shocked by these words, looking at Yan Fei with full expectation.

Yan Fei continued unhurriedly: "The Big Three are still immersed in their past glory, becoming too cumbersome to change. It is inevitable that they will be eliminated by the new era of mobile phones. Among these international brands, apart from the pioneer Apple and its follower Samsung, the others have failed to grasp the essence, and their failure is inevitable."

"As for domestic brands, apart from Huawei, which has a solid foundation, a righteous cause, and heavy investment in research and development—and will surely have a place in the future market—the others will either die along the way or struggle to survive. Their paths were flawed from the very beginning."

Listening to Yan Fei’s confident analysis, Lei Jun was incredibly moved. He had thought about these things himself, but not as thoroughly as Yan Fei. Now that he heard Yan Fei’s explanation, the fog in his mind cleared, and his own convictions became firmer.

After absorbing this, Lei Jun asked earnestly, "May I ask what you do, Brother Yan? Why are you so knowledgeable about the smartphone industry?"

Yan Fei smiled lightly: "I am an independent investor, and I have founded a few companies. Under my banner, I have WeChat Technology, the Phantom Private Equity Fund, and Dazhong Dianping, which are all doing quite well."

Lei Jun glanced at the WeChat icon on his phone, his eyes filled with shock. Although he hadn't heard of the Phantom Fund, WeChat Technology was going toe-to-toe with the Big Penguin, and Dazhong Dianping was a unicorn in its industry with limitless potential.

"I admire you!" Lei Jun said with respect. "I am nothing compared to you. I am currently unemployed, having left Kingsoft a few months ago. Although I have some savings, I’ve been a bit lost about the future, looking for an opportunity to enter the smartphone industry."

After talking so much and waiting so long, this was exactly what Yan Fei was waiting for. He immediately replied: "President Lei, you are too modest. Everyone in Zhongguancun knows what a model you are. I have faith in your entry into the smartphone industry. What are your plans?"

Lei Jun hesitated for a moment, perhaps sensing Yan Fei's sincerity. He replied, "I plan to start with cost-effectiveness. The current 'shanzhai' (copycat) smartphone market is huge. I plan to launch a smartphone with extreme price-performance value to grab market share from these copycat phones. Once I have a foothold, I will move into the mid-range market."

"Excellent!" Yan Fei nodded seriously: "That is a great entry point. I suggest you first create a custom UI, accumulate a user base, and I can open a section on WeChat for your product users to communicate."

Lei Jun’s eyes shone with excitement: "Does that mean you want to invest in us?"

"Of course!" Yan Fei confirmed. "Have you thought of a name for the company? I suggest a registered capital of 1 billion. We can discuss the specific investment shares."

Lei Jun thought for a moment and said: "I’ve thought of a few names—Xiaomi, Radish, Coral. Perhaps you could help me choose."

Yan Fei considered this and said, "Let's go with Xiaomi! It’s a good name—healthy, comforting, and carries a strong sense of intimacy."

"Xiaomi it is!" Lei Jun smiled. "I’m quite fond of that name too. As for the shares, my plan is for the founding team to retain absolute control. I wonder if you can accept that?"

Yan Fei smiled: "Am I not part of the founding team? Before the company goes public, I can entrust my voting rights entirely to you, and I will serve as the Chief Strategy Officer."

Seeing Yan Fei's sincerity, Lei Jun laughed happily: "Great! Let’s proceed with your 1 billion investment plan. I will contribute 500 million, and you will contribute 500 million. We will put 20% of the equity into an incentive pool. Of the remaining shares, you will hold 38%, and I will hold 42%."