The Joyo Regret: Lei Jun's First Painful Sale

Prologue: The "Rebel" in the Kingsoft Office

In the spring of 2000, in the Kingsoft office in Beijing, the air was thick with the tense atmosphere of WPS coding and a subtle "strangeness." As the general manager, Lei Jun had become the biggest "outlier" and "rebel" in the company. While the engineers were racking their brains over technical problems, his mind had already drifted to a new world, one filled with the smell of soil and sweat, completely unrelated to the main software business—Joyo.com.

Initially, it was just an IT information download site he had instructed his subordinates to create, an insignificant "side project." But Lei Jun's instincts detected a pulse of the future from the traffic data of this side project. At that time, a website called "Dangdang" was selling books online and gaining momentum. It was as if a fog had cleared in Lei Jun's mind. He clearly saw that beyond the bloody red ocean of the software market, a vast blue continent called "e-commerce" was rising on the horizon.

He made a decision that shocked and unsettled the entire Kingsoft board: to completely transform Joyo into a B2C e-commerce website, starting with books and audiovisual products, just like Dangdang.

The news caused an uproar in the company. The decision seemed almost a "betrayal." Kingsoft was a proud software company with technology in its blood. E-commerce meant doing the "low-tech" dirty work: packing parcels, sticking labels, managing warehouses, handling logistics... each step was a bottomless money pit. More fatally, Kingsoft was just crawling out of the ruins of the "Pangu failure," its WPS business suffocated by Microsoft, struggling to survive. Every penny had to be stretched.

To use the company's life-saving money to incubate such a high-risk and "frivolous" project was nothing short of a crazy gamble.

At the board meeting, opposition was rampant. But Lei Jun's attitude was unusually firm, almost stubborn. He did not want to repeat the fatal mistake of "Pangu"—"pulling the cart without looking at the road." He stood up and, in a tone that brooked no argument, almost made a military pledge: "The wave of the internet has arrived, and we cannot pretend not to see it. This time, even if it is my personal failure, I ask the board to give me a chance to try."

In the end, the board was persuaded. Joyo was formally established, with Lei Jun personally at the helm. He hoped that this seed, "accidentally" grown from the parent body of Kingsoft, could grow into a towering tree and become Kingsoft's "second engine" in the internet era. He didn't realize that the fate of this seed, from the moment of its birth, was no longer his alone to decide.

Act I: Sprinting on a Knife's Edge

Joyo's growth rate, like a wild horse that had broken its reins, exceeded everyone's imagination.

With Kingsoft's strong technological DNA and Lei Jun's personal reputation in Zhongguancun, Joyo demonstrated a product experience far superior to its peers from the moment it went online. Lei Jun applied the product methodology he had accumulated over a decade in the software field, "dimensionally reducing" it to the then-crude e-commerce sector. Like an obsessed artist, he led his team to meticulously refine the webpage pixel by pixel, repeatedly deliberating over every detail of the shopping process until users could make a purchase with the fewest clicks and the smoothest experience.

Soon, Joyo overtook the pioneering Dangdang to become China's largest online bookstore. It then rapidly expanded into audiovisuals, games, and software, becoming a spiritual home for the literary youth and programmers of the time. Lei Jun's operational strategies, such as "free shipping on all orders" and "24-hour delivery in major cities," were like thunderclaps in the Chinese e-commerce world of 20 years ago, completely subverting user expectations.

However, behind this high-speed, magnificent race car, the fuel in the tank was being consumed at an alarming rate.

E-commerce is a business with classic "diseconomies of scale." Every package was backed by a mountain of costs for warehousing, packing, logistics, and marketing. Joyo's warehouse space expanded from one floor to an entire building, its employees grew from dozens to hundreds, and the loss figures on its financial statements snowballed.

The parent company, Kingsoft, was also being strangled by the dual pressures of Microsoft and piracy. Its WPS and antivirus business lines were struggling to stay profitable and were in no position to continuously transfuse blood to the "money-devouring beast" that was Joyo. Kingsoft's CFO called Lei Jun almost every day, anxiously reminding him how long the cash on hand would last.

Lei Jun was forced to embark on his first-ever fundraising journey. But fate played a cruel joke on him. In 2000, the global internet bubble burst. The NASDAQ crashed, and the capital market was a scene of devastation. Investors heard the word "e-commerce" and reacted as if it were a plague, avoiding it at all costs.

"We met with every well-known investment institution in the country, practically begging them for money," a founding employee of Joyo later recalled. "But the answer was always a cold 'Let's wait and see.' It's a kind of despair you feel when you're watching your child starve to death, and you can't find a single grain of rice."

Without the ammunition of external capital, Joyo was like a Ferrari with its fuel warning light flashing wildly. Although the engine was still roaring, it could stall on the track at any moment before reaching the finish line.

Act II: The Trembling Hand

By 2004, Joyo's capital chain was stretched to its limit. The money in its account was only enough to sustain operations for a few more months. Just as Lei Jun was at his wit's end, even considering layoffs and scaling back the business, an unexpected buyer crossed the Pacific and knocked on Joyo's door—the global e-commerce giant Amazon.

Jeff Bezos was ambitiously planning his global expansion, and entering the Chinese market was a crucial step. Acquiring a local leader was the fastest and safest way. They were interested in Joyo's team, brand, and market share. After a few brief rounds of negotiations, they made an offer that no one could refuse: $75 million in an all-cash acquisition.

In that desolate capital winter, this amount was nothing short of a "fortune." It would not only allow all early investors to cash out handsomely but also provide a precious, game-changing lifeline to the struggling Kingsoft.

When the news reached the Kingsoft board, the shareholders' opinion was unanimous: sell! For a listed company, decisively divesting a continuously loss-making business and injecting a huge amount of cash was a rational, unquestionable, and the only correct business decision.

But Lei Jun's heart was in torment.

Joyo was his "own son," into which he had poured countless days and nights of effort. He had watched it grow from an idea, a line of code, into an industry leader. Selling it was like personally handing over his child to a complete stranger, to be separated forever.

What pained him even more was that he knew better than anyone that Joyo's "cause of death" was not strategy, not the team, not the product, but simply "bad timing" and a "lack of money." He had replayed the scenario in his mind countless times late at night: if he had been able to raise just ten or twenty million dollars, Joyo would have definitely survived the winter and become the third pillar to rival Alibaba and JD.com in China.

The night before the board vote, Lei Jun didn't sleep. In a later interview, he recalled that night with a hoarse voice: "I just sat in my office, asking myself over and over, if Joyo were my personal company, would I sell it? The answer was ten thousand 'no's.' But it wasn't. It was Kingsoft's. Behind me were hundreds of Kingsoft employees and all the shareholders. I couldn't sacrifice everyone's interests for my own dream."

In the end, when it was time to vote, he raised his hand, which felt as heavy as a mountain, and cast the crucial vote in favor.

In August 2004, in Beijing, in the conference room where the acquisition agreement was signed, the Amazon executives were beaming, while the Kingsoft side had mixed expressions. Lei Jun remained silent and expressionless throughout. According to those present, when he picked up the Montblanc pen and signed his name on the thick document, the room was so quiet that only the sound of the air conditioning could be heard. Everyone saw that his hand was trembling uncontrollably.

After the signing ceremony, he did not attend the celebration dinner. He locked himself in his office and saw no one for the rest of the afternoon. This man, known for his iron will and calmness in the business world, cried that day.

Epilogue: The Key to Xiaomi, Bought with the Pain of Selling a Son

Selling Joyo became "an eternal pain in Lei Jun's heart." For many years after, he rarely mentioned it in public, but whenever he was asked, his disappointment and regret were palpable.

This painful experience taught him the heaviest and most valuable lesson of his entrepreneurial career. It was like a scalpel that cut through the warm facade of the business world, showing him the truest, cruelest face of capital.

He came to a profound realization that entrepreneurship is a brutal marathon. While business models and product experience are important, the depth of your capital determines whether you are qualified to reach the finish line.

He also deeply reflected on the issue of equity structure. Because Joyo was an "un-favored son" incubated within Kingsoft, its fate could never be independent from the start. At the most critical moment, as the founder, he had no absolute decision-making power and could only watch as his dream was held hostage by the interests of the shareholders.

These lessons, learned through immense regret and pain, were firmly etched in Lei Jun's mind. They were like unhealing scars, constantly reminding him.

Six years later, when he founded Xiaomi, his understanding and design of capital, equity, and company control were completely different, even obsessively so. He started the company with his own money and made it clear to all investors from the beginning: Xiaomi would not consider going public for the next five years. He wanted to ensure he had absolute control over the company, to never let the tragedy repeat itself.

The regret of Joyo was finally, in a different way, redeemed by Xiaomi. The key was bought with the pain of selling a son.

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Key Takeaways

1. Entrepreneurship is a marathon, and the depth of your capital determines how far you can run: Joyo had a leading model and excellent operations, but was ultimately forced to sell due to a broken capital chain. This taught Lei Jun that continuous capital support is the lifeline for a company's survival and development.
2. The top-level design of the equity structure determines the fate of a company at critical moments: As a subsidiary of Kingsoft, Joyo's fate could not be decided independently by its founding team. This prompted Lei Jun to place extreme importance on the founding team's absolute control over the company when he founded Xiaomi.
3. Never fight a war of attrition against a world-class opponent in a field where you are at a disadvantage: The "disadvantage" here refers to fundraising ability. In the extremely cash-intensive e-commerce race, Joyo's fundraising ability in a capital winter was far inferior to that of the later Alibaba and JD.com, ultimately leading to its sad exit.