Alex Mashinsky, Founder, Celsius
David and Goliath, Breaking the Bank
Why Alex Mashinsky has devoted his eighth startup to taking on the world’s financial systems.
An entrepreneur like Alex Mashinsky is always looking for the next big disruption, and that means banking on perfect timing.
The serial founder—who’s famously raised more than a billion dollars in funding—is known for pioneering VOIP (voice over internet protocol) technologies that helped revolutionize internet and phone service in the 1990s. His timing was perfect, and his respective companies would go on to secure contracts with the likes of AT&T and the New York City metro system.
But he hasn’t always nailed it. Mashinsky also created Groundlink, which he describes as “Uber before Uber.” The rideshare company was in 100 countries when Uber was just in San Francisco, but was one of many businesses taken down by the 2008 recession.
Today, Mashinsky hopes to ride the cutting edge of yet another major innovation—cryptocurrency. He’s the founder of Celsius, which enables users to earn interest on and borrow dollars against cryptocurrencies.
“I hope my timing here with Celsius is better than my timing was with Groundlink,” Mashinsky says.
While any business owner wants their company to succeed, Mashinsky sees much more at stake here than just his entrepreneurial resume. He’s entered the cutthroat battle to drive mass adoption of cryptocurrencies, and in the process, turn the world’s entrenched financial systems on their heads. Here’s why Mashinsky has dedicated the rest of his career to the fight.
Outsmarting the Toll Collectors
Mashinsky has worked for someone else only one time in his life. While launching his first startup, he was struggling to make ends meet. So he got a job at City Hall giving tickets to illegally parked cars.
The job didn’t last long. The third time he wrote a ticket, the car’s owner came running at him asking him to stop, and it turned out to be someone Mashinsky had a business meeting with a few days prior.
“It was so embarrassing that I never tried to work for anyone again after that,” Mashinsky says. Instead, he’s busied himself with founding a whopping eight companies over the course of his decades-long career.
His first real venture involved building the first VOIP gateway back in 1994. (This system made international calls—then the bread and butter of phone companies—free.) Those were the days of dial-up internet, when nobody was sure if the internet could even scale. Mashinsky helped prove that it could by building the first PC-based voicemail systems.
His company’s big break came in 1995, when he was tasked with helping AT&T develop some of the first international VOIP systems in places like Korea, Japan, and Australia.
“It was all about bypassing the traditional phone systems,” Mashinsky says.
That theme of subverting the “big guys” to create more efficient, democratic, decentralized systems would go on to inform Mashinsky’s work with Celsius decades later.
“I haven’t really changed what I’ve done for the last 30 years,” he says. “I’m always breaking the barriers, trying to fight the big guys, the ‘toll collectors’ who make all the money.”
Creating the Cryptocurrency ‘Killer App’
While his focus was on bypassing cumbersome and expensive phone systems in the 1990s, today Mashinsky is attempting to fry an even bigger fish: the deep-seated financial systems that undergird all of western society.
“ all about bypassing banks and certain systems that force us to do things a certain way, which is obviously much slower and much more expensive,” he says.
Mashinsky believes the best alternative lies in cryptocurrencies, although at first, he needed a little convincing. “I actually looked at bitcoin and blockchain back in 2010 and thought it was a crazy idea that’s not gonna scale,” Mashinksy says. “I was a skeptic. It was very inefficient, it was slow, it consumed a lot of electricity. And I’m an efficiency guy.”
Thus began a gradual mindset shift by which Mashinsky has come to believe that cryptocurrencies are about something much bigger than efficiency. “It’s about a different way of thinking and a different way of achieving consensus,” he says.
At the same time Mashinsky became a believer in cryptocurrencies, he also started to notice that the crypto community was struggling to scale. So he decided to start Celsius, he says, “to move the industry from this early adoption phase to this mass adoption phase.”
Bitcoin is about 10 years old now with probably 26 million users, Mashinsky says, while the internet had 500 million users when it was the same age. So the technology is way behind on adoption. “The question is, how do you bring in the next billion or 5 billion people?”
Mashinsky’s perspective as one of the early pioneers of internet technologies informs his outlook on the rise (or lack thereof) of cryptocurrencies.
“The barrier here is that we don’t really have a killer app,” he says. He points out that the internet had multiple such “killer apps” in the form of email, voice-to-voice communications, web browsers, and so on. He hopes Celsius will do for crypto what email, for example, did for the internet.
“Celsius is basically saying, ‘Hey, the killer app is borrowing and lending,’” Mashinsky says. “If you can do global distributed borrowing and lending and take banks out of the way, we can actually use that to bring 5 billion people into the middle class.”
That mission lies at the heart of Celsius’ work. “We’re trying to really normalize and decentralize who gets credit, how credit is being provided, who gets to earn interest and how much, and so on,” Mashinsky says.
To that end, Celsius enables its users to earn interest on their cryptocurrencies and/or borrow dollars. Basically, this means users can “store” their cryptocurrencies with Celsius (much like a regular bank) and rest easy knowing those cryptocurrencies are earning additional interest at a rate of up to 7 percent. Or, if they need fast cash, they can take out loans (in dollars) from Celsius while their cryptocurrencies remain safely stored.
“It’s a win-win,” Mashinsky says. “Everybody borrows for less, and everybody earns more. … This is just one example of how you take stuff that only banks can do and you make it available to effectively everybody on the planet.”
Taking on Big Banks
While Bitcoin tends to get all the press (it was one of the most searched terms on Google last year), Mashinsky’s mission is to create mass buy-in around something much larger than even the most well known form of cryptocurrency.
“For me, bitcoin is almost like a foot soldier,” Mashinsky says. “It’s not the main event. The main event is really several hundred years of centralization being disrupted by decentralization.”
That number isn’t an exaggeration. “Banks have not changed in 700 years,” Mashinsky says. “We just went from physical gold, to paper notes, to digital money, and now we went to cryptocurrencies. So there were only four evolutions in 700 years. And this is the biggest one.”
In Mashinskys’s view, what makes cryptocurrencies so revolutionary is their capacity to disrupt the centuries-old, highly centralized banking system.
“All these giant companies, I call them the barons of the internet,” Mashinsky says. “Just like the robber barons or the railroad era or the banking era, now it’s the data era. The barons of the internet—the Facebooks, the Googles who control the data and are basically just giant toll collectors—are squeezing so much out of the system that everybody’s looking for a way to replace them. And decentralization is the only way to replace them. So it’s not about fixing what we have, it’s about creating a whole new system that bypasses all of that.”
If the term “decentralization” still has you scratching your head, Mashinsky offers a quick primer:
“Today, we’re used to…data sitting in a centralized server,” he says. “So your personal data sits with your hospital or your doctor or Facebook, and you or somebody else pays to access that data. There’s a toll collector who collects a toll either in the form of a monthly insurance payment or a health bill or a phone bill or something else to get access to all of those services.”
That’s the “centralized” reality we live in now, but Mashinsky envisions a future based on decentralizing core services. Blockchain technology is a vehicle that many believe will make that possible, as it allows large networks of users to cooperatively secure online information (financial transactions, in the case of cryptocurrencies) without relying on a central authority.
“We believe that almost all the services around the planet that have been billed as centralized services will be replaced with decentralized services where no one is really in charge, but at the same time the service provides utility to almost everybody on the planet,” he says. “That’s the big innovation about blockchain; that’s the big innovation about cryptocurrencies.”
But the big banks have no intention of going down easy.
For the People
“This is the biggest battle that I’ve fought in my life,” Mashinsky says. “I fought with the phone companies…in the 90s. This is 10 times worse.”
For example, he says that three of the largest banks in the United States (Bank of America, JPMorgan Chase, and Citibank) have instituted policies that prevent U.S. citizens from using their credit cards to buy cryptocurrencies, thus putting a giant roadblock in front of Mashinsky’s efforts to onboard more of the world’s population to crypto.
Making things harder is the fact that most of the world’s population still doesn’t understand the uses or global implications of cryptocurrencies.
“This is not a small battle, and most people don’t see that,” Mashinsky says. Nevertheless, Mashinsky is so passionate about his vision that he plans to devote the rest of his life to fighting the big banks, facilitating mass adoption of cryptocurrencies, and generally aiding decentralization.
“If there’s any legacy I want to leave behind, it’s winning this battle,” he says. “It’s about all of us owning our future versus governments printing money and diluting it without us having any say—even though we work really hard to create all that money. … This is the future of finance. Is it gonna belong to the banks, or is it gonna belong to the people?”
- Appreciate the importance of timing. “Most entrepreneurs aren’t masters of timing; they’re just the who were in the right place at the right time.”
- When raising funding, be persistent. Mashinsky has raised over a billion dollars in venture funding, but it didn’t come easy. He’s been turned down by VCs who told him he’s too young, too old, and everything in between. Between the eight companies that he’s founded, Mashinsky says, “I had to pitch over 200 times. Over 200 people said no to me.”
- Embrace mistakes as lessons. Like any seasoned founder, Mashinsky can rattle off a list of so-called failures—but they all had priceless silver linings. For example, he missed out on an opportunity to invest in a company that would go on to become Google. But he’s learned to accept that “you don’t win all the time. … You learn from your mistakes. That’s where you learn the real lessons.”
- How the 2008 recession took down his ride-share company (that was more popular than Uber at the time)
- Why Mashinsky is so passionate about educating the world on cryptocurrencies
- 4 entrepreneurial lessons to guide your business journey
- The mindset shift that led Mashinsky to focus on mass adoption of cryptocurrencies
Full Transcript of Podcast with Alex Mashinsky
Nathan: The first question that I ask everyone that comes on is, how did you get your job?
Alex: Well, I, unlike most people, actually never worked for anyone else. I’ve started seven different companies as a founder. A funny story is one time when I was doing my first startup, I couldn’t make a living, so I actually went to City Hall to get a job giving tickets to parking cars, cars that parked illegally.
It was funny because like, whatever, I think it was like the third ticket I was writing, this guy running to me and says, “Stop, stop, stop! I’m moving my car.” I turn around, and it’s somebody I was meeting with like two days earlier, pitching him on my next big thing. It was so embarrassing, that I never tried to work for anyone again after that. That was probably like what? 35 years ago or something.
Nathan: Wow, you’re a seasoned veteran. You’re one of the inventors of VOIP, and you had a foundational patent dating back to 1994. Was that kind of your first kind of play or what was your first startup? Because I know you’ve done some incredible things throughout your career. I’ll cover those in the intro, but yeah, I’d love to know, yeah.
Alex: Sure. I was, as a teenager, I had like a business building and fixing all kind of electronic equipment. My first real venture was, I used to trade commodities and stuff like that, like physical commodities. My first real venture was building the first VOIP gateway back in, like I said, October ’94, which was a great …
It definitely wasn’t clear that the Internet could carry voice or could scale. Back then, you had to dial-in to get your email and it would take, whatever, 10 or 15 seconds just to get connected, and then 10 minutes to login and actually load something up, so everybody was very sceptical that this stuff could run better, cheaper or faster than the traditional voice system.
Nathan: I see. Like how did you get into that? Were you self-taught, did you go to like university? Did you meet like business partners or co-founders?
Alex: Before, so I had a company called VoiceSmart, which built the first PC-based voicemail systems. We had, basically, back in the early ’90s, if you wanted a voicemail system, you had these really like proprietary computers that played the voice message when you called in and routed you to the right extension, and things like that. That was very expensive equipment, and we managed to do that on a traditional IBM PC.
When I saw the Internet, I was like, “Hey, I can put voice on the same box. I can take the same box and put some, a few extra boards there and process incoming voice on a traditional TDN network, put it on the IP network, ship it on the Internet, and do the same thing in reverse on the other side.” There were other people who experimented with voice over Ethernet, but not voiceover IP, no voice over the Internet. Definitely not voice over, the public Internet.
Our break came in ’95. I was lucky enough to be at the right place at the right time. Back then, the U.S. paid billions of dollars, basically in settlement payments, to all the carriers overseas, including Telstar and KDD in Japan and all these other guys because for every phone call from those countries, there were three phone calls from the United States because it was always cheaper to call from the U.S.
Alex: The Department of Commerce tasked AT&T to balance that ratio of payments. They went to Bell Labs and Bell Labs couldn’t come up with a solution. AT&T basically said to me, “Hey, do you have a solution? Show us you have something that works and we’ll actually use your equipment instead of Bell Labs.” We put the first system, I think it was in Korea, then it was in Japan. Then we put some systems in Australia and so on. It was country by country, it was the first guys to bring VOIP into all these foreign entities.
It was all about bypassing the traditional phone systems. Now, if you look at what we’re doing now, it’s kind of from voice over IP to money over IP. Now it’s all about bypassing the banks and bypassing all the financial restrictions that force us to do things a certain way, which is obviously much slower and much more expensive. Kind of haven’t really changed what I’ve done for the last 30 years. Always breaking the barriers, trying to fight the big guys, and making … The toll collectors who make all the money. You know?
Nathan: Yeah, yeah. It’s incredible. I really want to talk about Celsius in a second. Before we get to that, I just really want to understand and for our audience to understand the breadth of your entrepreneur journey and how much you’ve achieved in these past 35 years, because it’s a really like incredible feat, all these things you’ve done. I guess, maybe yeah, let’s fast forward. You know what? Let’s fast forward. That was 35 years ago. Tell us about Celsius and what you’re working on now, and this space around crypto.
Alex: Yeah, so I’ve been active in crypto since 2013. I actually looked at the bitcoin and the blockchain back in 2010 and thought it was a crazy idea that’s not going to scale. I was a sceptic. It was very inefficient, it was slow, it consumed a lot of electricity. I’m an efficiency guy. I do everything bigger, faster, cheaper, and here was a system that was slower, more expensive and required tremendous amount of electricity to operate.
It was kind of like the opposite of the Internet. The Internet, if you think about DC, PIP and how the Internet works, as you add more and more nodes to the Internet, it runs faster and faster and faster. The blockchain actually works the opposite. The blockchain is very fast if you have two or three nodes, but it’s very slow when you have 10,000 nodes. For me, kind of the hard piece of kind of joining the revolution was about understanding that this is not about efficiency, but it’s about just a different way of thinking, a different way of achieving consensus, achieving agreement on what’s the open ledger is all about, and how to create a really distributed global application.
Because VOIP is the largest distributed application that exists today, so I understand that part very well, but applying it to money took me a few years to really catch up with. Then started buying coins, helped a bunch of projects that … Other blockchains and other coins that came onto market. Then kind of seeing how the crypto community couldn’t scale, decided to start Celsius to really get the community from the early adopter phase to this mass adoption phase, which we think is what’s needed to really make this a global success.
Because today, bitcoin is 10 years old and there’s probably whatever, 25 million users, 26 million users for bitcoin. The Internet had 500 million users when it was 10 years old, so we are way behind on adoption, compared to where the Internet was in its infancy. The barriers here are that we don’t really have a killer app. The Internet had multiple killer apps. Email and voice and the browser and so on. Here, we’re missing the killer app.
Celsius is basically saying, “Hey, the killer app is borrowing and lending. If you can do global, distributed borrowing and lending and take banks out of the way, we can actually use that to bring five billion people into the middle class.” That’s, so that’s kind of our mission. We’re trying to really normalise and decentralise who gets credit, how credit is being provided, who gets to earn interest and how much, and so on.
Nathan: Yeah, I see. Basically, like would you be able to just, I guess, give our audience a little bit more of an insight into how Celsius works?
Alex: Sure, yeah. It’s actually very simple. If you have any cryptocurrencies, bitcoin or ether or other coins, today you don’t earn any interest, so those coins either sit on an exchange or they sit on your cold storage or wallet and you hope that they’re just going to go up in value. With Celsius, you could basically earn income on those coins while they’re sitting and waiting to go up in value, or you can borrow dollars against them.
If you need to borrow some dollars and you don’t want to sell the coins because you have to pay taxes and you’re going to have less coins, they’re not going to appreciate as much, so you can avoid that by taking a loan from Celsius, a dollar loan. Those are the two things, earn interest or get dollars.
Nathan: Ah, I see. I’m curious. Like what are the challenges? Because I find that a very … I really liked how you broke it down around … Because a lot of people do compare this cryptocurrency, blockchain movement to the Internet. Often, people do use that as a comparison. I really like your comparison around the killer app and the amount of users, et cetera, et cetera. What is your biggest challenge right now to grow Celsius and do you … Yeah, so what is your biggest challenge right now?
Alex: The crypto community had three waves. The first wave was all anarchists, all these crazy people who wanted to blow up the planet and use this for illicit means. That was the smallest wave. Then we had the wave of libertarians. They were the opposite of the anarchists. They were like, “We’re going to save the planet with this thing.” They basically started coming up with all the ways we could save the world by using these global, distributed, store value as a mechanism to compensate people and raise money for projects and so on, so on.
Then the third wave was this wave where all the speculators showed up because they saw how quickly these things increased in value. They said, “Hey, we want to be part of this also.” Those waves are great, but they’re enough to, again, they’re like, there’s probably only 50, maybe 55 million active users like now worldwide for all the different coins. Most of them are bitcoin. That’s out of a population of seven and a half billion.
The question is, “How do you bring in the next 100 million or next billion or the next five billion people?” Really, that’s what we’re focused on is, “How do you make the user interface real easy?” Back in the Internet days in 1995, the browser came out, the Netscape browser, and immediately, everybody downloaded it, 100 million people downloaded it in, I think, six months.
Alex: Because it completely made the Internet visible. You could basically browse, you could surf everywhere you wanted to and it normalised, standardised access to the Internet. That Netscape moment has not yet happened in the cryptocurrency world. No one has figured out how to make cryptocurrencies … How to hide all that complexity and really provide immediate access and fungibility to this ability to basically store value, move value between all the countries around the world and so on. That’s really what we have to solve. We have to solve making it real easy and have people trust the platform.
Right now, when we talk to people about cryptocurrencies, they’re like, they don’t know how to get in. They have no clue how to kind of job on, and then they don’t know what do with it. Even if they have few coins, “Okay, what do I do with it now?” Probably what we’re trying to do is really show them, “Okay, look. You have money, you put it in a bank, they give you 1% per year. Then they take your money and they give it to your neighbour and they charge him 25%. They make all the profit. How about we charge all these people 9% instead of 25%, and we give you 5% of the 9?”
You get to keep most of that profit and it’s a win-win, because everybody borrows for less, and everybody earns more. This is just one example of how you take stuff that only banks can do and you make it available to, effectively, everybody on the planet.
Nathan: Yeah, amazing. When it comes to this trend, like one thing that strikes me is you’re very, very good at kind of picking trends. Like when I was sent and I did some research on you, like you own all these different patents around VOIP and you’ve done, like you’ve raised over a billion dollars from venture and three billion in … You’ve done over three billion dollars in … Like three billion dollars in exits.
Like, what I’m curious is, is what do you look for when it comes to trends? Because this is like, this is early, like this very, very early stage adopter stuff and a trend that you’re looking at and you believe in. How do you find these trends? What do you look for? What … Yeah.
Alex: It’s not like there is a book I could write and everybody could figure out what the next big trend is. It’s almost like an extra gene. It’s like you either have it or you don’t have it. I don’t spend a lot of time researching or thinking about stuff or whatever. I look at something and I instinctively know if it’s the next big thing or not. The problem is that many times, being too early is almost bad as being too late.
For example, in 2004, I started a company called GroundLink, which was the Uber before Uber, and I was five years too early. Everybody thought it was the dumbest idea. Like, “Why would you … Alex, you’re crazy. Why would you start a limo company?” I was like, “No, you don’t understand. It’s not limo, it’s transportation on demand. It’s going to work all over the world. It’s going to be instant. You’re going to use it on your phone, on the smartphone you don’t have yet.” You know?
Alex: That was a little bit too early. We were in over 100 countries when Uber was just in San Francisco. We had service in over 100 countries and like several thousand airports and cities.
Nathan: Yeah, wow. What happened?
Alex: We were too early and we didn’t subsidise the rides. Uber is an amazing company. They lose money on every ride, and they hope they’re going to make it up in volume. We actually made a profit, and my investors didn’t want to subsidise rides, so they ate our lunch. We were too early. We were basically, we weren’t as aggressive and as financially savvy, I would say, as Uber was and our timing, which was, right, we went through the recessions of ’07, ’08, so we had to be profitable because you couldn’t just continuously just raise money from everybody, so we were on a different track.
I think, I hope my timing here with Celsius is better than my timing was with GroundLink. My point is that most entrepreneurs … McKinsey did a 10 year study of figuring out why the most successful companies are successful. Everybody tells you, “Oh, it’s all about the management or it’s about marketing,” whatever. No. It’s about timing. That’s what every research shows. Mostly, these entrepreneurs are not, it’s not like they’re masters of timing. They’re just, they were the guys who were at the right place at the right time, and VCs just tend to fund the companies that have the most traction. It’s almost like natural selection.
Here, I hope our timing is right, because I think the industry is, like blockchain and crypto were one of the most searched terms on Google in the last year, so I think there’s a lot of awareness, but most people don’t know how to jump in. It kind of reminds me of the Internet, ’96, ’97, where everybody knew what the Internet was, but no one knew how to use it or what it was good for. We are at that stage, where people are still trying to figure out, “How do I … What is the blockchain? What is cryptocurrencies? What can I use them for, beyond just the basic way for speculators to bet on this or that coin?”
Nathan: Yeah, because there seems to be a massive gap in the education piece. Like for example, my parents, they’ve read about it, but they don’t really know how it works or what exactly it is. It went massive over the media. It seems kind of quiet at the moment, these days. It’s not as on the front papers as much as it was, I guess, end of last year.
Alex: People exhausted themselves from listening to crypto every day. Like everything was blockchain and crypto, and every day everybody was tracking where the bitcoin is. It was just crazy. These are, for me, like the bitcoin is almost like a foot soldier, it’s not the main event. The main event is really several hundred years of centralization being disrupted by decentralisation. Bitcoin’s just like, again, the front soldiers, where the war is today between centralization and decentralisation.
Because all these giant companies, I call them the barons of the Internet, just like the robber barons of the railroad era or the banking era, now it’s the data era. The barons of the Internet, the Facebooks, the Googles, who control all the data and are just giant toll collectors, are squeezing so much out of the system that everybody’s looking for a way to replace them, and decentralisation is the only way to replace them.
It’s not about fixing what we have, it’s about creating a whole new system that bypasses all of that and crypto, slash, cryptocurrencies, slash, again, blockchain are the only way to do that. We are still experimenting with what are those perfect solutions? We are, it’s like it came to an explosion. We have thousands of experiments going on at the same time.
Alex: All these ICLs got funded, and to try to figure out healthcare, and try to figure out the personal data, and try to figure out how to move money around the world, and how to earn interest, and so on, so on. Each one of those is an experiment, trying to see if that is the right path or that is going to become the killer app that’s going to disrupt centralised, dominant toll collectors with a decentralised, crypto type solution.
Nathan: Yeah, amazing. When it comes to, and I know this might sound naïve, but for our audience, when you say a decentralised, like a network, what do you mean by that?
Alex: Well, so let’s take Voice Over IP as an example. Voice Over IP, a billion people use it every day around the planet. No one is in charge of it. I mean, like if your VOIP doesn’t work, like this is me and you just having a VOIP conversation right now. If it doesn’t work, there’s no one to contact. I mean, no one’s in charge, even though we’re using this or that app, the service provider is really the global Internet. It’s a completely decentralised application that uses the infrastructure that are available all over the planet to deliver a service that is free. It’s safe, it’s scalable and it’s free. The same thing can exist with your data, or with your data related to your health, or data related to social media, or your finances or anything else.
Today, we’re used to all that data sitting in a centralised server. Your personal data, for example, sits with your hospital or your doctor or sits with Facebook or anywhere else, and you actually pay or somebody else pays for you to access that data. Either the advertising company or somebody else pays for that service. There’s a toll collector who collects the toll, and either in the form of a monthly insurance payment or a health bill or a phone bill or something else to get access to all those services, which is the opposite of how VOIP works, for example.
We believe that almost all services around the planet that have been built as centralised services will be replaced with decentralised services, where no one is really in charge but at the same time, the service is provided as a utility to almost everybody on the planet. That’s where, that’s the big innovation about the blockchain, that’s a big innovation about cryptocurrencies, and about the ability to basically have it safely stored all over the Internet but, at the same time, only you and the people you trust are getting access to it.
Nathan: Yeah, amazing. Thank you. That was a great explanation. I’m curious around raising capital. You’ve raised over a billion dollars in venture funding, is that correct?
Alex: Over. Yes. Over a billion.
Alex: Hard to believe.
Nathan: Yeah, yeah. I’d be foolish, and the audience would be kicking me if I didn’t ask, what’s the secret sauce of raising? Like do you have rule book, playbook, anything key that has led you to do that, or anything you want to share?
Alex: Well, yeah, so again, timing is everything. When I was in my 20s, I immigrated to the United States, and I ran around … First I was in Europe, no one wanted to give me a dime, so I had to leave Europe and come to the U.S. When I came to the U.S., I was pitching people on these ideas I had about technology and this and that. All the VCs looked at me and said, “Oh, you’re too young. You need to bring adult supervision to really manage the company and build something real.” Every time I started a company, they would bring somebody to run it for me, and so on.
Now, I’m the older guy in the room and all the VCs are telling me, “Oh, you’re too old. We need to bring somebody young who understand what the future looks like, and really is in touch with technology, because you’re so old, you must not know anything about this stuff.” Times have changed, and back in the ’90s and the 2000s, the idea for VCs was that if you are the founder, they have to replace you as soon as possible, and put professional management to run the companies.
Then they realised that the companies that were ran by founders created the most value, like Google and Amazon and Apple and so on. Now, it’s the opposite of that. Now, like the founder, they hope to keep the founder for as long as possible. Every company I founded, I did about seven of them, Celsius, number eight, I had to pitch over 200 times.
Nathan: 200 times. Wow.
Alex: Over 200 people said no to me. Like I did this project called Transit Wireless, which was building the wireless system in the subways. Now you would say, “That’s obvious. What do you mean, wireless in the subways? You mean no one had it before that?” No. New York is, New York was the last big city in the world where you went down the stairs and your phone stopped working. I used wireless in the subways in Paris in the late ’80s, okay?
Alex: In 2004, 2005, there was still no wireless service in New York in the subways, all right? I had to fight with the city for a decade, basically, to convince them that it had to happen, and they said, “Great. It costs $300 million to build it. Are you going to pay that money?” I said, “Yeah, I’ll raise money, I’ll build it.” When I went to investors, they were like, “Are you crazy? You want us to give you 300 million upfront, and then maybe some carrier is going to come in and run the service on your system.” I’m like, “You guys don’t understand. Eight million people use it every day. Of course, somebody’s going to pay for it.”
No one wanted to have anything to do with it. It took a long time to fund it, a long time to build it. Now, this company is worth over a billion dollars and, obviously, eight million people use it every day. There isn’t anyone who’s not using that service, because it’s provided for free to all of the wireless customers of Verizon, AT&T, T-Mobile and Sprint, so basically because they had to come in and be part of the service. They couldn’t afford for one of them to be in there and not the other guys.
It’s obvious in retrospect, but when you are trying to raise the money, people think you’re a little … The distance between a genius and crazy is very, very small. The gap there is actually a few inches. That was a hard project to fund, it was a hard project to build, and I can say that about every company I’ve created. Nothing was easy. Same thing with Celsius. I mean, it’s not an easy project. Convincing hundreds of millions of people around the world that they should trust a system that you can’t see, you can’t touch, there’s no branch, there’s nothing.
You just have to trust this global network, that it actually stores all your money and you can withdraw it at time in any place on the planet. “That does not make any sense,” so for most people it’s a foreign concept. Part of our mission is really, again, we’re not trying to provide service to the existing 50 million people. We’re about the next 500 million, and getting them to trust us and trust the infrastructure that we’re building.
Nathan: Yeah. I’m taking a tonne of notes. This is awesome, man. Really interesting. You talked about the company around the wireless in New York City. I’m curious, you said you had to pitch over 200 times. Did you have the same conviction that you had, like was it the same level of conviction after you’d done it versus when you were pitching? Was that conviction the exact same?
Alex: Look, I can tell you that you have to look at yourself in the mirror every day and convince yourself. It’s not like you don’t lose faith. It’s not just that we were … Like even when people said yes to us, like we eventually got a big financial firm to agree to fund the project, and during the 2008 collapse, they went out of business and we had to go and look for it again.
Nathan: Oh, wow.
Alex: You thought you were already done and you were good to go, and then you lost your main funding partner, so it’s never done until it’s done. Your conviction and your grit has to do with just continuously convincing yourself that you’re doing the right thing. With GroundLink, I could not convince my partners, my financial partners, that I had the right idea and that we had to pivot from focusing on being profitable to focusing on getting as many customers as possible, which is what Uber did, and we lost the race.
The company still exists, even now, GroundLink is in more cities than Uber but, obviously, we’re not as big or profitable as Uber is. I think you don’t win all the time. On my website, I have a bunch of the situations in which, obviously, I made tremendous mistakes, and you learn from your mistakes. I mean, that’s where you learn the real lessons. You don’t learn from your successes. Those, most people, most successful people you talk to, they’ll tell you, “I did not learn much from my success. I learned most of what I know from my failures.”
Nathan: Can you tell us about some of those failures and mistakes? Like some of the biggest?
Alex: Do you have like four or five hours, or … Well, I’ll give you one that I’m famous for, okay. Back in ’98, I had one of those really top unicorns in New York City. I was famous and everybody was like … I had like the golden touch because I raised all this money and my company was one of the top ranked Internet unicorns back in the day. One of my investors called me and said, “Listen, you’ve done great, but it’s time for you to help other people. I have this Russian entrepreneur who has this crazy idea, but I really need you to check it out and help them out.”
I met with them in New York, and they were pitching me on this crazy idea of like service for librarians, service that could index the white cards, replace the white cards for librarians and this and that. I’m like, “That’s the dumbest idea I’ve heard in years. Who needs … No librarian’s going to buy software. It’s going to take you forever to sell it. What else can you do with it?” He’s like, “Oh, well, I can build a search engine.” I’m like, “We already have 10 of them, AltaVista and Lycos and Yahoo.”
He’s like, “No, no. Ours is going to give the results in a different order.” I’m like, “Who cares about that? Do you have the Alpha chip?” That’s what digital equipment had. A chip that was running 100 times faster than the IBM 80, 86 or whatever the processor was, 286, I think, was the processor at the time, 386. I’m like, “Can you compete with the Alpha chip, which is running 64 bits, versus you’re running at 16 bits?” He was like, “No, I can’t compete with that.” I’m like, “Well, I’m not investing in this project. Besides, how much do you need?” “I need $100,000 for 10% of the company.” That was Sergey Brin with Google, you know?
Nathan: Yeah, wow.
Alex: Sometimes when you think you know too much, you know nothing. Obviously, they’ve done a phenomenal job, not just conquering the search engine space but also creating this dominant operating system that is on 80% of all the phones in the world and knows everything about everybody. They know more about people than the CIA does. Sometimes luck just stares you in the face and you’re just, your choice is you just walk away. I have a few of those.
Like I can tell you that, even like after I did VOIP and everything and Arbinet and everything, the investors that looked at Skype, when Skype was just a little startup, called me. We’re talking on Skype right now, so it’s an appropriate story. They called me and they said, “Can you help us with due diligence on this crazy …” I think it was Lithuanian company, they were based in Lithuania or something.
Alex: I called them, I had a chat with them, and I know they came from the Kazaa team. I was like, “Great. You guys solved all the ways to get around all firewalls and everything else so the stuff works in every environment, but you’re never going to make any money because your service is free.” They’re like, “Well, we’re going to sell SkypeIn and SkypeOut. I’m like, “Ah, that’s a shit service, they’re never going to make any money,” and I was right. They never made any money, but that doesn’t matter. They still sold the company for like $9 billion. Being right doesn’t mean you’re right. Sometimes knowing too much is your main obstacle.
The people who have conviction and have a belief in something sometimes know the least, not the most. Because if you know everything, then that usually is in your way. It’s not always helping you get to the right result, or make the right financial decision, or the right investment or whatever. I know a lot of investors who are … My wife always make jokes with me. She says, “If I had a lobotomy, I would be a billionaire several times over,” because I just, I know too much.
I know a lot of investors who just pray and pray, and they just hit a bunch of unicorns and they’re doing great. If you landed in San Francisco and you just threw money around, chances were you were going to do very well. You didn’t have to hit all the best companies. You did great, no matter what. At any time in the last 20 years, it didn’t matter what you did in the last 20 years, you would have done very, very well spreading your investment across almost any company in San Francisco.
Timing has a lot to do with it and, again, I’m not a professional investor. I’m more of an idea guy and write the … I come up with a vision, I come up with a strategy, and then I put a team together and raise money to execute. That’s kind of what we’re doing here at Celsius. Now we’re at the scaling-up phase. Now we’re kind of bringing in the professionals, the marketing guys, the finance guys, to really figure out how to convince hundreds of millions of people that they need to stop using their banks and earn five times as much with Celsius.
A lot of it has to do with trust, so I’m like the guy carrying the flag and convincing people that just like what we did for VOIP, where we allowed a billion people every day to use stuff for free. I remember calling Australia, it was $3 a minute.
Alex: I mean, and calling Japan was $3 a minute, a minute. I used to, I remember, I used to send faxes with half a page because that was less than one minute. You could get half a page through a fax machine, and they would not charge you the second minute so you could do it for $3 instead of $6.
Nathan: That’s crazy.
Alex: Those were the days. Now, when you … Like my daughter, when I show her a picture of a phone that used to have a cord attached to it, they’re like, “Why do you need a cord?” They think everything was always wireless. Just we sometimes underestimate how quickly things change. If you look at banks, the banks have not changed in 700 years. Bank of dei Paschi, which is the first bank in Italy, it was created in Siena.
They had a branch, and they had a bank manager. You walked in, you gave them gold coins and they gave you a little note the bank manager signed and said, “You gave me three gold coins.” You could come at any moment with that note, and they would give you back the gold coins. That was the first bank branch, 700 years ago.
Alex: That hasn’t changed. We just went from physical gold to paper notes to digital money and now we went to cryptocurrencies. There were only four evolutions of money in 700 years, and this is the biggest one. Money’s bigger than anything. Money’s bigger than the Internet, and bigger than cars, and bigger than oil and gas, bigger than real estate. It’s everything.
This, when we’re talking about decentralisation of money, that is a bigger tsunami wave than everything ever happened until now, and that’s what I think people underestimate. They think, “Well, this whole crypto thing looks like just a little wave inside the Internet.” No. It’s not a wave inside the Internet. The Internet is a wave inside this decentralisation.
Nathan: Yeah, so, man, you’ve blown me away. I can really hear your conviction and your vision. Look, we have to work towards wrapping up, but I have a few more questions. When it comes … You said you’re an ideas guy, you come with the vision, you hold the flag, and you scale, you’re in the scaling-up phase. When it comes to hiring, are you looking for experience or attitude? What do you usually choose, experience or attitude?
Alex: Right. I think smarts and originality kind of beats almost everything else. If you hire smart people who are self-starters, they can figure anything out. Like we did our ICO, for example. We raised just over $50 million, and we did everything differently than every other ICO before us. We didn’t raise money from big investors. We did not focus on the United States. Because we were building a community. For us, it was all about, “Let’s bring as many users as possible who believe in our vision.” Because that’s what we’re trying to build.
We focused on the stuff that was important for our community, because it’s all about the community, and we were one of the most successful ICOs of the first quarter of 2018. Everybody ran after us and said, “How did you know? How did you do this?” We’re like, “We didn’t know, we just did it.” We thought this was the right, to do it, and we did not include almost any VC, like we were the opposite. When VCs came to us, we said to them, “You’re not part of the community. Why would we include you?” This is after building seven companies that were all VC backed.
Why? Because the team, everybody on the team. It was a young team, more than half of them were women, felt that that was just the wrong thing to do. “If we have a real mission and real passion for this, then let’s follow what we’re telling everybody. Let’s not dilute our message. Let’s not cheat by going the easy route of just taking a lot of money from the guys who want to come in early and make just a giant profit on the backs of all the people who actually we’re supposed to help.”
That’s, it’s definitely not obvious, that’s not the obvious answer but when you have a good group of people with original thinking, you’re going to do the right thing. Hiring has more to do with like, “Okay, are you passionate about the subject? Are you smart? Are you a self-starter? Are you going to figure this out?” Or if you … I always joke that you go to school and you only learn what everybody already knows. You go to life, and you have to do stuff that no one has done every day, because that’s how you create value. You don’t create value by doing stuff that everybody knows.
When you start a young company that is in a new space, it’s all about breaking new ground, and figuring things out, and original thinking, and things like that. That’s, these are the kind of characteristics of the people we’re looking at.
Nathan: Yeah, love it. When it comes to … Last question, two last questions. What’s next for Celsius? What’s the grand plan to really be a shining beacon for this space, and be that, potentially, that killer app that we spoke about, like the browser? Then, where’s the best place people can find about, more about yourself and your work?
Alex: Yeah, so it’s actually harder than I thought. I mean, we thought there’s going to be barriers to adoption here, but we definitely did not expect, for example, the three largest banks in the United States, not just that they copied Ethereum, they copied all the source code and created their own system. They also, at the same time, went and prevented U.S. citizens from using their credit cards to buy cryptocurrency.
Bank of America, Citibank and J.P. Morgan blocked all their users. I think that’s illegal, but no one is fighting with them in court. That kind of like completely puts the brakes on our ability to convince people to come and try crypto out, try to buy cryptocurrencies, or earn interest or anything else. Because, obviously, they see us as a threat. This is like war. This is like Russia invading France, stealing the Mona Lisa and then throwing an atomic bomb on France, just to make sure that they kind of clean up after themselves. This is, that’s the fight. This is war. This is decentralisation.
This is the centralised companies saying, “Oh, you want to mess with us? Here’s an atomic bomb. Let’s see what you do, and we stole your Mona Lisa. We stole the Ethereum source code. We’re going to call it something else, and in a few years, no one’s going to remember that you wrote this.” I think this is the biggest battle that I’ve fought in my life. Look, I fought with the phone companies. Believe me, in the ’90s, going and telling AT&T, “We’re going to give voice for free,” when they were making 90% of all their profits from international voice communications. Those were not fun conversations, but eventually, AT&T was our largest customer.
In 2004, when Arbinet went public, AT&T was my largest customer. Here, this is 10 time worse. This is a fight. I feel the weight of the community on my shoulders, because no one wants to take on this fight. No one is out there saying, “Hey, I’m going to go face-to-face with Jamie Dimon and fight it out with him.” He’s worth, whatever, $20 trillion in assets, and I have 53 million that I raised from 15,000 people all over the world.
That is the David versus Goliath that we’re facing here. It’s, this is not a small battle. Most people don’t see that. Most people think, “Well, you guys are just trying to solve a few problem of how to move money around the world.” I mean, like, “No. This is the future of finance.” Is it going to belong to the banks, or is it going to belong to the people? It’s not about a government, it’s not about a border, it’s not about a country or a central bank, it’s about all of us owning our future, verus governments printing money and diluting us without us having any say, even though we work really hard to make all that money or create all that value.
Like you said, I was very successful, my first … I’m 52, very successful. I hope to dedicate the next 50 years to this battle and really fight it out, because if there’s any legacy I want to leave behind is winning this battle. This is the biggest battle of my life.
How you find out about it? We have, go to Celsius.Network or to Telegram. Look at Celsius Network on Telegram. Join us, follow. We have a lot of … We have a YouTube channel that has hundreds of interviews and video clips, and all kind of educational stuff that kind of try to explain to people why this is important and why it’s for the people by the people. It’s not, this is not about profit. This is all about taking everything we generate and giving it back to the people who are members in our organisation.
Thank you for having us. The call to action to your viewers or listeners is that every one of them, if they believe what we’re trying to do has to bring 10 people into crypto, because that’s the only way we’re going to win. We’re going to win if each one of us takes actions every day and bring their friends and family into this. Because this is a much brighter future than hoping that the United States or Australia or the EU is going to stop printing dollars or Euros. The dollar lost … If you put the dollar versus the bitcoin, the dollar lost 99.999 of its value over the last 10 years. Okay?
Alex: That’s how much it got diluted, versus the bitcoin. That’s going to continue, because that piece of paper that you call $100 has over $160 worth of debt behind it. Most people don’t understand that. It has negative net worth, because the United States is 22 trillion in debt. Each citizen in the United States owes $165,000 to people all over the world including China, and Japan, and Korea, and so on. All that debt is coming due and somebody’s going to have to pay it.
All this money that we’re printing is worthless, in reality. Crypto represent the alternative universe of that. The bubble is in the dollar, is in the bond market, is in the stock market. All those things are in all time highs, and the cryptocurrencies represent the opposite of that. They represent actual limited supply of something where you can put your assets into and know that they’re still going to be worth that or more tomorrow.
Nathan: Amazing. Look, this was a great conversation. I think even just hearing you speak and even the “us verse them,” I think that’s very powerful, just the way you’re communicating your vision. Yeah, look, it was an absolute pleasure speaking with you, Alex. Thank you so much for your time and, yeah, I can’t thank you enough for taking time to share.
Alex: Yeah. Thanks for the opportunity. Again, I hope your viewers, your listeners are going to have as much passion as I do about the subject, and do their learning and make a decision for themselves, who’s right and who’s wrong.