He studied computer science in Switzerland but didn´t stay in the country because he lacked entrepreneurial challenges. After some time of organizing Bitcoin conferences and doing business in China he co-founded DECENT, a Blockchain startup aimed at revolutionizing content distribution on the internet. Matej Michalko.
Let´s start with a short introduction. What is your educational and professional background?
I have a computer science background. I studied CS at Swiss Federal Institute of Technology in Lausanne and worked there for a few years. Then, for the lack of challenges I observed in Switzerland, I moved to Slovakia.
That´s interesting. You lacked challenges in Switzerland so you came to Slovakia?
Indeed, yes. I am actually really entrepreneurial and Switzerland is not the best country in the world when you´re an entrepreneur. I have never worked as a fulltime employee in my life. I just did my bachelor thesis in a corporation, a small internship in Orange Slovakia for about 3 months and one project in Nokia Research Center in Switzerland as well. I realized the corporate world is just not for me.
It´s good you realized it that soon.
I´ve been entrepreneurial since the age of ten – selling fireworks, coins and other collectibles to my classmates and making profits.
Then I started a small business in Slovakia to import manufacturing goods from China for one and a half year. It was not successful but I´ve learned a lot from it. So my financial estate was probably on zero but what I earned were skills and experience. I learned much about China, about manufacturing process in China, about myself and picked up a bit of Chinese language.
And then, in 2011, during the financial crises in EU, I was in Switzerland and as the exchange rate of Euro and Swiss Franc changed I realized I lost a lot of money. After some research I found Bitcoin. Just a very few people knew about it at that time and I started to play with it and mine it. I was miner for a long time and when it started to have a certain value and I moved into bigger machines with lot of GPUs. My whole house was just one noisy place.
This was in Switzerland or Slovakia?
I started in Switzerland and then moved it to Slovakia and also to China. It was all worth a small investment, there were big farms, people paying more than one hundred thousand dollars for electricity per month just to mine Bitcoin.
At that time I started to love Bitcoin and to understand what kind of advantage this technology can bring to humanity. Not only in the case of Bitcoin. If you look at the Bitcoin you can extrapolate blockchain out of it. This is a mental model that can be applied almost everywhere, not only in FinTech.
In 2012-2013 I started to organize Bitcoin conferences all over the world in order to let people with alike mindset get together, share their experiences and shift the development and knowledge. I organized one conference in London in 2013 with about 1500 attendees. It was a free event, basically with no profit. Then we did more events in Vienna, Brussels and Shanghai. In Shanghai it was actually the first international Bitcoin conference in China. At that time the Chinese cryptocurrency community was kind of isolated so we made a bridge and brought the Western people in. After that there was another conference in London.
I also did cryptocurrecy consulting for about a year.
What was next?
I spent a few months at the Isle of Man and was actually one of the first to introduce Bitcoin to the local government. I talked to Minister of Economic Development and had many gatherings with the government institutions. It was very easy because the whole island has only 80 000 inhabitants with 24 000 living in the capital Douglas. So I managed to have 8 meetings per day with different officials and different departments, all taking place on the same street 🙂
We proposed a new legislation but unfortunately it didn´t end up successful, because even though the government is very approachable, it would have taken a very long time to set it up. We were not able to wait so long so we came back to Slovakia. And since then I am half of the time in China.
So it was about that time when you started to think about DECENT?
Actually, during the conference organized in Shanghai I got hooked up with an investor who had a project and he wanted me to evaluate an idea, whether it has a potential to become a global project. I had a look at it, found a few flaws and reasons why it wouldn´t work. So he said “Okay, could you please propose another project in this area?” And as we already cooperated on the conference, he had absolute confidence in me so I actually proposed DECENT and he said “Okay, let´s do it!.”
When was that?
That was at the end of 2014 and beginning 2015. We secured investment from Chinese-Malay-US investors. In the seed round we received 500k EUR and started to work right away.
What was the first main idea you had with DECENT? Was it the same as it is now?
We were talking about many different ideas that would make sense, evaluating it with our team and trying to validate it on the market. But the first that I really proposed to the Chinese investor was already this one – to create a digital content distribution platform that would allow anyone to publish for free. So we decided to do it via Blockchain which suits best as a solution and is for free.
If you had one sentence to use how would you describe DECENT?
DECENT is Blockchain based digital content distribution platform. What does it mean for a layman? Blockchain is the technology that is behind Bitcoin and it is a distributed database in a form of linked list. That means all the transactions are registered. It´s very difficult to delete the transactions that happened before because they are validated by all the nodes in the network and are decentralized. That means the solution is highly secure and transparent.
Because everyone sees everything.
Exactly. And if it´s a permissionless ledger such as we have, it can be used by everyone. It´s open source and for free.
That´s interesting point. You were established as a non-profit organization which is quite unusual for startups. What is the idea behind that and how does it work?
We are building DECENT ecosystem in order to build something else afterwards. This is the first step – creating the backbone. Then we would build other, more traditional businesses on it. But we need to have the infrastructure.
Take for example Linux Foundation. It came from the ideas behind Unix that were made open source. The team at the Linux Foundation is working on Linux kernel, the backbone. So everyone can download the kernel or the core of the operating system and just wrap it with other stuff. Such as Ubuntu (Canonical) or RedHat. They are big companies with hundreds of employees and their own business models, but still using free software.
What´s the business model of your foundation?
We have our internal token of payment called DCT that is intrinsic to the protocol. If you want to use DECENT you have to use the DCT. Something like our own Bitcoin. We issue those tokens and we keep – in a very transparent manner – a part of them for our operations.
Exchanging them for real money?
Partly we exchange them for real money with the external world and part of it we just keep. Of course we are trying to let people accept DECENT in a way as Bitcoin is accepted but this is not easy. The main use case for DECENT coins is for the protocol.
Who uses these DCTs? Is it you as founders or are there testers and early adopters?
Recently we finished the development of the prototype. It was running on more than one hundred nodes and now we are doing kind of semi-public beta testing of the platform. We would like to launch it within a few months.
Before that we are planning to do a crowdsale. That means something like Kickstarter or Indiegogo campaign so the crowds can buy our tokens directly from us for lower price than it will be for sale afterwards. This would at the same time allow us to raise some funds for the foundation and it would also ensure even distribution of the currency.
What is the exchange rate?
We are having some talks about it and I can´t tell you right now. But for sure it will be volatile to some extent.
For me DECENT represents this scenario: a censored author or activist in a dictatorship can write blogs and everyone in the world can see it without him being persecuted. But I don´t think that´s the main purpose of DECENT, is it? How can common people use DECENT?
Of course there are some whistleblowers in the countries where internet is blocked but this is not really the main purpose of it, because the market – the number of those whistleblowers – is not that big. What we are aiming at is to actually attract freelance authors and corporate partners to use the network as publishing tool.
Because what we got in there is decentralized system of reputation. If you use Amazon to buy a book, after two weeks you receive an email “Did you like this book? Please, rate it”. You can put zero to five stars and write what you think. If you do it, however, is the review really published? Who will guarantee it will be published? Because every time you go through a third party, what will happen next is not guaranteed.
If you are an author and you are selling book via DECENT, when I download it, read it, rate you and write a comment, it will stay in the Blockchain forever. Decentralized so everyone can check it. Good authors can make a decentralized lifetime reputation. Non-manipulable by third parties. We are changing the industry into a free competitive market. This is our most important aim. To liberate this market from oligopolies.
You said there are future products or services you are about to have on the DECENT platform. Can you talk about those?
First we are developing the kernel that will be free for everyone. In parallel we are developing a web app for e-books and bloggers so that we have gateways into the real world money in order to let people charge the accounts with their cards. Using it the non-geeky way. It is a platform for laymen that enables everyone to publish. We are planning to launch it together with DECENT to attract the geeky audience as well as the ordinary people.
In what time?
Several months from now. We just need to finish the testing, finish the development of the web, do the crowdsale and we can launch.
What have been crucial challenges you have been facing during the process?
I was quite aware of the technical side of the project and how technology would work. One of the most challenging parts was to find good people into the team. For example for the marketing and business development position at least 100 CVs went through our hands. We had few people and eventually only two stayed. We´ve been applying the rule “Fire before you hire!” but it´s still not enough. This is only the business development part that one would say is not that difficult. It actually is.
Another problem was the cryptography that is behind DECENT – a lot of custom cryptography and functions. Many PhD dissertations can be written about it. I talked to people that are now at Swiss universities doing PhDs and they told me “There is so much development done on this, why you are not at the university?” 🙂
So it was hard to find people who could do this. It´s almost impossible to find technically skilled cryptographer in Slovakia. No one studies that in this region. Fortunately, we found a guy in Ukraine that was working for two US startups before and he decided to join us along with the team of developers. We also hired a software architect from Eriksson.
In case if someone from Slovakia would like to join you, what skills should he or she have?
We are as lean as possible which means choosing only the best people and let them work as effectively as possible. But of course if someone would like to join currently we are interested in ambassadors that would spread the idea of liberation from the oligopolies in digital content distribution over the world. Most of our team is in Slovakia but we have ambassadors in Russia, Latvia, Germany and Canada. So we need to cover other countries, Slovakia too.
Let´s say you are growing fast and you need new technical people. What he or she must know? What are you looking for when hiring a technical person?
In regards to cryptography we already have quite a strong base. We would now be interested in more traditional IT guys that would be able to ensure system integration of DECENT through an API. We already have an API and for that one does not really need to understand what´s under the hood. So PHP, Ruby on Rails, etc., guys.
You mentioned that one of the greatest challenges was building the team. Could you describe the evolution of your team?
I started with the Chinese investor who asked me to build a team around it. He doesn´t really have time to act as a founder or in an executive role. Then I asked Matej Boda and we started to work on it as co-founders. Then we began to hire people according to our needs.
What does the team look like now?
Currently we have Martin for business development and Sandra for marketing and social, both full-time. Josef is technical guy. Then there are ambassadors and four people from Ukraine as mentioned before, plus advisors and consultants. All in all about 20 people.
And what is your role now? Do you also do the technical part or are you more a business person?
To be honest with you, I didn´t write a single line of code in DECENT. I have been more into project management and supervision. So I´m more a business person with a strong understanding of the technology.
Do you miss writing the code?
It´s about priorities and their leverage. I can only do one thing and cannot do another and I am more needed for the business part.
I was about to ask what were the steps you took to get investment in China, but it seems that was your first step.
In my opinion, the seed or initial stage VCs or other investors are interested in the team, whether the people are able to execute project up to the end. And as he´s already seen that I have strong execution skills the investor said “Okay, let´s do it.”
Do you see any difference between Chinese and European investors or VCs?
I don´t have much experience with European investors and VCs although I have some friends who got investments, but I haven´t really made a business plan and haven´t talked about an investment to the European investors. However, I talked with some in Silicon Valley.
For them it´s about people but mostly about the idea and the validation of the idea and whether there are users. In China it´s about whether you know how to execute things, whether you´re trustworthy or not. Basically that´s it. The idea doesn´t matter that much.
If you should give 2, 3 or 5 tips to a Slovak startup with intentions to go to China, what would it be?
First of all, learn Chinese 🙂 That´s above all. Because you wouldn´t get far with English in China. Most of the investors don´t really speak or don´t want to speak English. Or find someone trustworthy who speaks Chinese and can do translations for you and hope he or she won´t cheat you in one way or another. I already had some knowledge of the market, I was manufacturing some stuff and I learnt a little Chinese. I cannot tell that I speak Chinese, but I learnt a bit. Just enough to understand the local mentality. Then you can really get somewhere. It´s all about the language.
Are investors in China open for European startups?
They are, but only if you find a way to communicate with them. The main specific of the Chinese market is that it is totally isolated from the rest of the world. It´s a huge market but totally isolated. They have their own Facebook called 人人PeoplePeople. You are not able to connect to Facebook. They have their Twitter, they have their Youtube. Google is blocked, they use Baidu and Bing. However, I visited Google offices in the tallest building in Shanghai. The company has offices in there and does some marketing and software development for the US. So in fact Google is there but not on the web. Only LinkedIn works.
You are about to write guestblog for slovakstartup.com, mostly about the blockchain. What are the main topics you will cover?
First of all I would like to describe the advantages Blockchain technologies bring in comparison to the standard technologies and how we can solve various use cases in the Blockchain in much better way. I want people to understand the potential and how it already has been applied.
People can “touch” the use cases, they are tangible, not just some ideas: how can Blockchain develop, how it can save money and how people can get rid of unnecessary middleman? Then I would like to go use case by use case.
When you think about Slovakia what product, startup or service comes to your mind first?
Because Marek and Dusan have been friends of mine for a long time. We know each other from school, they were talking to me about the idea of RubixLab incubator and I was like “Go for it! I love it. We will see what it will look like after some time.” They are still here and they are building the ecosystem.
I was in Silicon Valley few months ago and what´s so perfect there is the ecosystem. You just go anywhere and you talk to guys in the street and they pitch the ideas to you and are all about “Let´s find an investor.” It´s so entrepreneurial and great. Like in a heaven. At least for me 🙂
There are meetups for everything, there are advisors for everything, there is a huge concentration of brains for business and science&technology at the same time, for such a small geographical area.
How far do you think are we from that mindset or environment you are mentioning? How big the gap Slovakia vs. Silicon Valley is?
In Bratislava – as I don´t know ecosystem in other cities, unfortunately – I would say we are few tens of years behind.
If you look at the history of Silicon Valley it started to be interesting during the Gold Rush in the 19th century with the cold nuggets and people from all around the world. Even from China. Then some technology development proceeded and Stanford University was founded. Since 1930s one of the Stanford professors told his students to found their own companies. This is how Hewlett-Packard started. There is a picture of garage in Palo Alto where they started. The garage is still there as “national monument” 🙂 The ecosystem was established, new people came, new “gold rush”. The history just repeated itself. Business cycles.
So compared to us I would say we could get closer to that state in about 20-30 years.
What do you think could we change in our mindset to shorten the period?
Most of the people in Slovakia are still very conservative. From my point of view people should be more open and accept change and diversity. Diversity is the most important. To understand that the future of this country is in letting qualified foreigners in. If we manage to get into the stage that qualified foreigners, the brains from abroad, would like to come here, then we are fine.
How can we do it? Building the ecosystem and getting people from abroad over here. As DECENT we also have investment from abroad but we are here, in Slovakia. There is still a lot of work to be done and it will take some time. But we are all working on it.
Photos: Facebook Decent & Matej Michalko