Alex Mashinsky On Achieving $3 Billion In Exits And Being One Of The Most Feared By Banks

Alex Mashinsky is on his eighth startup company, Celsius Network, which has already raised $50 million via an Initial Coin Offering (ICO). He’s also made around 120 VC investments himself, holds 34 patents, raised over a billion of dollars for his companies, and has achieved at least over $3 billion in exits.

In this episode you will learn:

Entrepreneurs are born not made
Lessons learned from founding 8 startups
Dealing with investor issues
Turning around companies
The future of crypto and blockchain
Raising capital and selling companies

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About Alex Mashinsky:

Alex is one of the inventors of VOIP (Voice Over IP) with a foundational patent dating back to 1994 and is now working on MOIP (Money Over IP) technology. Alex is a serial entrepreneur and founder of seven startups, raising more than $1 billion and exiting over $3 billion.

Alex founded two of New York City’s top 10 venture-backed exits since 2000: Arbinet, with a 2004 IPO that had a market capitalization of over $750 million; and Transit Wireless, valued at $1.2 billion.

Alex has received numerous awards for innovation, including being nominated twice by E&Y as ‘Entrepreneur of the Year’, in 2002 & 2011; Crain’s 2010 Top Entrepreneur; the prestigious 2000 Albert Einstein Technology medal; and the Technology Foresight Award for Innovation (presented in Geneva at Telecom 99).

As one of the pioneers of web-based exchanges, Alex authored over 35 patents that cover aspects of the Smart Grid, ad exchanges, Twitter, Skype, App Store, Netflix and many other popular web companies.

Connect with Alex Mashinsky:

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers Show. I’m actually excited about the guest that we have. He has 3 billion in exit if I understand it right, and we’re going to learn a lot. So, without further ado, Alex Machinsky, welcome to the show today.

Alex Mashinsky: Great to be here. Thanks, Alejandro for inviting me, and it’s a beautiful day here in New York. Where are you calling from?

Alejandro: I’m actually in New York City as well.

Alex Mashinsky: Oh, okay.

Alejandro: I’m right there with you. Beautiful day and I’m tired of the cold and the snow. So, hopefully, we’re getting into sunnier days, I would say.

Alex Mashinsky: Yes.

Alejandro: You have done this entrepreneurial thing multiple times. I mentioned to you that I got a little bit dizzy learning even further about your story because you just once being at it, it just takes a lot being at it so many times like you have done. It’s unbelievable. How many companies have you built and exited so far?

Alex Mashinsky: Celsius is my eighth company. The seven companies before that all had exits. I tried retirement in the middle, though, and that didn’t work too well.

Alejandro: I got it. How did you get the entrepreneurial bug, Alex?

Alex Mashinsky: I think you’re born with it. I don’t think you get it. There are people who are doers, and there are people who are just dreamers or people who just think about things. I don’t think about things too much. I jump in and try to do things. A lot of my companies are kind of the same theme of basically disrupting this or that industry and trying to make the world a better place.

Alejandro: Yeah, I hear you. I understand that your first rodeo was with Arbinet. Is that right?

Alex Mashinsky: First in the U.S. Yeah, I had little startups when I was in Israel before I went to the military. I had all kinds when I was in my teens. But the real big company like my first success was Arbinet.

Alejandro: So, before you got started with Arbinet because I think that the military and then also these ideas or projects that you were doing, I’m sure that they shaped you quite a bit. So, what did you learn from that experience there in Israel before you got here?

Alex Mashinsky: I’m an immigrant. I was actually born in the Ukraine back when it was still the USSR. It was part of the Russian Soviet Union. My parent immigrated to Israel in ’72, and I spent 16 years in Israel. It was like a culture shock because you went from a communist country to socialist country, from a different language, different environment. Israel is people from over 100 different countries. So, it was really like a melting pot of different cultures. It was a great way of growing up and trying to understand the world. Then, again, being in the military; also, I was deployed in Lebanon for a while. So, being in the frontlines, I have a few scars on my body to prove it.

Alejandro: Wow.

Alex Mashinsky: Really kind of seeing life and death. After you’ve been in those situations breathing every day is like a miracle. So, you appreciate every day you’re alive.

Alejandro: I hear you. You know, I actually have experienced that myself. When you have either a relative or someone or even yourself, like you said in a life or death situations, you become more grateful of things that you did not know you were supposed to be grateful for. Did you get the same thing?

Alex Mashinsky: Definitely. I think there are two types of happy people. There was a survey done all over the world, and I think that’s the country that came up #1? They’re north of Belgium. What is that called?

Alejandro: What was the survey?

Alex Mashinsky: The survey was about who had the most happy people on the planet. These people came up first because their expectations are very low. So, they’re always happy. When your expectations are low, you’re happy. But the other extreme of that is you’re happy because you know that the world can be such a bad and hard play that you appreciate everything, even the little things. So, I’m on the second camp. I’m on the camp that has high expectations but appreciates the little gifts that we get every day.

Alejandro: I love it. I hear you. Here’s the thing, I’m also a foreigner. I came from Spain here to the U.S. I am actually interested now in hearing what was your process of coming here before you actually went at it with Arbinet?

Alex Mashinsky: It’s a funny story because people will think, “Oh, he was a tech guy, so he came to the U.S. as a tech guy. Funny enough; actually, I wanted to work in Europe. When I went to the travel agent, and they asked me where I was going, I said, “I’m going to Paris.” They said, “You know it’s cheaper to buy a ticket the U.S. with a stop in Paris.” So, I always had that stop. I had that extra ticket in the first year that I was in Europe trying to make it work. I kept looking at the ticket, and I said, “You know what? Maybe I should go to America and test it out.” So, I planned to come here for a few days and then go back. I had maybe $100 in my pocket. I landed here and took the bus to 42nd Street. I looked around, and I was like, “I’m never going back anywhere. I’m staying right here.”

Alejandro: What year was this?

Alex Mashinsky: 1988. It was definitely not a master plan. I thought I was going to end up in London, or Paris, or one of these places. I definitely didn’t think I’d stay. I’ve been in New York for over 30 years now, and I love this place. I leave the city for a few days, and my hands start shaking.

Alejandro: I hear you. It’s the speed. Once you’re used to it, it’s tough to leave it.

Alex Mashinsky: And, one more important thing. In Europe, you go in, and you say, “I want to do this. I want to do that.” People look at you like, “What’s your name? Where did you go to school?” And they kick you out of the office. In New York, you come in, and it doesn’t matter if you are a Russian-Israeli immigrant. You come in, and you say, “I want to do this big idea.” People scratch their head and say, “Wow! This is a big idea. Let’s do it together.” So, it’s like this place was made for me. I felt like I could finally breathe. It was just really, I found my environment, and again, most of us are not lucky enough to find the one thing we do very, very well. For me, just being able to land in the right place at the right time, and be an entrepreneur was just heaven.

Alejandro: Let’s say your first contact, or your big contact with heaven, in a meaningful way. That was Arbinet. How did you come up with this idea?

Alex Mashinsky: I had this little company that made voicemail systems. I was one of the first guys to build a PC-based voicemail system. Until then, companies like Octel and VMX used to—on mini computers with proprietary hardware. They cost hundreds of thousands of dollars. I basically made the same machine for like $10,000. So, we were selling that to everybody. I started playing with the internet, dial-up, BBS, and things like that and email. I realized that the voice could run on the internet. I started going around telling people, “Look. Voice is going to be an application on the internet.” People were like, “No, you don’t get it. The entire internet is an application on the voice network. You have to use a modem to dial into the internet.” I’m like, “No, no. That’s today. But 10 or 20 years from now, it will be always on, and you will be able to have gigabits of speed, and the voice will just be an application. So, it took me a while to convince people. I built, actually, a prototype of the devices because I already had the voicemail system. I just added some voice boards and T1 connectivity, and things like that. I built the first voice of RP Gateway. That was that. Then created Arbinet. Became a public company. Had a billion [7 valuation 8:48]. We had 4,000 carriers all over the world using us. We ran over 10% of all the world’s traffic. Today, 3 1/2 billion people use Voice over IP for free because we basically decided that charging $3.00 a minute was just not a viable, sustainable business model. Lots of phone companies used to charge us to call overseas. So, here we are. That was easy. You know the old saying, “It was staring you in the face.” All you had to do is execute.

Alejandro: For sure. How did you capitalize this business because we’re talking about the ’90s? It was a different way of doing fundraising.

Alex Mashinsky: I had 12 VCs that invested money in us. We raised over 300 million dollars. I did six or seven different rounds of funding. In 2004, the company went public. ARBX. It was the symbol of NASDAQ, and it was the best IPO in 2004. That was a very powerful year. Google went public that year, and a few other big companies. So being #1 that year was not easy. Believe me. But we were the hottest thing. We were the creators of VoIP, and obviously, VoIP still is one of the hottest and largest distributive application on the internet.

Alejandro: And the company ended up being acquired by Primus Communications?

Alex Mashinsky: Yes, it merged with Primus. It’s still around. Now, it’s called HC2, and the symbol is HCHC. So, the company is still around. They just changed names and changed owners. I was on the board. I was off the board. I’m no longer involved with them.

Alejandro: Were you involved at the time of the transaction?

Alex Mashinsky: Yeah, of course. I was CEO for the first five or six years. I helped raise all the money. I helped take the company public. I was on the board until 2009, I think. So, I was involved for a very long time. Yeah. I started the company in 1994, so a long time.

Alejandro: Really cool. One thing that I was really impressed by is that you did so many things at the same time. I was getting lost on the amount of things you were involved with because during this same period, for example, you also did Comgates. Is that right?

Alex Mashinsky: Yes. Comgates was like an offshoot of Arbinet. So, Comgates created soft switches. The software that needs to connect networks to each other, VoIP networks together. There was technology that we could not really deploy inside Arbinet, so we decided to spin off a separate company that had its own separate funding. It raised over 20 million. It eventually got sold to a public company as well. It’s part of the gateway protocols that are used today. What we’re talking on right now is a VoIP conversation. Even if we’re in New York, your gateway and my gateway may not be the same company, and you need someone to basically enable the traffic to clear between all these different networks, and that’s what Comgates created.

Alejandro: So, you guys sold to Telco Systems. What trigger the M&A process here?

Alex Mashinsky: We built a great product. Telco wanted to be in the VoIP business, and we sold the company. That’s just what happens. Obviously, there were many different companies in the space. There was consolidation of—like SISCO bought a company and Telco got a company. So, there were definitely four or five solutions out there, and you had to team up with someone to be part of a bigger solution because phone companies don’t buy equipment from small companies. They usually want to work with bigger companies.

Alejandro: Yeah. Absolutely. Then at the same time, you had Elematics. What was this company about?

Alex Mashinsky: Elematics was an idea way ahead of its time. Elematics started in New York, but it actually scaled up in Beaverton, Oregon. So, we had, I think, like 60 or 70 people in Beaverton right next to the Intel offices. We created what’s called N2NI, network to network interface. If you’re familiar with computer virtualization, virtual machines, and being able to extract, and network topology, and all that stuff, and put it on the higher layers, which is what’s happening today on Amazon Cloud, Google, and so on. Before any of these things existed, Elematics was one of the first companies to come out and show how it can be done. We actually won the Verizon contract to deploy network virtualization across their fiber-optic network. So, we were really one of the first hot startups in the space. More, I think because the two rounds of funding put like 23 or 24 million dollars into the company, and again, pioneer in the space. Today, everybody is using that service. They don’t even know they’re using it because it’s embedded into Microsoft Cloud, and Amazon Cloud, and so on. But back then, the whole idea that you can basically have a dumb network and extract everything into virtual machines was a very, very new idea.

Alejandro: Got it. Here, you were acting as chairman for the most part?

Alex Mashinsky: I was the founder. I was a CEO for the first year. When we decided to move the company to Beaverton, I did not move with the company. I stayed as chairman. Scott Cook and a few other people—Clive Cook. Scott Cook is the CEO of Apple. Clive Cook was my co-founder and ended up running the company day-to-day.

Alejandro: What ended up happening with Elematics?

Alex Mashinsky: The company was sold. It was an exit. I think in 2004. I don’t remember the exact year, but I think it was 2004. The technology is still being used anyway. I have like 50 or 60 patents in the space. Just like VoIP, the technology is used by everybody. So, it’s a standard now. It’s a global standard.

Alejandro: Was this acquisition similar to the one that we were talking about of Comgates or how did this happen?

Alex Mashinsky: Elematics had no connection to Arbinet. It was not a spinoff of Arbinet. That was a completely separate company, separate idea. So, we started up from scratch. That was actually just like an idea that I had that turned into a startup, just like Arbinet was a startup.

Alejandro: Got it. Really cool. Who ended up acquiring the company?

Alex Mashinsky: Wow. I can’t remember, but there’s a press announcement somewhere.

Alejandro: Was it a public company like the other one or not?

Alex Mashinsky: No, I don’t think it was a public company, but it was one of the players in the space.

Alejandro: Obviously, you have reasons to not remember because you were doing, also, Transit Wireless at this time as well. When did you sleep, Alex? When did you sleep?

Alex Mashinsky: Well, when you see an opportunity, you’re going to jump on it. You know?

Alejandro: Wow.

Alex Mashinsky: So, yes. My best friend died in 9/11 during the collapse. He was in one of the towers. I wanted to do something in the city to commemorate and help the city with what happened. One of the things that really was a huge problem during September 11 was the fact that millions of people use the subway every day, but they don’t have connectivity. Well, the subway system is over 100 years old, and the minute you go underground, you were disconnected from the world. There was nothing there because New York is granite. No signal goes through granite. I was naïve. I went to the MTA in 2002 and said, “We should put wireless in the subways.” I used wireless in the subways in Paris in the ’80s. This is 2002, and there was nothing in New York. I was just going crazy. I couldn’t understand why this big city, the largest underground system in the world would not have wireless service. Then I realized it had nothing to do with technology or anything else, but just business. Just like a gym membership doesn’t want you to use the gym every day. They are okay with you never coming. The phone company, because they charge you a monthly flat fee, they would love for you to not use the service as much as possible. If you are in the subway one or two hours a day, they love it. They don’t want to spend hundreds of millions of dollars building wireless in the subways. And the city could care less. And the MTA, they were worried about terrorist attacks and things like that instead of worrying about safety of the people using the system. So, I had to fight with them for several years. Then they had me pay for a survey. We surveyed thousands of people. Of course, almost everybody said, “Of course, we want service.” Then they opened it to bid. They opened it to everybody. So, 400 different companies applied for something that I fought for five years to create. There were only like four finalists out of the 400. Let’s see. It was me and my partners. I had to partner with another company against the four carriers. The large four carriers got together, created their own consortium, and the bet against Transit Wireless, which was my company. They were sure that the MTA would never give this project to a little company that no one had heard of before called Transit Wireless. So, it was funny because I was sitting at home and my wife throws the paper on my lap. I think it was a Saturday or Sunday. It says on the paper, “Transit Wireless wins the award from the MTA…”

Alejandro: Wow.

Alex Mashinsky: She looks at me, and she says, “I don’t know if you’re the smartest guy or the dumbest guy.” I was like, “What are you talking about. Look. I won the project.” She was like, “Just read the article.” It says in the article, “Transit Wireless agrees to pay the MTA 46 million dollars for the license. And the four carriers who came second agreed to pay $4.” She says to me, “Do you think you overpaid?” So, it wasn’t clear that we got something of value. We agreed to pay so much money to build this. It also cost 300 million to build it. Now, it’s a big success, but back then, it looked like a big mistake.

Alejandro: Got it. What was the outcome? What ended up being the outcome of the business?

Alex Mashinsky: Well, 8 million people use it every day, today. Were you in the subways today?

Alejandro: Yes.

Alex Mashinsky: Yeah, so you got 5 bars everywhere. Right?

Alejandro: So, you’re responsible for that.

Alex Mashinsky: We give you the 5 bars, and we make the phone company pay for it. Do you like that?

Alejandro: Well, whenever those 5 bars go to 4, I will be calling to complain, Alex. I know who to call.

Alex Mashinsky: Well, I’ll give you a secret because even in the subway, everybody tries to use their WIFI, but if they shut down the WIFI, the 4G is so fast, it’s faster than the WIFI. So, the secret to all your listeners, when you’re in New York, shut down your WIFI when you’re in the subway, and you’ll be blazing through the internet.

Alejandro: I love it. I actually have experienced that. So, really, really cool. I saw that you were involved with the business up until 2016. Right?

Alex Mashinsky: I’m still a shareholder, and we sold half of the company, I think, to a partner, but I’m still a shareholder. We’re still building things. We’re adding things. Like, right now, we’re working with AT&T to put more fiber to enable all the signs and to enable to know when the train is coming, and all kind of other improvements. All of that is using the Transit Wireless network. So, all these new innovations and new things that you’re seeing, a lot of that is riding on the same network we built for the wireless.

Alejandro: Got it. I also saw that during this time again, you did another initiative, and that was Governing Dynamics which basically was like a fund. Is that right?

Alex Mashinsky: Yeah. I had a few exits. I had a little bit of money, and I said, “Let me try to help other entrepreneurs. Let’s create a fund that is just dedicated on early-stage innovation, disruptive ideas, people like me, come with $100 and have big dreams. I can help them navigate to become successful entrepreneurs. So, we made a bunch of investments and started a few companies through Governing Dynamics.

Alejandro: What kind of companies could you mention that perhaps some of the listeners might recognize on those investments?

Alex Mashinsky: GroundLink is one of them, for example. GroundLink was Uber before Uber. We started it in, I think, 2005. We were the first app in the app store that you could download and order a car on demand. When Uber was just in San Francisco, we were already in over 5,000 airports. But we did not subsidize the prices. What Uber did that we didn’t do is they lose money on every ride, and they hope to make it up on volume. Every year, they lose 2 billion dollars because they subsidize all the rides. So, even though we invented the idea—in New York, we had at the peak, GroundLink had over 1,000 drivers. We were providing service. I’m sure a lot of your listeners used GroundLink both on corporate accounts, and retail accounts, and before Uber, and may know exactly what I’m talking about. But you can also use us in hundreds and hundreds of cities all over the world, but we just did not subsidize the ride. We didn’t think that losing money on every ride was such a brilliant idea. But I raised 35 million dollars for the company, and it was profitable.

Alejandro: Alex, I saw that for GroundLink, you actually did quite an interesting Series A round. It was like a big, big A round. Right?

Alex Mashinsky: Yeah. But the problem was that my VCs, my investors did not—I remember that board meeting like today. I said to them, “Look. We have to do what Uber is doing. We have to subsidize the ride. Otherwise, it will just come and eat our lunch.” My investors were like, “No, you already have 7 million in revenues. You’re profitable. Just keep growing. You’re growing 30, 40% per year. You don’t need anything more than that, and I left. At the end of 2010, I left the company because I felt that—that was my most miserable and painful experience because it’s like seeing your child being molested. You have the idea. You’re there ahead of everybody else. You know what they’re doing wrong, and there’s nothing you can do because your investors own the majority of the company and they don’t agree with you. They want to go in a different direction. There’s nothing you can do. So, I left the board. It was better not to look than to see them just completely ruin GroundLink.

Alejandro: Because GroundLink was your real next, I would say, experience as a founder and CEO because, on the other initiatives, you were more like at a board level, a strategic—

Alex Mashinsky: No. All these companies, I’m the founder, with no exception. All eight companies, I’m the founder. So, it’s not that I was just an investor. The issue was more that I was running this company day-to-day. I wanted to turn left, and my investors wanted to turn right. In almost all the other companies I ran, the investors and I were almost always aligned. This was like the one time where we were completely in an opposite direction, and they were wrong. They know it. Look. Uber is the fastest value creation in history. It’s the company that got to 60 billion dollars faster than any other company. And we were them. We were there before them. So, we could have been exactly what they became if we just did not mess up and did not be so greedy and try to make so much money. Right? They went for adoption, getting as many users as possible, and my investors went for making money.

Alejandro: Yeah. What I meant to say is that this was the next company where you would be the CEO. Not only the founder but then also the CEO on a day-to-day like you were mentioning.

Alex Mashinsky: Yeah. I ran it for five years as CEO, and then I left.

Alejandro: Got it. What did you learn from this experience because I always tell founders that divorcing your investors is tougher than divorcing your wife or husband, so you need to be very careful who you need to get in bed with? But what did you learn from this experience and having investors that there was complete misalignment?

Alex Mashinsky: Well, it was very painful both because you were right—I was right about the decisions, but I could not convince my team. So, I was right, and I was wrong at the same time. For me, I was the successful guy. I already had five or six startups. The CEO of Uber—most people don’t know, but the CEO of Uber lost all the money for all of his investors, ten times in a row. He had ten startups, and he couldn’t have a single exit before he joined Uber. So, he was a complete failure, and here he comes and steals my idea. He goes to BenchMark, the same investor I went to. He sits with them, and he convinces them to give him the money and not me. I met with Bill Gurley a week before he funded Uber. He was an A round in Uber. He gave Uber all the money. So, that was just completely painful. The analogy here is that I would be the world’s best marathon runner, and I’m way ahead of everybody else, and I fumble, and I fall right before the finish line, and somebody else finishes. It was very, very painful for me. I went through almost depression. Like just basically, “How could this happen to me?” It took me a while to get out of it. It wasn’t easy. It was basically like I had to go, and dissect, and break everything down to really look into the how, and why, and what could I have done better? And really rebuild myself to do better things in the future because you have to learn from your mistakes. Even again, being in the military and everything else, you think you’re solid, and you can take anything. When something like this hits you, you’re knocked out. There’s no getting up after that. So, it took a while. It took probably a year or two years to really get out of it.

Alejandro: Got it. Then after this, you go and become the CEO of Inseego, which had about 200 employees at the time when you joined, but what an interesting shift for you, from building companies from nothing to joining and leading something that is a little bit more mature.

Alex Mashinsky: Yeah. Back then, this was called Novatel Wireless. They changed their name to Inseego. Novatel was a public company, and they were looking for a turnaround CEO. They’re based in San Diego, and they asked me to come in. In the beginning, they just asked me to join the board just as an outside director. I joined the board, and then they asked me to come in as CEO. So, I just came in and did the turnaround. I think we more than doubled the revenues and went from 200 employees to over 1,300 employees when I left.

Alejandro: Wow.

Alex Mashinsky: So, grew the company very, very quickly, and handed it off to the next CEO. My wife looked at me after two years of commuting to San Diego from New York and said, “You have to pick and choose. What are you going to do? Are you going to live there, or are you going to live here because I’m not moving?

Alejandro: And what a commute. I mean, it’s quite a long commute, Alex.

Alex Mashinsky: Yes. It’s the longest commute you can even create. San Diego is the most southern city. Yes, my commute is much shorter now.

Alejandro: Just out of curiosity, like when doing a turnaround like this, what are the pieces, like in this case or in any case, you would look at in order to really make a solid decision on how you can turnaround something? You said like on the number of employees, on the business model, so where do you look?

Alex Mashinsky: Novatel Wireless was a great company. Believe me. They had a great brand, the MiFi devices. A lot of people have these devices. The company sold over 100 million of these all over the world. So, they have a very solid base of customers, users, and a very solid brand. Really, the company just lost its way. So, this was more about cutting off the things that the company did not do well and doubling down on the things that the company did well. For example, I don’t know if you saw these ads for Verizon bragging about their 5G and so on. The first 5G device made and launched in the Verizon network was the Novatel Wireless [31:47] and single device. So, Novatel is the world leader in wireless connectivity. Again, I’m a technical guy, so for me, it was very easy for me to come in and shut down the things that were not working, and double down on the things that were working. They’re just continuing to do it now. So, in three days, I raised 120 million dollars. I brought some outside investors. I recapitalized the company. We went from vendors and customers worrying about the future of the company to being a very stable company that grew fast. When you stabilize the company, then everybody wants to work with you again. So, it wasn’t anything amazing. It wasn’t like sitting there and inventing Voice over IP or coming up with the future of ground transportation or doing like Celsius Network. Those are fundamental, kind of reinventing a whole business, and disrupting a whole industry with a new idea versus here, this was more about the caboose was off the track and we put it back on the tracks, and we filled up the gasoline, and it was running again.

Alejandro: Talking about changing the world, after you left Inseego, you started your most recent company, Celsius Network. Tell us a bit about Celsius Network.

Alex Mashinsky: Celsius is bigger than anything I’ve done. The reason for that is that we’re going through a huge disruption, a huge reinvention that most people do not even realize it’s happening. It’s like imagine a tsunami that’s washing us and no one realizes that they’re even getting wet. This tsunami is decentralization. When you say decentralization, people are like, “What does that mean? I don’t even know what that word means.” Basically, today, the entire world, all the businesses that exist, everything that runs in the world is based on centralized companies. So, the most powerful companies in the world: Amazon, Apple, Google, Facebook, and so on, they’re all centralized companies. The guy at the top controls the centralized set of computers, and those computers run the lives of hundreds and millions of people. We’re going from that to what the internet was supposed to be from the beginning, a decentralized environment where no one is in charge, and no one is in control. The reason for that is that basically most people don’t want—they’re not happy with what’s happening today. Again, 90% of the people in the United States, for example, have the same wealth as 33,000 Americans, 0.1% of all Americans. So, that’s just not a sustainable business model. So, this decentralization is a movement that you can see all over the world. Through that movement, you have things like cryptocurrencies, Blockchain, and other things, OpenLedger that are driving new invention of systems. The Bitcoin, for example, is one example of these things that are happening. The Bitcoin is coming and saying, “Your bank is really stealing from you every day. They take your deposit. They lend it to your neighbors—your money. They lend it to your neighbor. They pay you almost nothing, 0%, 1%, and they charge your neighbor 25%. So, they make almost all the money on your money, and you’re not complaining about it. Well, guess what. With Bitcoin or Cryptocurrency, you can lend good money to your neighbor through a decentralized system. You can take the broker in the middle, and you keep most of the profit. So, all Celsius is doing is building a system that acts in the best interest of the users, of the depositor, not in the best interest of the shareholder. So, what does the bank do? The bank takes all this profit that we just talked about and gives it to their shareholders, not the depositor. Celsius says, “Wait, wait, wait. Not so fast. We want to do exactly the same thing, but we’re going to take the profit and give it back to the depositor. So, give the power back to the people.” That is a very big idea. It’s a very simple idea too. The company launched in 2017. We launched the service in 2018. We did an ICO. We raised close to 50 million dollars, and we’re using all that money to build this for the community and act in the best interest of the community.

Alejandro: Got it. What was the process of doing an ICO?

Alex Mashinsky: We did almost the opposite of what everybody else does. The traditional ICO is you run around. You take money from anyone who will give you money. Mostly, in the beginning, you go to big investors, and then you go to retail, then you immediately list on some exchange. Then you sell it to your coins as fast as you can, and you hope for the best. The problem with that model is that the people who took the coins early, they buy them cheaply, and then they dump it on the people that come late. That’s not a sustainable business model. We wanted to build the community. Our model was we’re building a service for the community. Let’s go to as many people as possible. We’re not going to go to big investors overseas. It’s the opposite of what I’ve done my entire life. We don’t have a single VC in Celsius Network. Not a single private equity guy, or institution, or anything like that. We have 15,000 people registered and say, “Hey, I want you to build the service. I want to participate in this. I’m going to give you a little bit of money, and when you launch, I want to have some utility. I want to be just in the subway. I want to be able to use my token to ride the subway. I don’t want to own the subway. I just want to have the service run, and cost not a lot of money, and have wireless service in it, and do what’s in my best interest. Right?

Alejandro: Yeah.

Alex Mashinsky: So, this is a similar thing of just doing it with your bank. It’s doing it with your money instead of doing it with your transportation. So, we did not list on an exchange. We did not dump all the tokens. We didn’t do all the things that other people do, and we have over 50,000 downloads. We’re close to 100 million dollars in deposits meaning people give us 100 million dollars’ worth of coins, and we do two very simple things. We pay interest. We pay up to 7% interest on deposits. So, try to get that from your bank. Right? And we take that money, and we lend it out. For most people, we don’t do credit check. We don’t do background check. We don’t do income check because we lend only against assets, and we only charge 9%. So, we charge 9%, we give 7% back to the community.

Alejandro: One thing that I wanted to get your thoughts on, Alex, is you’ve been talking about banks, and I have seen the transition of, for example, Jamie Dimon from J.P. Morgan just talking not so well about Bitcoin. Then, all of the sudden, having J.P. Morgan coming out with their own crypto, their own thing. What are your thoughts on that?

Alex Mashinsky: First, I know Jamie. He was in my YPO chapter here in New York. I met him, shook hands with him a few times. I know [Kristine Moen 39:18] who works for him who is running the effort over the coins that they launched, and I can tell you that first, it’s not a bitcoin, it’s not a cryptocurrency. What they did hush-hush, no one knows, but I’ll tell the secret. You have an exclusive of this. They copied Ethereum. They copied the whole Ethereum software. They called it something else. They’re calling it Quorum™, but if you look at the code, you’ll see that it’s all Ethereum source code. They didn’t create anything new. And they deployed it inside their bank. It’s a private network. It’s not a public blockchain. It’s just a private network like the internet. You’re familiar with Intranets back in the ’90s? GE and all the big companies thought that Intranet was going to be the big thing, not the Internet. So, here J.P. Morgan is doing exactly what IBM and all the big boys tried to do in the ’80s and ’90s to kill the internet. They said, “Oh, we’re going to create our own version of this. We’re going to call it something else, and everybody’s going to come and use us. Not so fast. So, Jamie hates crypto. Jamie hates Bitcoin. Jamie hates anything that will disrupt his bank. His bank makes 20 billion in profit every quarter. Where do you think they make their profit? They steal it from you and from me, exactly what I described before. Right?

Alejandro: Yeah.

Alex Mashinsky: So, the last thing he wants is something that will disrupt—you know, it reminds me. The phone companies used to charge $3 a minute. I remember AT&T when I showed them VoIP, they looked at me and said, “Alex, we love what you created, just don’t give it to everybody. We don’t want everybody to know how to make phone calls for free.” You and I are talking for free right now, and you could be in Madrid, you could be in Tel Aviv, you could be anywhere, and this call would still be free. This is what I’m promising, everybody is listening, that we can do with banking. We’re going to go from VoIP to Moip, Money Over IP, and it’s going to work exactly like VoIP without anybody in the middle.

Alejandro: Yeah, and I love it.

Alex Mashinsky: Drop the mic.

Alejandro: That’s it. So, let me ask you this, Alex. You’ve been a founder multiple times. You’ve done like 120 VC investments, 34 patents, a billion dollars raised in funds, 3 billion in exits, so I have to ask the question that I always ask.

Alex Mashinsky: This is the biggest fight of my life, though.

Alejandro: I hear you.

Alex Mashinsky: This is the biggest fight of my life. Celsius Network, I’m taking on the biggest guys, the most powerful guys in Washington. They’re the banks. The most successful, the richest people, the guys that make the most money, who give the most to politicians. Fighting the phone companies was just the warm-up. This is the real fight.

Alejandro: Wow. I can’t wait to see how this fight is going to go. I want to ask you here, where do you see Celsius in five to ten years from now?

Alex Mashinsky: Look. The bar is very high for me. Like I said, 3 1/2 billion people use VoIP. So, if I brought 100 million people to Celsius, people would laugh at me. They’ll be like, “Alex, come on. You went from 3 billion to 100 million? Seriously, that’s where you stop?” Again, this is for the people. Okay? It’s not for me. I don’t need the money. I already made a lot of money. This is so people who have very low income can take their savings that they work so hard on and put it in a real account that earns them money. So, their money makes money instead of them working for the bank because that’s how the rich people are rich. Their money works for them. They don’t work for the money. Do you see Donald Trump working really hard? His money works for him. He’s in real estate, and all the other stuff that he’s doing, and he barely pays any taxes because he defers his taxes on real estate and so on. He borrows against it. So, we took all these secrets of how the rich people stay rich, and we gave it to people without them even having to understand how it works. I bet you, if I asked you right now, how Voice over IP works. How can we talk to each other like this? You wouldn’t be able to explain to me, but it works. The same way, Moip can work the same way. If we created the system that acts in the best interest of the people, in the protocol. In the hardware. In the software. Everything was already acting in your best interest, as far as your money is concerned, then you would be making money on your money. So, what we’re building is the system that will allow your money to be safe and to act in your best interest to work for you. That’s the opposite of what banks and other institutions try to do because if they give you all of that, then they can’t make the profit. Right?

Alejandro: Yeah.

Alex Mashinsky: So, the banks hate me. Just like the phone companies hate me. That’s fine. I’m willing to take that any day.

Alejandro: Well, if I ever go to a bank, I will make sure you and I were not going together so that I get whatever I want.

Alex Mashinsky: I say bad things about banks every day.

Alejandro: So, Alex, all these companies that you’ve done, if you could go back to the past and give yourself one piece of advice, let’s say if you had the chance to go back to that moment where you were about to launch your first business, knowing what you know now, what would that piece of advice be?

Alex Mashinsky: You have to be bold. You have to allow yourself to succeed. A lot of people doubt themselves. A lot of people are like, “Well, I’m not sure I can do it. It’s so hard. Where am I going to get the money?” All of us, I think every person on this planet is the best in the world at something. The problem is they do not find out what they are the best in the world at. So, they never get to do that thing. They never become the champion. But they are; they already are. They just don’t know it. So, the most difficult thing in life for each person is to find what they are the best in the world at. Unfortunately, they don’t teach you that in school. They don’t teach you that in college. Most of us, even in our 60s and 70s still don’t know what we’re really good at. Some of us get lucky, and we become a star, or athlete, or star singer because those are easy things to find out. But if it’s a talent that you have deep inside of you—like for me, it’s very easy to see the future. I can see the technology that something will become prevalent and everybody is going to use it, and I just go and do it. But for most people, it’s very hard to find out what it is. So, the best advice, like for me, even with Voice over IP, I could have been Microsoft or SISCO, or whatever even though Arbinet became a very successful company, did not become the dominant company in our space, and all the people jumped in and stole all our ideas, and so on. So, for me, my advice to myself was go even faster. Go even bolder, and bring bigger partners quicker to dominate the industry. So, those are things I’m trying to do now with Celsius. That’s an example of how we are—you know, we launched six months ago. We launched in July. We did over 630 million in loans in the first six months. That’s more than 10 times more than all of our competitors put together. Some of our competitors are three and four years old. So, why? Because we went bold. We went hard. We gave everything back to the community, and people looked at it and said, “Wow. Celsius is giving me much more. I’m taking all my money from here, and I’m putting it over there.” And we’re doing great. Again, for the people. This is for the people. We’re delivering exactly what we promised to give them. So, I think it’s not like it’s one secret. There’s a lot of little things that need to go right. Some people do it magically like Mark Zuckerberg. He got lucky, and he did everything right the first time, and all of his competitors like MySpace and everybody else made every mistake possible. Because sometimes, your competitors also have to make every mistake for you to be successful. So, it’s not just about you. It’s about the environment, being at the right place. And many times, you’re either too early, or too late, or you’re in the wrong space, or it’s not for you, and you just fail. But that doesn’t mean anything. That does not mean that the next time you’re not going to become—like I said, the CEO of Uber—you can look it up. It’s public information—failed ten times in a row. Lost all the money for all of his investors and then he becomes the CEO of the fastest-growing company in history.

Alejandro: Yeah. Well, I love the advice, Alex. What is the best way for folks who are listening to reach out and say “Hi.”?

Alex Mashinsky: I answer my own emails. AlexEdMashinsky.com, my last name, and you can also download our app. Try us out. Celsius Network. So, @celsiusnetwork on Twitter or Telegram, or just go to our website, https://celsius.network and you can email me through there. Again, just be the best you can be. We’re given one life, and on your deathbed, you’re going to be asking yourself, “Did I try everything? Did I give myself every chance possible? That’s what you’re going to be sorry about. You’re not going to be sorry about, “Oh, I had two more dollars or ten more dollars.” It’s not about who accumulates the most wealth. It’s about who gave it all.

Alejandro: I love it. Alex, thank you so much for being on the DealMakers Show.

Alex Mashinsky: Thanks for having me, and just one call for action for all of your listeners. We’re bringing some people into Crypto. Just invite people, introduce them into it, try it out yourself. Just $10. I’m not asking anyone to put anything, their net worth, or their savings. This is what’s going to change the world. You want to make the world a better place? We need a system that will replace the banks, and this is the only way that it’s going to work, so try it out.