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Daniel Vogel became fascinated by bitcoin far before most had heard of it. His passion for crypto has morphed into the dominating exchange in Latin America, which processes more than $1B a year in the US to Mexico bitcoin transactions. His company has raised $80M in financing from top-tier investors like Kaszek Ventures, Pantera Capital, QED Investors, and Coinbase Ventures.

In this episode, you will learn:

  • The ups and downs of fundraising for your startup
  • The mom test
  • The future of finance
  • Where to learn more about bitcoin and how crypto works

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    About Daniel Vogel:

    Daniel Vogel is the Co-founder and CEO of Bitso. Heis one of the young leaders in entrepreneurship and technological innovation in Mexico. Accompanied by a feeling of social responsibility, it has made Bitso a company committed to the development of efficient, competitive, accessible, and inclusive financial services in Mexico.

    Daniel Vogel has two Stanford degrees (BA in Economics, BS in Computer Systems Engineering) and a Master of Business Administration (MBA) from Harvard Business School. During his academic career, Daniel Vogel chaired several student societies such as the Latin American Entrepreneurs Society, the Bitcoin Society, the Latin American Society, the Aviation Society, among others. In addition, Daniel Vogel was elected by his Stanford peers to be a member of the student government.

    Daniel Vogel has not only shown his entrepreneurial side, but also innovative. Previously, Daniel Vogel created Quantcast’s real-time bidding system in Silicon Valley, which became the company’s main line of revenue-generating products.

    In November 2016, it was included in the MIT Technology Review “Innovators under 35 Mexico 2016” Awards. In addition, Daniel Vogel has received various awards such as the Global Endeavor Entrepreneur, Gold Winner MassChallenge 2016, 33 Most Innovative Startups in México, Líder Digital México, among others.

    Connect with Daniel Vogel:

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    FULL TRANSCRIPTION OF THE INTERVIEW:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I think that today’s episode is going to be very interesting, especially given all the events that are happening right now with Bitcoin, with the price going off the roof, Elon Musk, and Lindsay Lohan saying that Bitcoin is the future. Oh, my gosh. Where are we heading? But without further ado, let’s hear it directly from our guest today. Let’s welcome Daniel Vogel. Daniel, welcome to the show.

    Daniel Vogel: Alejandro, thank you so much for having me. It’s a pleasure to be speaking to you and to your audience.

    Alejandro: Originally born and raised in Mexico City. How was life growing up there?

    Daniel Vogel: It was great. Mexico City is a little bit of a crazy place. There are 20-some million people that live here, and so it’s a miracle when you open the faucet and water comes out. It was great. It was a great experience. There is a lot of stuff to do in Mexico. There’s amazing food, amazing cultural things to do. It was just great. After living in Mexico, I went to live in Palo Alto, which was very charming and great, but I really missed the thrill of living in a big city. It’s hard to replicate that.

    Alejandro: I’m sure you didn’t miss the traffic of Mexico City because, oh my gosh, that is crazy.

    Daniel Vogel: That’s absolutely right. Those are exactly the things that I didn’t miss, and the things that I now miss about Palo Alto is the easy lifestyle that you can have there as opposed to this crazy metropolis.

    Alejandro: Absolutely. In your case, how did you develop that entrepreneurial bug because very early on, you were already launching companies, so was it anyone in your family, or how did you get that influence?

    Daniel Vogel: It’s a good question. When I look back, the thrill of starting things was always more about the thrill of doing something and less so about the thrill of starting a company. It was always about you would see an opportunity or something that I enjoyed doing or that I was really passionate about, which then turned itself into a larger project. But I never consciously felt like, “I’m going to start this company that’s going to do that.” It was more like I had this passion for something, and I wanted to explore that. And in the course of doing that, building a company ended up being the right path to grow that idea or that passion.

    Alejandro: Let’s talk, in your case, about starting your first company, one that you would start with someone that you didn’t even meet, RcMovies. Tell us about this concept.

    Daniel Vogel: I was a kid. The internet was just starting up to be a thing in Mexico, and I loved remote-controlled cars, and I would go online for hours to read about remote-controlled cars. Eventually, I found something called the webring. I’m not sure if your audience still knows what those are, but before search engines existed or were any good, the way that you would find similar contents was a website would put something called a webring on the bottom of the website, where you would go to one page; you would click on the webring, and it would take you to similar pages. The people of the webring controlled who was admitted and who got kicked out of the webring. I found this webring of remote-controlled cars, and in that webring, there was this Australian guy who was posting videos of his cars doing nice stunts. I thought that was amazing, and I connected with them on ICQ, which was the messaging platform of the 90s. I still know my ICQ number. We would chat for hours, and he taught me everything electronically. He taught me how to connect my video camera to my computer and how to import video into my computer and what software I could use to edit it. Then he showed me a little bit of how to program websites. I started programming my website, and basically what happened was that we would be the top two websites on the webring. He was the #1, and I was always the #2. One day I asked him, “Would you consider doing this together? Should we just do a nicer website you and I?” And we created this thing called RcMovies. We became the largest repository of online videos related to remote-controlled cars. This was before YouTube existed, and before it was easy to upload and manage content online, and it was a lot of fun. Then we added advertising. People would reach out to us because they wanted us to do videos of their remote-controlled cars or edit their videos, and it was super fun. After a while, it became one of the largest remote-controlled car websites on the internet. It was featured in various magazines. And that’s the story. At some point, I think we both grew up a little more, and we became a little bit less interested in remote-controlled cars and probably more interested in hanging out with friends or girls. I’m not sure; I can’t remember exactly, but we slowly abandoned it, and we ended up selling this thing to a competitor that was called RcVideos, and we handed it over to them.

    Alejandro: What was the big lesson learned during these five years with RcMovies?

    Daniel Vogel: The biggest lesson was the power of the internet. Something in my life changed when the internet appeared. I loved remote-controlled cars before I accessed the internet, and I had no idea how to edit videos, and I had no idea how to connected with like-minded individuals anywhere in the world, and then one day, I have this tool at my disposal that allowed me to do all these things, to connect with other people, to connect and engage with folks that had similar interests, to learn from them to enterprise with them. It was just a ton of fun. It was really a lot of fun.

    Alejandro: Let’s fast-forward a little bit because, at this point, you decide to pack the bags and come to the U.S., and you studied at Stanford. I’m sure that perhaps influenced, even more, your hunger toward continuing the journey of being an entrepreneur, so how was that for you?

    Daniel Vogel: Stanford University is a phenomenal place that really pushes forward people’s desires and capabilities to be entrepreneurial. It’s a phenomenal place because they teach you the style, they teach you the history, they bring in folks that are entrepreneurs and who are incredibly exciting to watch. In my time there, we got the chance to hear from a lot of phenomenal individuals. We had the chance to hear from Steve Jobs, Steve Wozniak, Google founders, Peter Thiel, and PayPal. It was a ton of fun. It was super inspiring. Given my love for cars, I thought I wanted to study mechanical engineering. When I was there, one of the nice things about these large schools is that you get the chance to take classes in a bunch of subjects, and I took classes in computer science, and I already knew how to program a little bit. It was obvious to me when I started taking those classes that I wanted to go in deeper there. I ended up studying computer systems engineering and economics. Obviously, that had a tremendous impact on who I am today.

    Alejandro: One thing that is interesting is, now that you are in Stanford, you are exposed to all of these incredibly inspiring stories, and as they say: once an entrepreneur, always an entrepreneur. But after Stanford, you choose the route of doing the 9 to 5, so why did you go and work for Quantcast?

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    Daniel Vogel: I worked at Quantcast as a summer intern right before graduating, and Quantcast was a very small company. They had just raised a little bit of money. I just loved it. I would say that it was hardly the 9 to 5. I was working at all hours trying to build software for this company. It was an incredible school. It was an incredible school because I was able to see – I got very close to the management team at Quantcast. I did special projects for the CEO for a while. So I was able to lead their first acquisition, understand how we were going to organize ourselves from a strategic perspective, build a bunch of the pieces. Even though I was very young at Quantcast, one of the things that was very different or where I got really lucky was that they put me on a Scrum board project that no one knew at the beginning whether it was going to become relevant or not, and it became the way in which Quantcast monetized their business model. It was a very different ride. It was a startup, but a startup where even though I was very junior, I got a lot of visibility into a lot of things. It was a lot of fun. It was a great school. It was a tough problem. If anyone in your audience knows about online advertising, we were starting to do programmatic ad buying. It combined well my passion for economics because there were all these auction theories that were going into place and how you should price things. Obviously, the engineering component of it, which was how do you build these systems at scale to process these real-time programmatic ad-buying opportunities? It was a ton of fun. But I always had the bug of doing my own things. Quantcast was so thrilling that I ended up spending about four years at Quantcast. I started as an engineer and then moved over to product, but it was obvious to me that I wanted to build my own thing at some point. It was at Quantcast that I found out about Bitcoin. A good friend of mine from Venezuela asked me one day, “Have you read about this thing?” I’d never heard of Bitcoin before. I went to my bedroom, and the next thing I knew, it was daylight, and I had spent the whole night reading about Bitcoin, and it became a huge passion of mine to the point where people at Quantcast would call me the Bitcoin Guy because I would talk and talk and talk about Bitcoin. I remember having conversations of folks telling me like, “Aren’t you afraid that Bitcoin is already $10? Isn’t that crazy?” And here we are today at over $40,000 a coin.

    Alejandro: That’s amazing. For you, you had developed that love and that passion already for Bitcoin, but perhaps jumping ships and going and doing your MBA gave you a little bit more perspective in the journey of bringing this idea of Bitso to life, so tell us about this.

    Daniel Vogel: Even though I loved Bitcoin, I wasn’t ready to start a company in this space. It was very early on Bitcoin days. Bitcoin was used very, very little. It was fascinating but unclear where it was going to end up. I had gotten into Harvard Business School, and I decided I’d go do this MBA. While there, I spent the whole time at the MBA thinking about Bitcoin, talking about it, engaging with professors, students, faculty, administrators on the subject. I joined the MIT Bitcoin Club, started the HBS Bitcoin Club. I met with the community at large, companies like Circle, which was starting up in Boston. I went to their launch party and tried to meet with people in the space at that time. It was obvious that something very magical was happening, something very special. My conviction around this technology as a potential future catalyst for a significant amount of change just got reinforced and reinforced over time to the point that halfway through, I just could not stop thinking about it. I did an independent project on Bitcoin. I worked on a small project with a friend over the summer on Bitcoin. I would write all of my papers that I could around Bitcoin. Then, at some point, it was like someone just told me, “You spend all your time talking about this; you spend all your time dreaming about this; you’re so passionate about this. Why don’t you just go and start a company here?” It was at that time that I met my co-founders that had been working on the idea of an exchange in Mexico. I got involved with them, and over time decided to join them and do Bitso right after business school. The day that I graduated from business school was the day that I wired money into the entity that we had created to capitalize it and start working this thing. And that’s been the story ever since. I’ve been building Bitso for the past almost six years.

    Alejandro: That’s amazing. Tell us about Bitso. What is the business model of Bitso?

    Daniel Vogel: When we started the idea, it was that we needed to bring access to people. People want to access Bitcoin, and if you’re in Mexico, it’s impossible to do so. Today, we’re the largest crypto platform in Latin. We have operations in Mexico, Argentine, and Brazil. We do have an exchange product, which is the first product that was built by players around the world in the industry where people can go in and put orders to buy and sell at different prices. You create a market, and then people are able to trade with each other. Then through time, we’ve been adding more and more functionality, and now we offer a more holistic set of crypto products. For individuals, we have a very nice wallet, where you can buy, sell, send, receive crypto, and we’re adding products to that on an ongoing basis. We have the ability to do real-time growth settlement, peer-to-peer payments now on that, and that’s been growing steadily and significantly. Then we have an area that’s targeted toward businesses and helping businesses onboarding into this technology make investments. You saw the announcements that you mentioned of Tesla buying earlier this week. So we help businesses like that that want to acquire and get extra crypto. The third one is the cross-border bit. Last year, we processed over a billion dollars in remittances from the United States to Mexico. The United States to Mexico remittance quarterly is the largest one in the world. Last year there were $40 billion that went from the U.S. to Mexico. We processed about 1.2 billion of those. This is our mission of making crypto useful, being put to work on these different products and customer segments.

    Alejandro: That’s amazing, and what a journey! You’ve been at this for about six years, so I’m sure that in year one, it was not as simple as it is now because I’m sure that back then, people were a bit reluctant to anything related to Bitcoin or Crypto. And now, everyone wants to hear about it. How has that transition been for you?

    Daniel Vogel: It’s amazing to see what’s happening today where people are begging us to spend time with them, whereas, as you say, six years ago, it was us begging them to take a call. When we started the company, one of the first few things that we had to do was to raise a little bit of money to run the enterprise. It was so difficult. The first time we did a fundraise, it was super hard. People would say like, “This is a scam; this is a pyramid scheme.” People would ask us, “What backs Bitcoin? This is crazy.” Or “This is used for illegal purposes. This is criminal money.” That was the narrative. It was very difficult to get people to spend time with you. Even my friends, it was difficult to get my friends. I would pay my friends in bitcoins after going out to dinner. Now they all thank me, or at least those that kept their Bitcoins thank me because that’s really appreciated over time. Back then, it was like, “You and your Bitcoins. This is so stupid. Pay me in real money, etc.” The change in interest and perception in the narrative over the last six years is impressive. Now, you have companies making purchases of Bitcoin. You have institutional investors who have been making very big bets on Bitcoin. People are talking about Bitcoin overtaking the digital gold. People are talking about Bitcoin as the next settlement layer for payments. It’s incredible. The narrative has really changed. That seemed to work for tons and tons of people that have been working relentlessly for years on creating the infrastructure, building the products, loving the regulation, convincing the customers, giving access, and it’s been incredible. It’s been an incredible journey, but very, very difficult to do at some point in time. Now, it’s just great, and it’s a good moment. But these are cycles. We don’t expect this cycle to last forever. We don’t know how long it’s going to last. We saw a previous cycle in 2017 that was smaller. Every cycle, it gets larger, but this is also what makes the industry super exciting. Every time that we get to the next cycle, you see more infrastructure, you see more projects, you see more volume, and all the fundamentals of a very rapidly growing industry are there. That’s incredibly exciting.

    Alejandro: It seems that the last cycle was driven mainly by retail investors, and now it seems that institutions are making this push, so what are your thoughts on that?

    Daniel Vogel: That’s great. One of the largest critiques that we saw in the last bull run was, “Oh, these poor people are going to lose all their money. They’re unsophisticated. They have no idea what they’re doing.” Unfortunately, there’s some truth to that. There were people that in January or December of 2017, bought Bitcoin at $20,000. It just went down and down and down, and it was under $20,000 for three years from December of 2017 until December 2020. Sure, now they would have doubled their money. There are people that probably exited their investment in Bitcoin at a big loss. Today, that’s a harder claim to make because the people that are purchasing Bitcoin at scale are incredibly important and sophisticated investors. You have some of the most important investors in the world publishing their papers around Bitcoin, like Great Value and Bridgewater a few weeks ago published an entire piece and thoughts on Bitcoin. You read it, and it’s incredibly positive. There are some doubts, as with anything in life, but it’s a huge, huge 180 from three years ago where people were still saying, “This is another [21:56] situation. There’s nothing behind this technology. There are not fundamentals. There’s no value.” You still get people like that, very sophisticated and very smart people like Charlie Munger who don’t like this technology, and that’s fine. We’re not able to convince everyone, but it’s amazing that now you have people that have really put in the work, really thought about the place that Bitcoin and the role that Bitcoin plays in today’s society, and they’re making big bets around investments in the space. That, I believe, is very telling. It becomes harder and harder to dismiss this thing, and that’s exciting for us working in the industry and for those of us who were trying to beg people six years ago. It’s very exciting to see.

    Alejandro: How much capital have you guys raised to date?

    Daniel Vogel: We just closed a round of $62 million in December. That’s the largest round we’ve done. It’s the largest round in crypto in Latin so far. Hopefully, I won’t be able to make the claim much longer. I would like to see bigger rounds in the region, but today, we’re happy to be holding that title for now. Before that, we had raised much smaller rounds, so in aggregate, Bitso hasn’t raised more than $80 million, and the real chunk was last December on that round that we announced where we’re getting investors for the first time to invest in a crypto company: Kaszek, QED, who are investors in companies like [23:42], which are these amazing companies that have been getting built out in the region, and we’re very lucky to welcome both Kaszek and QED for our cap table and to be working alongside with them into our mission of making crypto useful and making these accessible to the region.

    Alejandro: What do you think was the turning point for you guys? You guys were rejected quite a bit by VCs early on. I’m sure there was a point in time where all of a sudden, everything fell into place, and you’re like, “Wow! We’re going to make it happen here.”

    Daniel Vogel: I think in your entrepreneurship journey, you get a few of these little moments in time. The first time we got a really significant check from an outside investor into the company, it was amazing. The happiness that comes with that is unexplainable, especially when you’re working really hard for the money and when you’ve gotten rejected so much, and then when the check finally appears, it’s incredibly invigorating. The first time that this happened, the first large check that we ever got was about $100,000, and we felt like it was going to happen. We felt like all the pieces are in place. Little did we know what was up ahead, but there were a few moments. For example, when Mexico decided to regulate the Fintech industry and to keep regulatory clarity. That was a clear sign of progress. When we obtained our regulatory licenses, that’s been a clear source of progress, and again, a big turning point for the company. The last fundraise was incredible; the volumes that we’re seeing – the first time that we hit, we celebrated when we had our 100th customer. We celebrated when we had our 1,000th customer. I remember a really nice party when we had 100,000 customers. It was amazing. We’re a very small team. We celebrated, and now we’re in the millions. The challenges become larger, the responsibility becomes bigger, but the desire to build this out in a meaningful way grows over time, and that’s very exciting.

    Alejandro: Talking about building this in a really meaningful way, imagine that you go to sleep tonight, and you wake up five years later, or maybe even seven years later, and you wake up in that world where the vision of Bitso is fully realized. What does that world look like?

    Daniel Vogel: The mission that we have for the company is that we want to make crypto useful. The measuring stick that I always try to use is my mom. My mom is an amazing individual, but for her, watching technology and Bitcoin are irrelevant in her day-to-day basis. Whereas the internet is a technology that she fundamentally uses every day to connect with her grandchildren, sisters, brother, kids, etc. The internet has been transformational for my mother, but crypto has not yet been transformational for my mother. If in five years I sit here and I see that my mom has day-to-day use for this technology through the services that we have built, then that’s going to be the day that I’m going to be very happy. That’s going to be the day that I’m going to say, “We made this massive, and we got my mom to use this on a regular basis, and for our products and services to be relevant for her on a daily basis.” We’re already very relevant to certain segments of the population on a daily basis. We have people who trade ongoing; we have people who use us for payments; we have people who receive payments. We have a lot of freelancers, contractors, businesses that are getting paid on crypto. With the rise of stable coins last year, these coins that maintained their parody against the U.S. dollar, but you can transact them on a blockchain. The kind of volume that we’re doing on those in the last year is explosive. So we’re already very relevant for a large portion of the population, but I believe that we still have a really long way to go, and I’ve always thought about my mom as a good measuring stick for when we’re actually achieving in a meaningful way to make crypto useful.

    Alejandro: In terms of making crypto useful and Bitcoin, where do you think it’s going to be in five years? Let’s face it, taking a piece of paper out of your wallet seems a little bit archaic, so where do you think all of this segment could be five years from now?

    Daniel Vogel: I think there’s going to be a lot of streaming. Bitcoin is going to become our very clear store of value mechanism as it’s becoming today. We’re going to start seeing projects in the space become significantly used for payments, and I think that’s going to have a tremendous advantage because commerce is going to become more global, and the ability to settle in real-time is going to increase GDP throughout the world and countries that embrace this technology and build the right bridges, I think, are going to see their constituents or the people that live in those countries benefit from this. We’re speaking with partners who are thinking about real-time streaming of payments in the value chain. All of those things are incredibly fun and exciting to think through. I think there’s going to be a big, big opportunity in payments. I believe crypto companies are uniquely positioned to capture next-generation banking and to evolve from just these crypto wallets or crypto exchanges into actually fully-fledged financial services providers. That, I think, is going to be incredibly fun and exciting to watch. Ultimately, I believe that there’s going to be a complete reimagination of financial services. Some of them are going to work on top of Bitcoin. Some of them are going to work on top of crypto. Generally, we’re seeing incredibly fun and meaningful stuff in Ethereum. I think slowly we’re going to see a deconstruction of financial services and that construction on top of much more efficient rules, much more efficient principles. It’s going to be a mindset change, and the fundamentals are going to be different, and it’s going to be a paradigm shift.

    Alejandro: I hear it all the time, and I’ve been following Bitcoin since 2013 or 2014, and I remember since then when I speak with people, and I tell them about Bitcoin, they tell me that it’s a Ponzi scheme, a pyramid scheme, just like you were saying earlier. What do you typically say to those people that have that type of mindset towards it?

    Daniel Vogel: Look. There are people that we’re never going to be able to convince, and there are people that are sort of on the fringe. For the people that are on the fringe, we try to educate them. We try to explain to them how the technology works. For example, there are a lot of these conceptions on how Bitcoins are created. So when you explain to someone the step-by-step of how Bitcoins are created and how they were distributed or what was the method, what is the method that we’ve chosen to distribute them? That’s a pushing mechanism that we chose to distribute them. All of those things start giving people clarity, and it starts changing the narrative. I have friends in business school that I would tell them, “Look. You don’t have to agree with me, but just put in $1,000 in Bitcoin. If it goes to zero, you can be angry at me in the future, but I think it has an asset metric return.” Those people would have made their money 100 times, 80 times. I’m not sure any more about the prices that we’re at. And there are people that I could never convince even though they were good friends, even though we had good rapport, they were just locked in a version of reality. It’s hard for those people to change their minds. What we have found is that education is a key component to get people to understand and react positively to this technology, and we have a big commitment to that. As an organization, we spend a fair amount of time in education. If you go to edu.bitso.com, you can find a whole educational portal, and we try to be a resource for individuals who are interested in learning more about the technology.

    Alejandro: That’s amazing. I’m glad that you guys are pushing the education because that’s very much needed. One of the questions that I typically ask the guests that come on the show is if you had the opportunity of going back in time – let’s say we put you in this time machine, and we take you to that moment where you are at Harvard doing your MBA and thinking about launching something of your own. If you were able to have that ear of your younger self and tell your younger self one piece of advice before launching a business, what would that be and why given what you know now?

    Daniel Vogel: For me, that answer is very easy, Alejandro. I would just say, “Buy more Bitcoin.” [Laughter] But understanding the spirit of your question, I think what I would tell my younger self is something I already knew back then, but it’s never enough to hear it again. I would have told myself, “You’re about to go into one of the most demanding, challenging, and difficult journeys in your life, but it’s going to be, at the same time, the most rewarding thing you could be doing and building. So, suck up the tough times, enjoy the good times, and go out and build this thing.

    Alejandro: I love it. Daniel, for the folks that are listening, what is the best way for them to reach out and say hi?

    Daniel Vogel: I can be reached on Twitter @vogelbit. I’m pretty active there, and so if you have any questions or would like to chat or whatever, just send me a tweet, and I’ll engage over there.

    Alejandro: Amazing. Daniel, thank you so much for being on the DealMakers show today.

    Daniel Vogel: Thank you so much, Alejandro. It’s a pleasure to be here, and thank you to your audience for the interest.

    * * *
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