Shakil Khan is an investor in BitPay, Spotify, SecondMarket, Top10, Duedil and YPlan. A serial entrepreneur, he was part of the founding team at buy.at, and he recently founded bitcoin news site CoinDesk. Wired.co.uk caught up with him before his Q&A talk at Wired Money on 1 July.
Are there any companies in the fintech space you're really interested in at the moment?
It's funny, I was talking to someone this morning about amazing companies coming out of Europe. I ask this question to a lot of people: What are the top three companies you know who are going to be huge, mainstream companies -- both in terms of the product they offer, the disruption that they bring and the value they're going to create for themselves and for their investors?
And the one company that comes up more and more is TransferWise.
I'm hearing that a lot. They've just had another round of funding, they're going to expand ever-faster, obviously there's a need for it. In the same way that bitcoin has its own challenges in trying to disrupt the financial system, TransferWise is doing something similar. When you look at the extortionate rates being charged by banks [for transferring money across borders] you realise this is a sector that is now being attacked.
Which trends in the sector are exciting you?
In the fintech space, I think we're at day two of a hundred-day journey. There's so much that's going to take place. It is interesting that more and more companies and financial institutions are starting to embrace mobile. There was a while that trying to do anything with your online banking on mobile was impossible. But now it's getting easier: we're sending statements, sending notifications, fraud alerts. It might sound silly, but at least they're starting to embrace it.
What I'm really starting to enjoy is that every time I walk into Starbucks, more and more people are using their app to pay for their coffee rather than pulling out cash. If you take taxis either here or other countries, they've got the credit card machines, but there's usually a cover over them saying they're not working because they have to pay all this commission. And anyway you have to take out your card, swipe it, type the pin or sign it -- it actually takes longer than just giving somebody cash. Whereas just pulling out your phone and going "beep" and it's done. Why can't we get to that in Sainsbury's, or in Tesco -- in the mainstream. I should be able to hold up an app that is, to an extent, similar to contactless debit card. Why can't we do that with a phone, why do I still need to carry a card? In the next year or two we're going to see some really significant changes in the way payments are made.
What do you think are things holding this back? Is it hardware, legislation?
I don't think it's legislation. The issue is a number of things.
Resources, priorities et cetera. In every company -- whether you're a hundred-person company or you're a five-person company -- there are a number of things you need to do just to keep things running.
The other thing is that you're calling from Wired and I'm an entrepreneur who's been in this space [a long time]. But the mass market aren't all using iPhones. They're using Androids and there are a lot of people not using smartphones. Let's face it, there are still a lot of people out there using Nokias. It's just a natural trend and these things take time.
[Quote##"What will be interesting is the next generation.
They've grown up with smartphones, they've always been connected."####Id¬17tmf9]
Will we see a cashless society in ten years?
To an extent we're definitely headed that way. How much money to do actually carry around? That's purely because you've got your credit cards, I'm guessing you've got apps to do some stuff. I definitely spend more -- apart from big items such as rent et cetera -- on a daily basis without cash that I do with cash. I think we're going to get very close to it, but cash has been around for a long, long time. What will be interesting is the next generation. They've grown up with smartphones, they've always been connected. For example, somebody now is getting their pocket money not in the form of cash, but in iTunes vouchers for the App Store. They don't need cash. I would get a pound or two pounds in physical cash -- but my niece doesn't ask for that. She's like: 'hey, can I get some credit on this?' You'll see a few companies embracing that and trying to build the next generation bank for the next generation. That's something I'm very interested in.
Your current venture CoinDesk focuses primarily on bitcoin. Why not include other digital currencies?
I think if you look at digital currency as a whole, bitcoin occupies most of that arena, in terms of ears and eyes and the public fascination with it -- it's just a natural thing. More than ninety-something percent of the digital currency world is bitcoin.
That's the easy answer for it.
But as for why I started CoinDesk -- which was just over a year ago in April or May last year [2013] -- it was something that was becoming more and more of a discussion topic and I realised there was nowhere for me to go and read, research, or learn about bitcoin in a plain English fashion. There was a lot of very deep technical analysis out there, like the Satoshi [Nakamoto] paper and by some of the really expert crypto-experts out there. And then on the other side of the spectrum there was the tabloid media going: 'hey there's a pizza that sold for 10,000 bitcoin.' Which is great as a soundbite but it doesn't really explain anything.
I really wanted to learn myself and then while I started looking into that I thought: 'Well I'm trying to learn about it and I'm sure everyone else wants to learn about it.' It's one of those businesses that came about because I actually had a personal need for it, rather than me waking up one day saying: 'Hey, this would be a great startup idea.'
What are your eventual hopes for the currency and the site itself?
Well, they are two very different questions. This week alone has been a fascinating week for the currency system. Yahoo! Finance started showing the bitcoin price on their site, which is visited by millions of people. An hour or two hours later Google Finance followed suit. Expedia then announced on the same day that they were accepting bitcoin for travel bookings, so I think you're starting to see various waves of adoption and semi-mainstream understanding and embracing of it. So, we're on the right track, right?
CoinDesk, I honestly don't know. We'll see what happens. I don't spend much time thinking about where this will be in ten years time. I'm an entrepreneur, I've built a sold a number of companies, I've invested in a large number of companies, so I don't spend too much time worrying about that.
Where are the revenues coming from the site?
We're pre-revenue, in a sense. We're not deliberately out there trying to sell advertising. It's a catch-22 industry, especially in the the media space. You need to have sufficient eyeballs to ask for advertising dollars, so we've just let it grow organically -- and we're now starting to get significant interest from companies wanting to advertise. Up until a few months ago there weren't many companies being built [in the space] and the people who were building companies were doing it organically. Now, I think you're starting to see many more [bitcoin related] companies being created and I think they're going to need access to our readership or some sort of distribution. We've toyed around some kinds of ideas in terms of revenues... but it's not something I worry about too much.
Do you think bitcoin can maintain it's position in the crypto-currency market with the introduction of more currencies and bitcoin's somewhat chequered past?
I'm undecided on that. Let's take the internet for example, or any form of payments. A lot of technology originates in the adult industry, like video streaming and mobile payments. A lot of the internet [in the past] and now is used for people looking at "interesting media" online, but that hasn't stopped people embracing it. So there's that element to it.
On the flipside, yes there is a certain brand perception when you refer to the term bitcoin and part of that is a lack of education, part of that is its lack of a central movement, part of it is the very interesting thing that it's fully distributed. I honestly couldn't say. Human beings are strange characters. Let's look at a couple things: tens of years ago if me and you were discussing a time where you'd take a picture and send it to me and then it would get deleted in ten seconds, I'd say: 'What are you talking about? Why would I want to do that?'
Society is changing very rapidly... and trying to predict the future is an interesting thing.
What do you think of novelty currencies like Dogecoin and others?
I am very much a firm believer in digital currencies and in bitcoin being the market leader. A lot of these other ones are kind of still, to an extent, on top of bitcoin or people just trying to create value for themselves or for a network. The only way I would explain it is that I don't own any other types of alternatives currency, but I do own bitcoin.
You could look at it is like VHS versus betamax -- what is going to work, what isn't going to work? Is it like the browser wars?
Let's take Netscape and Internet Explorer and the 500 other browsers that came along. It's very easy to come up with quirky marketing campaigns for these things, but there's usually one that has mainstream adoption. I'm very much on the bitcoin side rather than any other funky named coin I would say.
You've been a very successful investor. Do you have any tips for wired.co.uk readers?
It's funny, I don't come from the traditional investment banking route. It's all been my own money over the years that I've built up and worked for and built companies. One, is that I invest in people, not ideas. That's fundamental. Two, I expect to lose every penny of every investment I make. Because that's the easy way for me to go to sleep at night. Otherwise you start thinking 'hang on a minute, did I just give a million bucks to an 18-year-old or 20-year-old kid who's got this crazy idea?' But you look at your past, you look at how things play out. Thirdly, I always had a huge appetite for risk.
Have you always?
Yes, ever since I was a kid. I grew up in a very poor family and when you've got nothing to lose you'll risk everything. But when you've got a lot to lose, you don't want to risk that, right?
I've got a lot more to lose now, so I'm a bit more sensible.
Before, I'd put on everything I had -- because there wasn't a lot there, right? If it was a thousand pounds I lost, I could try and make another thousand pounds one day. Whereas now I wouldn't put all of it in, but I take far bigger bets.
Shakil Khan will be appearing at Wired Money, on 1 July, 2014. Tickets are on sale now: see wired.co.uk/money14 for a full speaker list and further information. Wired subscribers receive a 10 percent discount.
This article was originally published by WIRED UK
