00:54:46 · Henrique Dubugras, Jack Zhang
[00:54:46] S0: And why did you move to Hong Kong? [00:54:48] S1: This is after I raised the $3,000,000 so $1,000,000 from Lucy and $2,000,000 from the Citi investor called Gobi Partners. And they are Hong Kong based VC. And they basically told us, you know, that the opportunity in China is quite big. There's a lot of companies exporting from China and doing e commerce, maybe there's opportunities there. You guys should check it out. And that's kind of how we were sort of moving to Hong Kong because the company also failed the first prototype, which is a peer to peer... [00:55:21] S0: But did you actually build it or just We models [00:55:23] S1: built the core algorithm and we do the simulation, and we just realized the simulation... From the simulation result, we realized the algorithm was never going work. So we have to do something new. [00:55:34] S0: But did you spend any of the money at that point or very little? [00:55:37] S1: We spent probably a quarter of the money. [00:55:40] S0: Oh, wow. [00:55:41] S1: Yeah. And And [00:55:42] S0: then at this point, you're saying you're raising the money. You kinda knew it was not working, but, like, you know, let's just keep going.
00:55:42 · Henrique Dubugras, Jack Zhang
[00:55:42] S0: then at this point, you're saying you're raising the money. You kinda knew it was not working, but, like, you know, let's just keep going. [00:55:46] S1: Yeah. We kinda know it's don't... Doesn't work, but we still wanna raise money so that we can keep building the the new idea that gonna make it work. Yeah. So the second idea is, okay. So we're just gonna get interbank liquidity from a bank, then build, like, a few payment corridors and Australia and China being the first corridor, Australia and Hong Kong and Australia and China being the first corridor. We hope there's enough trading volume to kind of [00:56:10] S0: But what get us was to the customer product? Like, what were they seeing? [00:56:14] S1: So we built an invoicing product. Invoice. So basically, any merchant in Australia, they sell to China. And at that time, China's sort of middle class is booming. They're buying a lot of product from Australia, like cosmetic product, you know, house product and then honey and all that type, like milk powders. You know, a lot of people from Australia are selling e commerce product to China, and then we basically want to build an invoicing product to help the merchants in Australia to get paid. And that's also failed. We just couldn't get enough merchant because the SMBs are very less profitable. We don't have enough. At that time, we raised $3,000,000 We couldn't get product market fit at scale. There's just not enough people who want to get paid from Australia to China. [00:56:59] S0: Interesting. So the two first products, like, failed completely.
00:56:59 · Henrique Dubugras, Jack Zhang
[00:56:59] S0: Interesting. So the two first products, like, failed completely. [00:57:02] S1: But we're leveraging the second product to raise more money. [00:57:05] S0: Okay. [00:57:06] S1: So the fir... We're leveraging the first failed product to raise three. Yeah. And then we're leveraging the second failed product to raise from Sequoia and Tencent and Mastercard, I think, which is the turning point. [00:57:18] S0: Oh, interesting. So, you know, at this point, you're already raising, like, a series a from Sequoia, Tencent. And, like, I guess, why do you think they invested? [00:57:26] S1: I think because the vision I was talking about is building the largest money movement network in the world to completely displacing SWIFT. So the infrastructure vision is very big. Even though I was building a part, I don't even know whether it's gonna work or not, actually getting the volume. Because you can keep building infrastructure, but still, you need... Like, infrastructure is like the railways. You still need a train, you know, to carrying stuff on the on the rails to making money. Yeah. Right? So just at that time, we know it's a big idea to build a railway, but we just don't know what product you can carry on the train. [00:58:00] S0: And how do you meet Sequoia and [00:58:02] S1: all of them? Well, I'm the... A city investor of Gobi Partners knows Steven, who is a partner of Sequoia China, leaving Melbourne. So that's kind of a coincidence that he just happened to be leaving Melbourne, that's kind
00:58:02 · Jack Zhang, Henrique Dubugras
[00:58:02] S1: all of them? Well, I'm the... A city investor of Gobi Partners knows Steven, who is a partner of Sequoia China, leaving Melbourne. So that's kind of a coincidence that he just happened to be leaving Melbourne, that's kind [00:58:19] S0: of how we got introduced to him. And then Tencent was, you know, also that also came together and then, you know [00:58:27] S1: Tencent was just a friends of friends introduction, and we hustled [00:58:31] S0: And how much money did you raise in this round? [00:58:33] S1: I think we're raising about $13,000,000 from Tencent, Sequoia, and Mastercard in that round. [00:58:38] S0: And that was a turning point. You're like, okay. Now I have like... I've raised, like, $16,000,000. You know, we shouldn't be able to make a product that works.
00:58:38 · Henrique Dubugras, Jack Zhang
[00:58:38] S0: And that was a turning point. You're like, okay. Now I have like... I've raised, like, $16,000,000. You know, we shouldn't be able to make a product that works. [00:58:45] S1: Yeah. There's a lot of story in that $16,000,000 or the $13,000,000 because there's no product market fit. And we know the product doesn't have product market fit. We really need the money from Tencent and Sequoia to keep building this infrastructure business to find product market fit. And then we passed the investment committee of Tencent in September 2016. But when they actually you know, this is like a small check, like a $6,000,000 from Tencent. It's a very small check. And the investment committee passed and everything. Then when they actually submitted approval for Pony, the founder of Tencent, to sign off, Pony said no. And they basically asked the team, like, why can't we build this ourselves? And the team didn't know how to respond. And this is September 2016. When I was talking to Sequoia, the idea I sold to Sequoia is Tencent is going lead the investment. And when Tencent invests, we're going to be able to power the WeChat Pay global money movement. So Sequoia is like, we're only going to invest if Tencent invests. [00:59:52] S0: Yeah, because like if you're going have Tencent's global business, that sounds like a great business. [00:59:56] S1: Yeah. But in fact, I know that Sequoia doesn't know. I actually got rejected by Pony. [01:00:03] S0: So the whole thing can fall apart?
01:00:05 · Jack Zhang
[01:00:05] S1: Yeah. The whole thing can fall apart. This is September 2016. 2016. I was having so much anxiety. And the Tencent guy is like, there's only one or two person in Tencent can change pony's mind. It's either Martin or James Mitchell, the president or the chief strategy officer. I basically was waiting for a meeting for three months. I couldn't get a meeting with either of them. And then by sort of December 2016, James Mitchell having a holiday in Melbourne in a winery in The Peninsula. And I basically just tried to get a meeting to meet with James while he's on holiday for three weeks. I couldn't sleep for every single day in that three weeks because James, I'm just checking, like, can James meet today? No, no, no, no, It's because he's on holiday. Throughout the entire Christmas of twenty sixteen, I didn't able to meet even in Melbourne. Then finally meet James in a subsequent morning on the January 5 in 2017 in Hong Kong, and that's where we had the meeting. And I was able to convince James to invest. I think James just have a sort of picture memory. So if he remember, when he did the RPO for PayPal back in the day is when he was at Goldman, I think more than 40% of the revenue in PayPal coming from FX, cross border transaction. He just felt that's a very big market. And it seems like I have the background, because I was a trader and I've built FX technology before, to have the right skill set to tackle this problem. And he asked for a demo at the of the meeting. We did a demo. When we that's the invoicing product actually going to fail. And then when we actually do the pay button, there's a page called four zero four. So there's an underlying bug in the code because our payment partner in China is a very bad technology company. And I just made up of reasons like, oh, maybe it's the FIBO or Tencent blocked us.