Steve Wei: A Crypto Winter Survival, A Telecom Disruptor
A profile story of our CEO by 8BTC
BBorn in the 1970s, Steve has waded through the ebb and flow of entrepreneurship.
When he was a young lad in college, Steve devoted all his time and energy in coding, giving up opportunities to date girls. In the late 1990s, Steve was busy coding for the nascent WebEx in the U.S., missing China’s first wave of Internet innovation. He came back home to launch his own startup in the early 2000s, but, unaware of the project’s long-term potential, he sold it to Huawei a few years later, failing to make the business a unicorn it could have become.
In 2017, a middle-aged serial entrepreneur, Steve decided to put an all-in bet on the blockchain. He was frequently confronted by doubts from the industry — “Steve, blockchain people are typically millennials,” one investor asked. “How did you get into the game?”
But no one else could win over investors like Steve did. While most blockchain & crypto projects tighten their belts in the deep bear market since the Bitcoin crash, TOP Network, Steve’s blockchain startup, has no problem raising funds in the private market, gaining one new investor per week. In this story, we’ll take you on a journey back to Steve’s earliest career to find out why he could survive the crypto winter.
— — — — — Youth with coding — — — — —
In September 1989, Steve Wei, 18-year-old then, came to Tsinghua University in Beijing as the top scorer of Gaokao, the Chinese college entrance exam, in Sheng County, Zhejiang Province. Admitted to the electrical engineering department, he didn’t know much about his major, and found it boring after the first semester.
In the second semester, the university started offering computer science courses. Steve discovered, after taking a programming class, that he was fond of solving logical problems with computer. Hooked on coding since then, he spent as much time as possible in the school’s computer lab.
Back then in college, guitar was the ultimate “chick magnet.” When musical talents in Tsinghua like Xiaosong Gao played guitar and sang folk songs on the campus lawn, Steve was head-down on coding. Dating was the last thing on his mind.
A poor student struggling to make ends meet, Steve went to work in 1991 at a Taiwanese-owned software company in Zhongguan Village, the Silicon Valley in China. During the interview, the company owner gave him a task: in one week, write a Windows-based program in C to read a DBS database and display the results on the screen.
Steve was petrified. He had only learned FORTRAN and Basic in college and never heard of C. Steve pored over programming books in the university bookstore and wrote his codes down on paper as he didn’t have a chance to run them on a computer. Nobody knew if his codes would work.
He went to the company a week later. After a day’s tinkering and tweaking, the first record of a database appeared on the screen.
“Look, it’s come up!” Steve told the company owner.
“You’re a genius!” The Taiwanese said, eyes lighting up.
In the early 1990s, people selling pirated software and smuggling computer parts were everywhere in Zhongguan village, where a golden era of technological innovation had just come. In Zhongguan Village, two well-known teams were developing software to localize Windows 3.0 (Microsoft did not provide the product’s Chinese version). One of the teams consisted of Steve, his Taiwanese boss and a student from Peking University.
It’s “super easy” to make money there — this was the deepest impression Steve had of Zhongguan Village back then. The company he worked for sold its software at 1,000 yuan a copy. Steve could earn up to 8,000 yuan (RMB) in a month, which equals 520,000 yuan by the end of 2017 based on the broad money supply (M2).
In 1993, the team had to disband as something went wrong with the Taiwanese boss’s Mainland Travel Permit. Steve went back to the university focusing on his study.
After receiving his bachelor’s degree from Tsinghua in 1994, Steve joined Beijing Clever Software, a tech company on par with Lenovo and Stone Group Holdings back then. In a time when Windows started to replace DOS while coders familiar with Windows were rare in China, Steve, in less than one year at Clever, was promoted to a managerial role.
In 1995, Clever Software, plagued with financial difficulties, saw many of its executives leave. Just as Steve was preparing to quit the job and start his own project, he met Min Zhu, now chairman of Cybernaut Investment, at Tsinghua.
“Let’s say I have a computer here and a random program on this computer draws a circle on the screen,” Zhu asked Steve. “Can you develop a program to draw a circle of the same size in the same position on another computer?”
That was a mind-blowingly complicated question for Chinese programmers back then, but thanks to his knowledge of Windows kernel, Steve came up with the answer in a few seconds.
He told Zhu, “I will implement a plug-in that can be injected into the Windows kernel and hook the Windows GDI API that draws the circle. Whenever an application tries to draw a circle, my code will be executed. The plug-in will capture the radius and position of the circle from the parameters in the API. All the information will be sent to another computer where my rendering software runs. The rendering software can then clone the circle.”
Min Zhu was trying to solve a problem similar to the circle-drawing question: how to display the same content on different devices simultaneously, the key to the screen sharing function in video conferences. In 1996, Zhu founded WebEx, a web conferencing service provider later acquired by Cisco, in the Silicon Valley. He invited Steve to set up a development team in Beijing, which was moved to the Valley in 1998.
— — — — — Riding the wave of cross-border entrepreneurship — — — —
The spring of Chinese Internet development arrived in 1998, when three main web portals, Sina, Sohu and NetEase came on the scene. Tencent, today’s tech and entertainment conglomerate, was founded the same year as a small messenger product provider. Working for WebEx in Silicon Valley, Steve missed the Internet wave back home, facing an entirely different landscape.
“In 1998, Chinese people from Mainland China were at the bottom of the pyramid in Silicon Valley,” he recalled. “It was tough for Chinese entrepreneurs to raise money from mainstream VCs. You didn’t have much chance to start a business. Our pay was low, but we were content with the opportunity to code.”
However, with advanced technologies and the first-of-its-kind SaaS business model, the Chinese-led WebEx saw its Web conferencing business grow rapidly. The company went public on the NASDAQ in July 2000 with a market capitalization of over $1.6 billion. The company survived the burst of the dot-com bubble, thanks partially to the worldwide panic triggered by the 9/11 attack. “Nobody dared to take business trips,” Steve said. “That helped boost our teleconferencing business.”
In 2003, WebEx was named by Forbes as one of the 25 fastest-growing IT companies in five years. “WebEx” has even become a verb in the U.S. People would say “Let’s WebEx it” when they needed to hold online meetings, similar to today’s “Just Google it.”
Steve left WebEx in October 2003. Two months later, he returned to China to launch Cenwave, a tech firm providing distance learning solution and video conferencing software.
The new project did not go as smoothly as he expected at first. In the first year, the Cenwave team buried themselves in product development, only to find, a year later, that their products were neither sellable nor competitive.
“You shouldn’t have gone to America,” said Steve’s wife, jokingly. “It made you dumb.”
What went wrong? Steve realized, in retrospect, that he shouldn’t have run the Chinese company like an American boss. For instance, lots of Silicon Valley-based companies adopt flexible work schedules so that employees can have happier, more productive work lives. But this usually wouldn’t work in China. People would come to the office at 9 a.m. in the first week. In the second week, it would be 9:15 a.m., and 9:30 a.m. in the third week. Steve also discovered he hadn’t paid enough attention to the differences in product form and business model between companies in two countries.
After three years’ effort of adapting the company to the local culture, Cenwave’s business began to soar.
“At that moment, two-thirds of the online-based education institutes across China were using Cenwave’s products,” Steve recalled. “Millions of people taught and learned on our platform every day.”
Despite its dominant position in the market, Cenwave failed to offer customers satisfactory user experience. Because of the lack of network infrastructure, using video conferencing software in China was not easy: the live stream video often froze, and the microphone always malfunctioned. Expecting that video conferencing business in China wouldn’t take off in the next few years, Steve sold Cenwave to telecommunication giant Huawei in 2010.
Steve admitted that he felt a bit regretful about the sell. “At that time we had a monopoly in the online learning market,” Steve said. “We had all these online schools’ information in our hands. The company could have been worth billions of dollars today.”
“A successful entrepreneur needs both the short-term goal and the long-term vision,” said Steve, reflecting on the lesson he learned from what might not be his best decision.
After Huawei acquired Cenwave, Steve took charge of the Innovation Center of Huawei’s Internet business unit in Silicon Valley in 2011. At that time, the mobile-Internet industry in the U.S., boosted by the wide consumer adoption of 3G and smartphone, was making revolutionary progress. Even an ordinary messaging app could easily attract 20 million users.
Steve smelled a new chance of entrepreneurship. Although he would lose a huge amount of money if he left Huawei to pursue his own project before the end of the three-year lockup period after the acquisition, Steve still chose to follow his instinct.
In 2012, at the age of 41, Steve invested over 10 million yuan from his own pocket in his new startup Dingtone, a cross-border tech firm with offices in Hangzhou and the Silicon Valley. The company has built VoIP app Dingtone, encrypted messaging app CoverMe, and VPN app SkyVPN. These apps have attracted 50 million users in total outside China. In 2016, Dingtone listed its shares on National Equities Exchange and Quotations, the NASDAQ in China.
Looking back on his entrepreneurship experience of two decades, Steve said, “If WebEx had not sold itself to Cisco in 2007, WebEx could have been worth tens of billions of dollars today. If Cenwave had held on for just a few more years, it could have definitely become a unicorn.”
Unable to turn back the clock of life, Steve moved on to his next opportunity.
— — — — — An all-in bet on the blockchain — — — — —
One day in July of 2017, when Steve browsed through the news on his laptop in the Silicon Valley office, a blockchain story caught his eyes.
The blockchain project in the story put forward “decentralized communication,” a new concept claimed to be able to considerably improve the security of user data stored in apps. It could shatter centralized communication, the old framework based on which Dingtone built its products.
For Steve, the story was a warning signal. He was fully aware that entrepreneurship is not just about focusing on the current technologies but also about predicting what will happen in the long run. The communication industry he had been comfortable with for two decades could change drastically with the emerging wave of decentralization.
A month later, Steve launched his first blockchain project, TOP Network.
The initial goal of TOP Network was to build on the blockchain a decentralized network that provides communication services, such as messaging, VPN and VoIP, and offers developers full-stack cloud communication infrastructures. The team built a demo app on Ethereum, which Steve soon found could not support his business because of its low TPS and high gas fee.
“The communication service is high-frequency, and service fee is small or nil,” Steve said. “It would be unreasonable if the gas fee on the blockchain far exceeds the value of the service itself.”
Besides studying Ethereum, Steve spent a month analyzing other public chains. He could not find one that reached at least 10,000 to 20,000 TPS — the prerequisite for handling the large volumes of transactions generated by TOP Network’s communication services (EOS, in its early stage then, was off his radar).
Worse still, the existing blockchain platforms lacked service-oriented infrastructures. Developers building centralized apps can easily find middleware to make their job easier. For example, if a developer wants to add a facial beautification function to a live streaming app, he/she could use a third-party face beautification SDK. But there were few viable middleware/service layers on any public chain, making it time-consuming and costly to develop business-oriented Dapps.
The weaknesses of the existing public chains, Steve realized, would discourage not only TOP Network but companies in various industries from leveraging the blockchain technology. He finally decided to create a high-performance, service-oriented public chain by himself to enable real-world business of any type, size or volume on the blockchain.
TOP Network has been developing both the base-layer blockchain ledger and the service-layer infrastructures. The startup announced the launch of its Testnet in October at Stanford University. On the Testnet, the TPS in a single shard hit 1,500, and six shards altogether reached 7,000 TPS. TOP Network expects to release the Mainnet in Q2 2019. The three communication apps built by Dingtone, along with their large user base, will be ported seamlessly to the blockchain platform and become the first group of Dapps in the TOP ecosystem.
From June to September, ETH sank below $200 from around $600, dampening investor optimism over the prospect of the crypto market and blockchain technology.
“As crypto entered a deep bear market, basically nine out of ten token funds had no money,” Steve recalled. “Lots of blockchain projects had to tighten their belt to survive the cold winter. A Silicon Valley-based blockchain project that I know had raised money on the private market during Ether’s bull run, but when it held an ICO in August, the price of Ether started to fall. To save money, it even quitted hosting offline meetups.”
But finding money is no problem at all for TOP Network. Having raised $11 million since its launch, the project keeps attracting one new investor per week.
“We have a good reputation in the blockchain industry,” Steve said. “Dingtone generates high revenues each year, so we have plenty of money to devote to TOP Network. We don’t usually seek outside funding, but we’d love to talk with investors who are connected with us through our friends. We won’t tell investors sentimental stories or shed tears in front of them. We just talk about the real things we have done. Almost all of those who have sufficient funds would invest in us.”
The current bear market is an inevitable test that a nascent technology like blockchain has to pass before making it into the mainstream market, Steve said.
“If we look at how much money has been made and lost in the market, we can see that the blockchain craze, the dot-com boom and the mobile-Internet wave are very much alike,” Steve explained. “Among 100 Internet startups, only about five could survive. For blockchain industry, there will be fewer survivals, because the number of users on the blockchain is much, much smaller than that on the Internet.”
It takes years for startups to build their products and communities, but in a bear market, many investors are too pessimistic to wait. The impatience in the market could turn good projects into scams, Steve said.
“For a startup, getting your product into the market is a crucial milestone,” Steve said. “Many blockchain projects in Silicon Valley still cannot reach this milestone, even if some of them have raised $20 million. Some people would say, ‘Why waste $20 million? Why don’t we just run away with the money?’ This bear market could force good guys to do evil.”
As doing tech startups is becoming a fashion for young geeks, it’s rare to meet middle-aged people like Steve in the blockchain industry. At a blockchain trade show earlier this year, Steve recalled, he invited a friend of his age to attend a keynote speech with him.
“Look at the speakers and the audience,” the friend said. “They are all twenty-somethings. There’s nothing for someone born in the 1970s like me.”
Some investor even asked, “Steve, blockchain people are typically millennials. How would did you get into the game?”
Young people are quicker than old folks to respond to the crypto craze, but Steve believed he is in a better position to bring the blockchain from the white paper to the real world.
“Making blockchain a real thing is a task that belongs to people like me — not necessarily folks of my age, but folks with entrepreneurial experiences,” said Steve. “All the commercial efforts in the world follow the same logic: user needs, product, business model and business management. They are the basic laws that you can find in any human activities. I believe the essence of blockchain lies not in the decentralization, but in its ability to redefine the relations of production. We can make the relations of production more reliable and trustworthy with TOP Network’s blockchain.”