“When things stop working, that’s when you begin to learn.”
“We’re too early, Charles…”
Uh-oh. We had agreed on a Taiwanese tea shop, as per the Block Kong custom of going local, but my excitement quickly cooled down when Phil Chen pointed to a Starbucks as a substitute.
In his T-shirt, Chen doesn’t look like a VC general partner. Maybe more like a DCO, “decentralized chief officer”, an emerging new crypto title for the corporate world.
He definitely doesn’t look like he works for Taiwan’s leading mobile phone manufacturer, HTC.
But he has two of them. Phones.
We do a switch. I give him my mobile so he can browse the Blockkong.com website. He shows me what’s running on his: one for a hardware crypto wallet running a Bitcoin full node; the other co-branded with the world’s biggest crypto exchange by volume, Binance – which will soon be connected to HTC’s own blockchain currently in the works.
Chen spots some previous Block Kong breakfast guests he knows, and he starts to chat about them. But today it’s his story that interests me.
Even if we are, alas, sipping coffees at Starbucks. Please don’t tell anyone.
Born and raised in Taipei, Chen was an aspiring physicist after graduating from the California state university system. His first job was at SLAC, a lab at Stanford that conducts research across many areas, including X-ray science, chemistry, materials and astrophysics.
He was right in the middle of the legendary Sand Hill Road, the highway along with most of Silicon Valley’s biggest venture capitalists are clustered.
So naturally he ended up setting up his own company. In 2005 he co-founded an e-book company, Alex, named after the library of Alexandria of antiquity. Barnes & Noble acquired it and transformed the business into Nook, B&N’s response to Amazon’s Kindle.
Chen was living the American dream but after selling his company he joined HTC as a product manager for its first Android firm. HTC was making the bold shift from being a supplier to American tech firms to developing its own brand, and it launched its first in 2007.
“Every year we doubled sales, from 2008 to 2012,” Chen says. “Those were good years.” In 2012, HTC sold 50 million branded handsets.
Chen moved from product to corporate venture capital at HTC, making investments in the likes of SoundHound (a virtual assistant) and Beats.
As an investor, he got exposure to everything in tech: robotics, internet-of-things devices, wearables and virtual reality. Chen was skeptical of VR. “I thought it was a stupid idea,” he says. But he changed his mind, and led HTC into its own VR line of headsets called Vive.
No good deed goes unpunished, and HTC’s moves attracted the attention of competitors. Its early successes soon got bogged down in patent fights, competition over suppliers, and various dirty tricks in the commercial world.
“When things work well, you hardly understand why you succeed,” Chen says. “When things stop working, that’s when you begin to learn.”
After Vive’s SDK release in 2014 (SDK means the package of software behind a system or app), Chen left HTC. He had plenty of money and he financed Presence Venture Capital with a fellow entrepreneur, from the gaming world. The idea was to initiate investments in gaming and content, but the team soon pivoted to healthcare and B2B training.
“Being trained in context by using VR accelerates the learning process,” Chen explains.
Presence VC was early in the world of VR/AR (augmented reality), funding 42 companies. Of these, 30% went on to raise second rounds from the likes of Adreessen Horowitz, Alibaba and Sequoia Capital. Several companies exited via acquisitions by the likes of Intel, Lift and Pokemon Go.
“Big VCs appreciated that we knew everyone and every component for VR electronics,” Chen says.
He didn’t move to Asia until after a 2015 meeting with Horizon Ventures, the venture arm of Hong Kong tycoon Li Ka-shing. At first he wasn’t sure how this would work, as he didn’t intend to leave Presence. But he was impressed by the flexibility, global reach and long-term outlook at Horizon.
Soon after joining, Chen was exposed to blockchain, following Horizon’s investment in BlockStream, a deal done in tandem with investor Barry Silbert, who afterward would establish Digital Currency Group, one of the space’s whales.
BlockStream is developing tools to mainstream Bitcoin. But Chen says his real interest was Ethereum.
Helping manage the Horizon portfolio, Chen witnessed the same tech giants doing most of the strategy acquisitions. For Horizon’s P&L this was great. But it didn’t jive with Chen’s vision of an open internet.
“Android got hijacked by data crunchers,” he laments. “All it did was make big data companies even bigger.”
Chen goes on: “If you believe data is the new oil, then the data industry will evolved in the same way as oil did. The GAFAs [Google, Amazon, Facebook, Apple – i.e. Big Tech] will control the industry for the next 100 years,” making them the new ExxonMobiles.
Chen wanted to use his time on something else, so he left Horizon to focus on decentralized computing – the only viable alternative to Big Tech oligopoly.
In 2017, he convinced HTC to incubate a blockchain-based phone that integrated a hardware wallet, and he returned in the newly created role of decentralized chief officer.
Initially he thought the role would be more like consulting. “I was only intending to advise,” he recalls.
The investment bug kept biting, though.
Before he goes into the climax of his story, I suggest it’s late enough in the morning now for the Taiwan teashop to be open. It’s not too late to consummate Block Kong Breakfast properly!
As we head across the street, Chen talks about his most recent VC firm, Proof of Capital. He launched it earlier this year with two partners, Chris McCann (ex-Greylock Partners) and Edith Yeung (former China partner at 500 Startups). (Chen remains DCO at HTC.)
Proof of Capital is focused entirely on blockchain startups. So far it has added seven companies to its portfolio. One of them is FTX, a Hong Kong-based derivatives exchange that wants to go head-to-head against local giant BitMex.
The teashop already has a queue. Chen browses the menu on wooden slats. My Cantonese is a bit rusty, so I suggested I’d have whatever he’s having.
We end up devouring a pair of remarkably delicious “yifang cha”, milk teas with wild-herb jelly
As we conclude, I ask Chen what’s missing in the blockchain space.
“Most of these guys are still young,” he says. “They haven’t lived through much yet. There’s a gap in the space between incredible ideas and execution.”
That is a challenge that will eventually solve itself, one way or another.
Yifang Taiwan Fruit Tea
- 28 Harbour Road, Wan Chai
- Yifang Tea x2, HK$72
- Starbucks coffee x2, HK$71