When Allan Zhang decided to move into the blockchain industry, he started a business with a focus on data storage and computing.
Previously as the founder of AI security company Trustlook, Zhang realized that most startups — including Trustlook — could not afford the high maintenance cost on data storage and computing. The blockchain technology, however, promised a bright future where it would play an increasing role in reducing this cost.
Start a new journey
Zhang is a security specialist, spending nearly 20 years in this sector — whether as a founding engineer of Palo Alto Network, a leading network security company in Silicon Valley, or the founder of Trustlook. However, he did not foray into blockchain with his security expertise.
“When entering any industry, I will first forget all my things. I will go back to the original point to examine what the industry lacks. This is the opportunity.”
Zhang believes the bottleneck of data storage and computing he encountered provides the biggest business opportunity in the blockchain market. His idea was to use data storage as some computing power (“data as computing power” for short).
He didn’t know the existence of Filecoin, a company working on blockchain storage when he identified this business opportunity. He began building a team during the second quarter of 2017, and in the meantime, in early August, Filecoin set a new world record in the history of blockchain ICO by raising a staggering $257 million.
Money was chasing after emerging blockchain projects. It proved that Zhang is right. On the other side, the competition was also intensifying.
“I am not a person who easily folds,” Zhang says.
In July and August, his project and team were all in place. However, Zhang’s father was seriously ill, and he had to go back to China, leaving him with no choice but quit the team.
When Zhang returned to Silicon Valley after finishing his family business, he was left alone. The previous team gave up on his original “data as computing power” idea. But Zhang had faith in it. He built a new team, which happened to be DxChain today.
“My strongest ability is neither coding a blockchain, nor the fundraising, nor the market and public relations. But I know who can do this with me. This is my ability,” Zhang says.
Zhang looked to one of his confidants Wei Wang, the chief scientist of the AT&T blockchain who has years of experience in distributed storage computing in the industry, and another close friend James Li who is good at writing codes, to co-found a new business, which led to his second venture in the blockchain.
Slow is fast
Zhang is a firm believer of the saying “slow is fast.”
Starting from the end of 2017, Zhang and two other founders had written white papers in the conference room at Trustlook for three months. They read papers day and night, discussing technology, and even quarreling.
In January, the three had published a white paper, but it was unsatisfactory. Zhang ripped apart the printed white paper and called a restart. By the beginning of February 2018, DxChain’s new white paper was eventually wrapped up.
During these few months, the booming digital currency market suddenly went down. The bitcoin price has plunged from $19,000 to around $6,000. Many told Zhang that it was important to grab the opportunities in the blockchain market, rather spend so much time writing white papers.
“If you believe in blockchain technology and you want to make this happen, your main focus should not be on the price of the currency, but on the project itself,” Zhang says.
Of course, financing is inevitable. By the 2018 Chinese Lunar New Year’s Eve, DxChain’s white paper was almost finished. The market was entering negative territory though. Zhang could not ensure that he could get any funding, but still, he decided to see the market’s reaction.
On the 29th lunar month, Zhang and his finance team came into contact with their first investor, Leo Wang, founder of PreAngle.
Within ten minutes, Wang started a group chat on Tencent’s message app WeChat and introduced Zhang to several other investors. At 9:06, he made the first greeting with everyone in the group and shared a white paper; 18 minutes later, investors said they would like to see a pitch.
A few minutes later, Zhang set up an online meeting, joined by Wang, investors, and his technical team. It took him two hours to sort out the company’s tech advantages. In the next day, the investors transferred the amount of funding they promised the night before to the DxChain’s bank account.
Other investors, including Bo Shen, Wenshen Cai, and Kevin Hsu, followed the same process: They listened to the pitch first and decided on funding on the next day.
DxChain completed their cornerstone investment round in six days.
Most investors believe that the most critical issue of blockchain remains in storage and computing, which is a relatively fundamental infrastructure issue. Bitcoin is mainly used for financial transfer, so it concerns little for storage and computing. Ethereum happened to address a part of the limitations somehow, but its amount of computation is still limited. As a result, the current smart contracts only perform some primary functions. Just a few sectors have blockchain applications.
Blockchain storage and computing remain a challenging problem to be solved, but still, a large number of investors are willing to bet their future on it.
There are many temptations during the process of financing. Some well-known institutions offered the 5 percent of free quota to help Trustlook promote. This is a common trick in the digital currency market that can make the project quickly widely reported. “I spend all my money on an organization to get some heat, what about real development?” Zhang says that he refused any of such cooperations.
Failure is the mother of success
A successful serial entrepreneur, Zhang knows how to be a good one.
Zhang joined the Palo Alto Network in 2008 and became the second security engineer for this network security company. He achieved financial freedom when the company went public in 2012. However, in December of that year, he left the company, while he just got the EAD card that week. This was very risky. The issuance of the EAD card indicates that the green card has gone through the process. An average person will wait until the card is accepted for 180 days before leaving the job. According to the US law, the program cannot be revoked after 180 days, but Zhang couldn’t wait to start his business.
There were some other opportunities placed in front of him after he left the Palo Alto Network. For example, cybersecurity company FireEye invited him to lead the team of security engineers, and cloud security company Arista networks asked him to join. However, he committed to the mobile Internet security. During the Android’s early years, most Android devices lacked security protections. He saw this as a promising business opportunity.
In the first half year of 2012 after his departure, he wrote a prototype of Trustlook at home. In the meantime, FireEye went to the city. If he joined, it was another chance to cash out. “I am not worried about money. At that time, I have a house, a car, a wonderful wife and kids. If you don’t live for yourself, you always feel the shortcomings,” Zhang says.
Around 2012, Silicon Valley’s Chinese venture capital fund started popping up, such as Danhua Capital, which was founded by Stanford University’s Professor Shoucheng Zhang. It invested in Trustlook in 2014.
Another investor came from a well-established Chinese network security company. What Zhang didn’t know at the time was that the investment had caused him to incur a significant loss.
This investor persuaded Zhang to reject the investment from Zhou Hongyi, a Chinese Billionaire and CEO of the Internet security company Qihoo 360, who showed a keen interest in investing Trustlook. He also restated that his company would never make a personal mobile security product. Zhang chose to trust him and accepted his investment.
However, this investor turned his back on Zhang and urged his own company to create a security product akin to the one of Trustlook before their product was prepared for the market. Zhang thought maybe he was too slow and accepted the fact.
Then, he also suggested that Zhang should promote Trustlook on his platform to increase the user growth. Zhang followed the advice and demanded his staff to sign a promotion agreement with the platform.
Promotion needs costs. The mobile Internet makes everything fast. Zhang surprisingly started crowdfunding in his WeChat friend circle, instead took five or six months to raise money from VCs. He raised 3 million US dollars in a few days, joined by more than his 40 friends.
One of Zhang’s friends who has been helping Cisco to do mergers and acquisitions has been in charge of Trustlook’s financial management. Unexpectedly, one day in 2014, the white old man called Zhang to his office and told him, “You are out of money. Do you know that?”
Zhang was shocked. “How is it possible? There should be still 2 million dollars in the account!” Then he was informed that the promotion on his investor’s company platform cost him millions of dollars, far exceeding the number he previously agreed.
The winter was coming soon. In September of that year, venture capital started to cool off, and Trustlook was facing a life-and-death crisis. Fortunately, Zhang once again secured more than 10 million US dollars at the time, and now since Trustlook has made profits, the company still keeps that money in the bank account.
These experiences were brought to DxChain. In the past few months, Zhang has been criticized by investors of stubbornness and disapproval, and he seems to be okay with that. Blockchain and digital currency are still in a fledgling phase. Unlike traditional industries, the entrepreneurship experience in the blockchain market is merely verified.
“I have my judgment, and it is the right path to form my judgment from the massive information,” Zhang says. He knows that others say he’s “dumb” and “stubborn,” but he sticks with the saying “holding on yourself.”
DxChain is a decentralized big data storage and computing network. It is an open public chain that applies the decentralization of blockchain to storage and computing.