GokuShow: Exclusive Interview with Klickl CEO and Senior Investor Michael Zhao

About GokuShow:

GokuShow is a program focused on interviewing Web3 entrepreneurs, initiated by Web3 blogger Dog Brother (@Gokunocool). It aims to provide a platform for all Web3 entrepreneurs to showcase themselves, understand the stories behind them, and create a warm and engaging show.

Host: GoKu Dog Brother https://twitter.com/gokunocool

Guest: Michael Zhao linkedin: https://www.linkedin.com/in/michael-zhao-38b97b2?utmsource=share\&utmcampaign=sharevia\&utmcontent=profile\&utmmedium=iosapp

Project Party Klickl: https://twitter.com/klicklofficial

Founded in the United Arab Emirates (UAE), Klickl is a licensed institution for crypto asset custody, trading, brokerage, and other services, regulated by the Abu Dhabi Global Market (ADGM) in the UAE. It has obtained the Financial Services License (FSP) and In-Principle Approval (IPA) as a global virtual asset service provider, making it the largest custody and payment platform in the Middle East and North Africa region. It holds a European VASP crypto license, allowing it to operate as a brokerage and provide digital asset custody, offering users professional digital asset trading and other related services.

As the CEO of Klickl, Michael Zhao comes from a traditional finance background and has ventured into the Middle East to develop his Web3 business. He is not only a core founder of Klickl but has also established his own C1 Fund focusing on secondary asset investments. To better create a fixed social circle for entrepreneurs in Dubai, he has also founded the first golf social venue in the area.

Whether in entrepreneurship or investment, the versatile Michael Zhao shares valuable experiences with us during the interview.

Highlights:

• Why establish Klickl in the Middle East? Traditional banking services are lagging in the Middle East, and user experience is poor. The acceptance of blockchain is cautious, and the payment sector represents a significant industry blue ocean. As a regional company, we aim to serve the entire market, even extending services to African countries.

• Crypto assets are fundamentally financial services, and at their core, they are about trust.

• The problem we solve is how to keep users on the platform for the long term using the most native traffic and the easiest-to-understand methods.

• The biggest culture shock in the Middle East is that it is a highly mobile region with strong transactional activity. Our goal is to gradually transform a city filled with money into a suitable home for family living, making the Middle East a good social platform.

• Entrepreneurship requires looking for big opportunities while doing small things.

• Difficult decisions are about doing the right thing.

• The biggest risk is not embracing risk.

The following content is from the GokuShow interview live stream:

1. Embrace Regulation for Faster Industry Development

Dog Brother: Please share your entrepreneurial experience and explain why you chose to start a business in the Middle East.

Michael: We were previously engaged in the traditional service industry, initially working at UBS Investment Bank, covering different financial sectors from the US, Singapore to Hong Kong. Later, I transitioned to a regulatory role, participating in business at the central bank. I entered the blockchain industry in 2015, and as a trader, I was willing to trade any volatile products, with Bitcoin and Ethereum considered excellent trading varieties. We then began investing in projects, establishing exchanges, wallets, and custody services, gradually growing. However, after the pandemic, the entire blockchain regulatory landscape began to change. Although Hong Kong and Singapore were developing well, the market competition was fierce for entrepreneurs. Therefore, we believed the Middle East was a region with great potential.

In fact, our arrival in the Middle East was somewhat accidental. At that time, we were in Hong Kong, and there was a financial technology exhibition called Gitex being held in the Middle East, where our tech company was invited to exhibit. It was November 2020, just as the pandemic was starting. When we arrived at the exhibition, we realized that the Middle East was not the place we had imagined. Especially in Dubai, we saw entrepreneurs from different ethnicities, and the local regulations and laws were very well established. Thus, we decided to seize the opportunity to settle in the Middle East and began researching local regulations and related policies.

Dog Brother: I heard you used to be a bank president. How do you view the crypto industry?

Michael: In the traditional finance industry, whether in commercial banks or investment banks, we have participated from a regulatory perspective. After entering the blockchain industry, our traditional finance background gave us a deep understanding of risk, regulation, and compliance. Compared to the past, the market is changing rapidly, with many risk events occurring, such as FTX and 3 Arrows. After these events, global regulatory agencies have raised more requirements regarding risk control, compliance, and regulations. Our experience allows us to communicate better with them because many Web3 practitioners believe decentralization is excellent and want to escape centralization and regulation. However, I think this is a gradual process. It is impossible to transition from a centralized financial system to a completely decentralized one overnight. Therefore, we should better embrace regulation and involve more community members so that the entire industry's development can accelerate.

2. Explore the Blue Ocean of the Middle East Market and Create a Tri-Functional Payment Product

Dog Brother: Why did you want to create Klickl?

Michael: We have been thinking about how to define our services and products more clearly. When Klickl was first established, we were an emerging startup entering the Middle East. Although the region is a hotspot attracting significant capital flows, trading, and talent, basic financial services are actually very backward. In mature Asian markets, we might think we can enjoy digital banking services at home, and even foreign exchange services are comprehensive. But in the Middle East, traditional banking services are very lagging and fail to provide a good user experience. Additionally, since the Middle East is a gray area, the acceptance of fund transfers and cryptocurrencies is very cautious. Therefore, if we can easily obtain a global account, including card services and a compliant digital currency wallet service, this tri-functional service will be competitive in the market.

Based on this, we began to build the prototype of Klickl. Previously, many industries were regional, such as only serving the Hong Kong market in Hong Kong and only serving the Singapore market in Singapore. However, the entire Web3, blockchain, or open banking industry is rapidly converging. We have the opportunity to become an intermediary service company, serving the market in return, which is why we are willing to continue cultivating in this region and replicate services that meet UAE compliance standards to the Gulf Cooperation Council and even African countries.

Dog Brother: Klickl's business idea is quite good, starting from a regional leader and gradually expanding to other regions. Now that the digital currency market share is rising and ETFs are developing, this provides more opportunities for Klickl. Can you introduce Klickl's business structure?

Michael: The most important thing is trust, but the cost of trust in financial products and services is very high. We successfully applied for the ADGM's FSRA virtual asset custody license and virtual asset broker operating service license, which allows us to legally and compliantly custody digital assets and bring confidence to the market. We are committed to providing global accounts, card services, and compliant digital currency custody and wallet services to deliver a better experience for users. Our services differ from financial technology products like Revolut because we have strong local licenses and credit endorsements. We adopt a low-risk business model to serve retail and institutional clients, and once we gain traffic, it can become very sticky.

Dog Brother: What are the specific use cases for global accounts for B-end clients?

Michael: More and more enterprises, whether settling and paying in US dollars or other currencies, are looking for compliant frameworks to cooperate with banks and have multiple account options. This is particularly true for Chinese e-commerce companies going overseas, such as Airwallex and Xtransfer, which need to use multi-currency accounts for settlement and payment.

Based on building trust, we launched three popular products. The first is a multi-currency iBank account, used with crypto top-ups, supporting Visa, MasterCard, and UnionPay International cards, and providing compliant digital currency wallets. This way, individuals and small to medium-sized enterprises can efficiently manage funds at low cost, whether for clearing, payment, collection, or disbursement. This is one of our main products.

The second product is "Klickl for you." We will primarily focus on the Middle East and African markets. Once users understand and use our first product, we will provide a series of services, such as earned services that provide added value from customer deposits, loan services based on transaction behavior, and future lifestyle segments. Although we operate in the Web3 industry, we also follow many Web2 logics, such as traffic, payment, product, and operations. We hope to attract the most organic traffic in the most intuitive and understandable way, allowing users to stay on our platform long-term through different products and services.

In the Middle East, the biggest culture shock is the high mobility and strong transactional nature. Previously, we studied Dubai's strategic planning to gradually transform this money-centric city into a suitable home for family living. At the same time, another market demand emerged: how to establish a good and lasting social platform. A few years ago, we created a social platform centered around golf. For local residents, Asian entrepreneurs are all yellow-skinned and black-eyed, making it hard to distinguish each other, just as we see them all in white robes, unable to tell them apart. Every Asian entrepreneur who comes here tells their story, but locals often lack a foundation of trust. Therefore, an important entrepreneurial lesson here is: we need to seize big opportunities while doing small things. These two steps are strategic and operational; by doing small things, we can easily deliver. For example, a few years ago, we created the first indoor golf club platform in the Middle East, leveraging golf to attract foot traffic while filtering out high-quality members and generating other value-added effects. Initially, people were skeptical, but we designed and built step by step, and when we finally opened, many local partners saw our actual actions and began to believe we could deliver on our promises.

Through the success of this small project, we gained everyone's trust. After establishing this trust, we could present our plan to establish a compliant digital currency bank, and they would believe us because we had previously delivered a small project. So, I think as a global entrepreneur coming to a new region, this is a small adjustment.

3. Embrace Risk and Seek Long-Term Partners

Dog Brother: Have there been any major moves in the Middle East recently?

Michael: We plan to establish a global series of golf tournaments designed for the digital currency and Web3 industry, called Web3 Open. Many practitioners in this industry play golf, and it is referred to as the green opium. Once in this state, it is very similar to the logic of striving for entrepreneurship. We want to connect 14 golf courses in Dubai with our indoor golf platform and hold the first golf event in the industry on March 1, bringing the industry together through playing and socializing. We hope this project can become global, starting from Dubai in the Middle East and then expanding to places like Singapore, Hong Kong, New York, and London.

Through these small projects, we aim to unite entrepreneurs who have aspirations for this industry. Although meetings are also a good platform, we hope this series of golf tournaments can facilitate easier communication and even generate some interesting connections.

Dog Brother: How do you find your partners?

Michael: Every day in the Middle East, there are many ideas and thoughts. However, the core issue is how to implement these ideas. During execution, it is challenging to ensure that one person possesses the capability and experience of three heads and six arms. Therefore, when looking for partners, several factors need to be considered:

1) Complementarity. Partners should be able to complement each other and achieve common goals.

2) During interviews and communications, I often ask a question: What excites you in life? This question can reveal a person's character traits. I hope to align with partners in terms of dream direction and be able to move forward step by step. Projects may fail, and directions may be wrong, but as long as there is a group of like-minded people working together, that energy and nourishment are very precious.

I want to share a story. When we initially started the exchange, we were not as successful as other partners. In 2020, we identified a very good opportunity, acquired a cryptocurrency, and successfully listed it on NASDAQ. At that time, Bitcoin was priced at $60,000, and I remember standing in Times Square in my pajamas, feeling like the whole world was mine. However, the market quickly fell after peaking, and the cryptocurrency market has been on a downward trend, with the US market also performing poorly. By mid-last year, we faced a choice: whether to withdraw to protect our assets. When we discussed this with the board and advisors, most of them were veterans who had been in the international market for many years, but no one voted for their own interests. They believed we should make a difficult but correct decision, and we would rather lose our money than compromise our reputation because that is how we can have opportunities for tomorrow.

Finding an excellent partner is like going through a journey together, achieving success and making money together. But sometimes, even if a project does not yield good results, knowing how to make difficult but correct choices is crucial. Although we ultimately returned all the investors' money, everyone was very supportive and recognized that we had done our best in this project; no one could have done better.

Later, many institutions proactively contacted us, expressing recognition and support. Based on this trust, we raised more funds and established a fund focused on secondary assets called C1 Fund. Therefore, I have great respect for my partners. Whether in Hong Kong, New York, or Dubai, they always come prepared and full of energy during meetings. Their dedication and contributions continuously inspire me.

Dog Brother: How do you manage multiple projects simultaneously?

Michael: The world is undergoing many changes, such as the Russia-Ukraine war, GASA, and the US elections. In this ever-changing world, we should focus on the Middle East to serve the future global market, and we are also learning to avoid missing opportunities. Without fully understanding all paths, we can expand our scope a bit because certain places actually overlap.

For example, we can define the left atrium as a golf lifestyle, making friends through small projects; the right atrium can be Klickl's services in the financial asset field, such as the C1 Fund secondary market fund. By combining these two, we gradually clarify how we can integrate our resources with partners, which I believe is a dynamic process.

We need not only a team but also a spirit of industry collaboration, which is the secret to driving industry progress. For example, Apple does not need to manufacture batteries and motherboards; they only need to assemble core partners and then focus on their own innovations. Similarly, for Klickl, while we have our core licenses and regions, from a global perspective, although we are optimistic about many markets, we will not personally engage in all core businesses. Instead, we choose to collaborate with the best partners in the region to move forward together. Whether in payments, custody, or cryptocurrency, only by accepting positive competition and being more open can we progress better and faster.

It is encouraging that the regulation here is very open, willing to listen to market voices, and actively working on risk control. Last year, when I chatted with the founder of Swissborg, we agreed that the biggest risk is not daring to embrace and take risks. When we take risks, we do not need to jump from 0 to 100 in one step; instead, we can move forward gradually. When taking risks, sometimes we should reduce the risk from 100 to 50, which is done from the perspective of market participants. At the same time, regulation should increase risks so that our market participants and regulatory agencies can coordinate in the middle.

For any project to develop sustainably, the most important aspect is "value capture." For example, at the parking lot where I swipe my card, many girls' arms are not long enough to reach the card reader, so they need to get out of the car to operate it. One day, a friend gave me a gift, a tool that extends the contact distance, so the girls do not need to get out of the car; they can just drive up, elegantly stop, insert the card into the reader, beep, and continue on their way. This is a very useful value capture point I observed. Therefore, in Web3 entrepreneurship, you should not always think about adding economic models, incentive tokens, and NFTs; instead, you should think about how to reduce these factors and, most importantly, find that true value capture point. The second point is that after launching the MVP, you should consider how to make customers feel pain when they lose your product. For example, in our golf project, we have a member who said it was fantastic, and they really wanted to live there so they wouldn't have to rent anymore.

Dog Brother: Do you have any suggestions for cost control?

Michael: Generally speaking, cost control can be divided into two situations based on the company's financial status: having money and not having money. In the case of insufficient funds, companies rarely fail to control costs well because if they do not control them well, they may face the risk of bankruptcy. However, with sufficient funds, many companies find it easy to mismanage costs. In the Web3 industry, personnel costs, server costs, and security costs are unavoidable, so costs can be divided into fixed and variable parts. We need to judge if a certain cost does not impact the product, then we can consider eliminating it. As entrepreneurs, we should maintain an optimistic attitude towards the market but a pessimistic stance in business.

4. The Key to Entrepreneurship is "Value Capture," and You Can Start a Business in Any Country

Dog Brother: Would you recommend newly established companies to start a business in the Middle East?

Michael: I do not discourage starting a business in the Middle East; in fact, as digital nomads in the blockchain industry, we can start a business anywhere. When choosing a location for entrepreneurship, we should position ourselves based on our strengths rather than blindly following trends. The questions we need to answer are: "Where is my value capture point?" and "Where can I maximize value capture?" For example, if obtaining a license is key to establishing product trust, then Singapore might be a good choice. However, after the FTX incident, licenses have become stricter, and the market is changing. Therefore, regardless of the region's license, it is just one of the standards by which local regulatory agencies measure the industry. As long as our business capabilities are strong, the license is just an extra bonus, and the region is also an additional bonus.

Dog Brother: What are your views on Chinese entrepreneurs?

Michael: Our company also has many local team members in the Middle East. Compared to Asian teams, they may not be as proactive. However, I do not view "hustle" as a negative term. I believe that through market research, product innovation, traffic acquisition, and effective operations, value maximization can be achieved. In the Middle East, there are also many successful Chinese entrepreneurs, such as Yala, which is a great listed company with a team composed of Chinese. In the new energy sector, we see more and more Chinese entrepreneurs showcasing their talents in the Middle East, so I believe this is healthy competition.

Dog Brother: What is the most practical advice for Web3 entrepreneurs?

Michael: 1) Entrepreneurs should have bold ideas and visions, but during implementation, they should also pay attention to small details. The product line for entrepreneurship should not be too long; it should focus on solving a specific need. An Australian fintech company spent $1 billion to acquire a screen recording software app, Loom. This model of starting from a very small point and then gradually monetizing is worth learning from.
2) During execution, entrepreneurs need to embrace change and seize good turning points. For example, Instagram's resurgence was due to the discovery of beauty features; product innovation often cannot be fully conceived on the first day of the team but evolves through continuous execution. He encourages entrepreneurs to be prepared to execute their plans and learn and adapt to changes during the validation process.