Famed tech entrepreneur Yat Siu, who launched Hong Kong’s first internet provider and founded a conglomerate specializing in cloud and smartphone software, is riding high on the next big wave in the industry: blockchain technology.
In an exclusive interview with the EJ Insight, Siu looked back at his fruitful entrepreneurial journey and shared his excitement over the enormous possibilities in the blockchain gaming space.
“Hong Kong is very entrepreneurial, but people who have made money as technology entrepreneurs are not that common in Hong Kong,” the Austrian-born tech enthusiast observed.
Siu returned to Hong Kong in 1995 after graduating from Boston University. He discovered that there was no internet service in the city, and this inspired him to launch Asia’s first internet service provider and later introduced a free web-hosting service called Cybercity.
The venture was eventually bought by an American company, which gave Siu some seed money to start Outblaze, which offered white-label internet application services such as hosting email and other communication channels for enterprises.
At the height of the dot-com frenzy in 2000, the fast-growing internet company was able to get Richard Li Tzar-kai, the younger son of Hong Kong billionaire Li Ka-shing, on board as an investor.
According to the media reports, the investment boosted the valuation of Outblaze to over HK$600 million, making Siu, then just 26, among the city’s first internet millionaires.
A year later, however, the internet bubble burst and many online companies collapsed.
The impact on Siu and Outblaze was not that terrible. “The dot-com bubble burst was actually the best thing that happened to us because our business experienced huge growth,” said Siu.
“We were offering email services, and even though the dot-com bubble burst and all the internet companies were reducing headcount, they still needed email. And because we relied on open-source software, our service was about 20 times cheaper than our competitors, we were able to get a big part of the market, even in 2000-2001.”
At the time, Outblaze expanded overseas to the United States, and swept the market with its competitive pricing advantage.
“We basically went to America and pretty much just got every customer we could in America,” he said. At one point, the company accounted for 40 percent of the email traffic in the US.
During Outblaze’s meteoric expansion overseas, Siu was extremely busy working on deals and trade shows overseas. “You might find that there was very little news flow in Hong Kong, but there was a lot of the English news flow overseas, as we did a lot of business in Korea, Japan, the US, and Europe.”
In 2009, the US-based technology giant IBM acquired the messaging business, which was then incorporated into its Lotus suite of business communication services.
“You could say this might be one of the first big tech exits for a big company in America from Hong Kong, I don’t think one of those companies would have bought an operation this size in Hong Kong before.”
Siu has become a legend in tech circles, but his entrepreneurial journey continued. In 2011, he entered the mobile game business by co-founding mobile developer and publisher Animoca.
The company built a broad portfolio of mobile products, including games such as Crazy Kings and Monster Chords, and acquired intellectual property rights to popular characters such as Garfield and Doraemon.
It topped the Hong Kong mobile gaming market in two years, recording 150 million downloads worldwide. In 2015, Animoca Brands, a spinoff from the company, was listed on the Australia Stock Exchange (ASX).
For Siu, blockchain, which underpins bitcoin and other cryptocurrencies, will be the next big thing.
Touted as the “trust machine” that could transform how the economy works, blockchain technology has experienced widespread skepticism, which only deepened after the prices of cryptocurrencies plunged.
Nonetheless, Siu strongly believes that blockchain is on its way to becoming the new internet.
“We are likely to see blockchain users around the globe reach between 300 million and 3 billion users,” Siu said as he saw some parallelism with the rise of the internet in the 1990s.
“About 30 years ago, the total number of internet connections was around 36 million. Today, the entire blockchain industry is powered by about 30 million wallets, so it’s about the same scale,” he said. “And if you read articles written about blockchain now, the market had the same discussion in 1996-97 about the internet.”
The hype around the technology has reached a point where adding the word “blockchain” to a public company’s name can send its shares skyrocketing in a single day. Indeed, companies don’t want to be left by the blockchain bandwagon.
For Siu, the technology offers a big boost to the gaming business. He said that based on the immutability and traceability features of blockchain technology, every item and character in a game can be unique virtual assets, just like crypto tokens.
“This will completely change how we design games,” he enthused.
“Right now all game developers keep issuing items, just like dictators who keep issuing currencies, so that the items have to be more expensive and newcomers will find them too pricey. These games fail in the long term because of inflation.
“However, with blockchain technology, we can actually create a sustainable game that won’t die.”
Siu takes CryptoKitties as an example. Each “virtual cat” has a unique value and is permanently stored on the blockchain. “[Game developers] make a business from transactions, instead of making a business from selling content,” he explained.
Animoca Brands is the exclusive China distributor of CryptoKitties. The online Pokemon-like game, which is built on the ethereum blockchain, allows players to buy and sell virtual cartoon kitties in a marketplace, and breed them with other cats.
It became a craze shortly after its launch in late 2017, amassing 250,000 active players in the first three months with the transaction amount surpassing US$40 million, according to the game’s creator AxiomZen.
Siu also believes that gaming can be the catalyst for blockchain adoption in the mass market because “gaming and technology have always been very close”.
“You have a faster graphics card, bigger monitors – all because of games,” he said.
Gamers have been early technology adopters. Moreover, “in a gaming scenario, the usage of digital money can become critical”.
He believes “the first billion people that will go on the blockchain will be gamer-type people.”
Having positioned itself to capitalize on the potential offered by blockchain technology and artificial intelligence, the company received a combined investment of A$1.5 million (US$1.08 million) from Sun Hung Kai (00086.HK) and blockchain fitness company Lympo last year.
With the investment, Siu explained, “SHK can get exposure to startup investments through the partnership with Animoca Brands, and they can explore the opportunity of using AI to improve their own business, for example, giving better customer experience.”
The company is pursuing efforts to thrive in the blockchain space, and these include building its network of technology and brand partners, driving blockchain adoption, and accelerating the progress toward the future of blockchain gaming: mass consumer markets.
“Do we think that the 30 million users of digital wallet owners today can become, maybe, 300 million or 3 billion users [of blockchain-powered applications]? That’s more likely,” said Siu.
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Yat Siu has put up a cryptocurrency mining rig for demonstration in his office. The tech veteran bets big on blockchain and cryptocurrency technology. Photo: HKEJ
Yat Siu at his Wan Chai office in 1998. Photo: Outblaze