Q&A With Angel Investor, Advisor to Spotify And Bitcoin Believer Shakil Khan

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Shakil Khan, a well-known entrepreneur and angel investor who divides his time between London, San Francisco, New York and various airports is a scheduled speaker in the “digital rock stars” track at the SIME conference in Stockholm November 12th and 13th.He recently spoke to Informilo Editor-in-Chief Jennifer L. Schenker about Spotify, the future of money and what motivates him to invest in start-ups.

Khan founded a number of start-ups including buy.at, which was acquired by AOL; and CoinDesk, a media site that specializes in news about Bitcoin, an alternative digital currency. He is head of Special Projects at popular music streaming service Spotify, where he is personal advisor to founder and CEO Daniel Ek. Khan was an investor in and mentor to British teenager Nick D’Aloisio, who built Summly, a news curation app that was sold to Yahoo in March this year for an estimated $30 million. Khan currently serves as an advisor to Path, a San Francisco-based personal social networking site, on its international expansion. He is an investor in Spotify, Skift, YPlan, Blackjet, Invi, Localini, Duedil, Top10, SecondMarket and, most recently, BitPay, a payment service provider that specializes in helping Web merchants accept Bitcoins, a controversial alternative crypto-currency.Unlike traditional money, bitcoins are virtual and are not backed by a central bank. Instead, the coins are created by a network of users who solve complex mathematical problems — a method known as “mining” — to generate bitcoins. Only a finite number of bitcoins can be created.

To date this virtual currency has primarily been a vehicle for speculators: in April the value of a single bitcoin spiked to about $260 before plummeting and then rallying. Today the value of a bitcoin is around $230, according to news reports. The current market cap of bitcoins is $2.6 billion.

Slowly, but surely, bitcoins are starting to become more mainstream. BitPay has so far helped over 10,000 merchants across the world start accepting payments in bitcoin. According to CoinDesk, the media site Khan founded to explain Bitcoin to the masses, 50% of the merchants that use BitPay are located in North America and 25% are in Europe. Over 90% of the merchants using the payment service provider are e-commerce businesses, and BitPay also counts blogging platform WordPress among its clients.

Beyond tech, Khan, who speaks Urdu, Punjabi, English, Chinese and Danish, has done extensive volunteer work and raised funds for charity: water, a non-profit that raises money to dig wells and build filtration systems and other means to bring underserved people clean drinking water. He is also a supporter of Pencils of Promise, an organization which builds schools for those most in need. Below find the interview with Khan:

Q: What is your background?

A: I was born in the UK. I am a high school dropout. Both parents were illiterate. I was the first entrepreneur in the family for as far back as we could trace the family history. Everyone in my family was a employee and could never understand why I did not accept going to school and getting a normal job. They do not understand business risk because in a working class poverty environment a stable paycheck is crucial.

Q: How did you get involved with Spotify?

A: I met Daniel Ek in February 2007 in London through a mutual friend. He introduced us and we hit it off. At that point I was already an experienced entrepreneur. Spotify was still in the very early stages. I love an underdog and when I understood his vision I realized this was going to be a great journey. What really caught my attention about Daniel’s vision was his sense of naivety. When you tried to tell him that ‘this is the way it has always been done’ his response was “says who?” There was this naivety and this drive to get things done which excited me.

Q: So beyond being an early investor what is your role at Spotify?

A: I basically act as support for Daniel. Every CEO/founder lacks time and Daniel is no exception. I can take the weight off by representing the company at conferences and certain meetings. My title is Head Of Special Projects. The unofficial title is “Go Get Shit Done.” My job is to try and help him execute his ideas. For him the core focus is always the product. I bring experience as I have already run a number of businesses, especially in Europe, and have a much broader network of contacts, some of whom have been hired by Spotify.

Q: What have been some of the challenges around scaling Spotify globally?

A: Companies that start in smaller countries scale far better. If you start your company in the UK the home market is big enough. But in a country like Sweden even if every single person is your customer it wouldn’t be enough so you have to think international from day one. Our next big office was the UK and we have expanded from there. The biggest challenge is keeping the entrepreneurial spirit and culture alive as you get bigger. This is something that applies not just to Spotify but to all companies. And communication is always key. It is important that everyone knows what the collective mission is so you don’t get silos. Everyone needs to be on the same journey.

Q: What’s next for Spotify?

A: We are still at the early stages. Look at how many people are on the planet — over seven billion. Look at how many people there are with mobile phones and how fast people are embracing smart phones. Today there are maybe a billion people who listen to music on a daily basis so we are still only scratching the surface. In 2007 people were still buying CDs and building bespoke cabinets for them. That has stopped. Then it was, ‘I need to own my files, to own the download,’ and then with time and Daniel and Martin’s vision the way people consume music has come a very long way. But we are still in the single digits. The potential to reach out to everyone who is listening to music is huge.

Q: Most recently you have started focusing on disrupting a whole other area: financial services. Can you tell us a little bit about that?

A: I am an investor in BitPay, which is a payment system that allows merchants to accept bitcoins as payments for purchases on their web sites. I personally own tens of thousands of dollars worth of bitcoins. And, I have launched CoinDesk. There is a need for information about this emerging industry and market. What was out there was only very deep technical information so I decided to launch CoinDesk while sitting at the Hong Kong airport. I have never been in publishing before and four weeks later we launched. Now, after six months we are the largest bitcoin news and information site. I am hoping CoinDesk will become the Bloomberg or Reuters of digital currency.

Q: So what do you see as the future of money and where does bitcoin fit in?

A: I refer to bitcoin as money over IP. Why is it that in 2013 I can send you a text message, audio, video, or an icon and it will take two seconds but if you tell me that I owe you $12 for the pizza last night it is going to cost me $18 to send it to you and take four days to arrive? The current systems were built in the ’70s and ’80s. Everything else has moved on but that hasn’t. I don’t know whether bitcoin is the one. We are just at the beginning of virtual currencies — like the Internet before Google or maybe Netscape.

Q: Cameron and Tyler Winklevoss, the twins best known for their part in the history of Facebook, have publicly said they have invested millions of dollars of their money into bitcoins and in July they filed a proposal with securities regulators in the U.S. to set up an exchange-traded fund that would allow any investor to trade bitcoins as if they were stocks. And you personally are risking tens of thousands of dollars of your own money by speculating on bitcoins. Would you urge people in the general public to start buying them too?

A: The price of a bitcoin either goes to zero or it goes to many, many zeros. Should people buy it? Yes. Should they go and put every penny in? No. They should only risk an amount they are comfortable with and can afford to lose. That said, when it comes to risk/reward potential I see no better investment.

Q: You are also continuing to bet on start-ups.

A: Yes. My first investment was Spotify, then Top10.com out of the UK. Now I have 13 or 14. About half are in the UK, there are a bunch in the States and one in China.

Q: What motivates you to invest in certain start-ups?

A: Europeans founders understand from day one you need to build for a global audience. Sometimes it is easier for Europeans to grasp that than it is for Americans. That said, the world is getting smaller. With communication tools, Twitter and social media in general you can launch an app, go to sleep, and wake up and be number one in Venezuela even if you don’t know where Venezuela is on the map.

For me the most important thing I can do is back entrepreneurs with amazing vision and see whether I can help them. I don’t tell them what to do. Sometimes, more importantly, I tell them what not to do. I have gray hair and experience and have built up a certain trust because I have been an entrepreneur myself and I invest in companies with my own money. The Shak investment thesis is based on whether there is a certain look in this guy’s eyes that tells me he is going to make it. I back the people I think have the vision. Time will tell if I am a good investor. All I can tell you is that is along the way I am really enjoying it.

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