Bitmain: Jihan Wu vs. Micree Zhan. What happens between the founders of the largest mining hardware equipment company?
It looks like one of them will lose everything.
The founders of Bitmain were Jihan Wu and Micree Zhan. Entrepreneurs are kept in the background, the details of their biography are little known. Jihan Wu received degrees in psychology and economics from Peking University. Micree is an engineer by education. He received his degree from the Chinese Academy of Sciences. They first met in the far away 2010, while Zhan led his own startup — DivaIP. Jihan Wu worked at that time in a venture fund and accidentally drew attention to one of the DivaIP employees who advertised the company’s product right on the street.
Wu became interested in the project and decided to meet with Zhan. Anyway, at that time he needed venture capital and asked his future partner for advice. But in the end, Wu was unable to help Zhan and DivaIP. The story could have ended with a chance meeting, but in 2011, Jihan Wu became interested in bitcoin. The idea to create a company that will manufacture mining hardware equipment did not come immediately. At first, Wu chose to invest in bitcoin. At that time, its rate was at the level of 1 dollar per coin. Wu invested all his savings in BTC. Relatives seriously feared that he was the victim of scammers. But they soon realized that Wu made a timely investment. In 2013, the Bitcoin exchange rate began to grow rapidly. Wu managed to not only to return the investment, but also to earn. Having received the starting capital, he decided to enter the mining hardware equipment market. But the company needed a talented engineer. Wu remembered Zhan and wrote him an email in which he outlined everything he knew about bitcoin. Zhan in fact spent about two hours reading about this cryptocurrency on Wikipedia. In the end, he decided that he wanted to participate in the project. Together in 2013 they created Bitmain. In addition, since 2012 ASICMiner and Butterfly Labs have been on the market. It all depended on who was the first to release a breakthrough product.
It took six months to develop the first Bitmain ASIC. Antminer S1 appeared in November 2013. It stood out with a power of 180 GH / s and a relatively low cost of electricity of 360 watts.
Bitmain then underwent a shock corporate restructure. On October 29, at a closed meeting of the board of directors, the co-founder of the company, Jihan Wu, dismissed his business partner and the second co-founder of the company, Micree Zhan, from all posts. Wu admitted that Bitmain was on the verge of bankruptcy,and called Zhan unreliable, and his ideas for developing a startup were insane. Now the entrepreneur was not allowed into the office, and employees were forbidden to communicate with him. However, he states that he is ready to assert his rights in court and intends to return to the company as soon as possible. Zhan’s sharp dismissal occurred just a week after Bitmain applied for another IPO attempt in the United States. Why are Wu and Zhan are fighting, what are Micree`s chances of getting back his post? Indeed not a single conflict between the founders ever has led the company to wealth and prosperity. And while the press observes all the new funny details of this conflict — one of the founders attacks with hired guards, and the second with special forces reflects the attack, the affairs of the company itself are actually pretty affected.
By 2018, Bitmain took the position of the world’s largest developer of ASIC for Bitcoin mining, and its founders became the richest people in the crypto world. 2017 brought billions to the company, but the past two years have been quite challenging for the business.
In September 2018, Bitmain filed for an IPO on the Hong Kong Stock Exchange, valuing the business at $ 3 billion and hoping to raise between $ 14 and $ 18 billion. Hong Kong regulators suggested that due to the lack of rules for regulating the crypto industry, the application would not be approved. In November 2018, the company owed $ 300 million to the TSMC chip manufacturer. Then Wu decided to rent power from bitcoin miners in the Antpool and BTC.com pools for mining BCH. Bitmain paid for a hashrate in BTC, and received a reward in BCH. This turned out to be unprofitable — the company was losing several million a day. In addition, due to the bear market, the unsold reserves of miners reached one billion.
Due to debt in December 2018, the company laid off about half of its 3,000 employees. Later, the mining giant closed its offices in Israel and the Netherlands and suspended production in Texas, where it had from 7,000 to 8,000 miners. In March 2019, the IPO application expired, after which the company decided to apply for the New York Stock Exchange.
The media wrote a lot about the short-sighted management policies of both CEOs, and their tandem predicted a gloomy ending. Last November, rumors circulated about the simultaneous resignation of Wu and Zhan.
In January 2019, Wu and Zhan had left their CEO positions — and the right to make strategic decisions either. Haichao Wang was appointed CEO, Zhan became chairman of the board and executive director. Perhaps he had the feeling that he had lost everything. And decided to compete again. In July of this year, Wu founded his own trading crypto platform Matrixport. It seemed that the founders’ conflict had calmed down for a while, but broke out again in November of this year. On October 29, at an emergency meeting of the company, Jihan Wu said that their conflict with Micree has been ongoing since 2015 and explained why he considers it necessary to remove his long-time partner from managing Bitmain. A letter was sent to all company employees stating that they were forbidden to follow Zhan’s instructions. Wu himself again took the position of CEO. Eh, Micree Zhan has now really lost a fight. But for how long?
What is happening in the company in recent days — in early June 2020, Micree still regained control of the company’s office in Beijing, again enlisting the help of employees from private security agencies. Within two hours, two dozen security guards stormed the company’s office. Micree in his letter, apologized to the company employees and promised that he would achieve the company’s IPO. He estimates that Bitmain’s value could reach $ 50 billion over five years. He also promised cash rewards to those who go to work. Now Bitmain is actively discussing the issue of transferring employee labor contracts from the Beijing office to a subsidiary. Recall that the previous episode in the struggle was Liao Liu’s attack on Zhan.
In conclusion, I would like to add that while the so-called sharing of the company’s pie is in progress and the conflicts of the founders entertain the public, the situation in Bitmain remains stable now and the crisis has been overcome. The company has survived — despite the difficulties in the top management, it still hasn’t got any worthy competitors — and Bitmain is still the hardware mining industry leader. Corporate conflict also occurs amid the fact that the upcoming halving on the Bitcoin network urges mining companies to make tough calculations, and their teams to possess in-depth knowledge of classical financial management. Interest in Bitcoin mining continues to be high, competition intensifies, as evidenced by the fact that the hashrate of the Bitcoin network again updated its historic maximum this year.
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