Entrepreneurs of Budapest: Barnabas Debreczeni, Shinrai

Up next in our Entrepreneurs of Budapest series is one of the most intriguing conversations we had in the series. We sat down with local Bitcoin startup Shinrai’s CEO Barnabas Debreczeni and didn’t stand up until we had covered alternative education, the decentralization of systems, personal motivation and learnings from Barnabas’ diverse career founding and working at startups, and of course, the local Hungarian startup ecosystem and the story of Shinrai. As curious as we were? Read on…

I’m going to jump right in with something a bit out of the blue here. I saw that you took part in a uSchool delegation to Boulder, Colorado. Could you tell me a bit about the whole experience and your takeaways from it?

So there is a uSchool pilot now in Hungary and I am one of the mentors, I run one of the schools. In the spring there was a delegation from the Slovenian uSchool guys and two of us from Hungary joined.

The fun thing was that the Slovenian delegation included two secretaries of state who came with us to see how Boulder built its ecosystem. One was from the office of the prime minister, the other from the ministry of economy.

It was really fun to see two really high ranking government officials, basically from the first line after the prime minister, sitting in a hipster cafe talking to the mayor and Techstars guys and investors. They were asking how things work here, because they realized that they wanted to implement the same in Slovenia.

One of the main priorities they have there is boosting social entrepreneurship. So they skipped the for-profit startup step and they said ok, we will go and support for-profit social enterprises and that’s how we can grow faster in the EU. They were there saying basically, ‘We have no idea how this works, but we have money, and we want to make it as a decentralized as possible, so we have to come up with a plan to have the right people do the right thing with our money.’

And that was so, so surreal as a Hungarian you know, like, what? These government guys are really here, they’re working, and they are asking questions and thinking of real stuff that will grow their country?

Alongside uSchool, you’re also quite involved with the Budapest school. Is there a line that connects all of these things that’s motivating you to go above and beyond running your own startup to getting actively involved in other progressive organizations?

It goes back to the ’80s when I was 5. I was always involved in all of the STEM subjects and programming. But after coming home to Hungary and going to high school, I was a very bad student. I wasn’t interested in the stuff we learned in school, and I was already learning university maths and computer science during high school because it made more sense to me.

I failed in many subjects and everyone was telling me that this is just the way it is, you have to learn because then you will get this and that, this is the roadmap for your life, and it starts with getting good grades in school. I refused to accept that and I felt alone with that, so much so that eventually, I almost believed it myself. And then fast forward to recently, when it turned out that I was right.

During the past 30 years of new academic research on educational policy, methods, processes and goals, they came up with the same conclusion that I came to as a kid, as someone sitting in the back rows uninterested and stigmatized for being a bad student.

I’d really like my kids to be able to be part of this happy 2040 generation. There are all of these experiences I gathered during the past 30-odd years, and I am now trying to make it work better for my kids as well because I believe it starts in kindergarten.

I remember at the Budapest School we had a meeting and one of the parents asked, ‘How will these kids go to state high school?’ Most of us said, well, we don’t know about you, but if we succeed, we’d like our kids to stay at Budapest School because it will be better at preparing them for life. And then another parent asked, ‘How will they graduate?’ Then the answer was, if your kid would like to graduate from a state school, of course they can. But if instead they want to learn nuclear physics, or pursue psychology, then why not?

You can start that at 14 if you want and if you’re motivated and if your education was set up in a way that you learn the basics and you’re supported along the way so you can find the stuff that interests you more easily. It’s not about fitting everyone into the same square holes.

I wonder if or where you see any sort of parallels between startup philosophy and the innovation in this kind of system change.

It’s more about, I don’t have the right word for this, just a sense of it, this metaphysical fabric, the thing the whole system is based upon.

As we enter the 21st century it’s becoming really clear that we are moving towards disintermediation and decentralization and pushing down power to the edges of the networks, of people, and of organizations.

There is a really good bullshit buzzword that I like, called “glocal.” I don’t know who came up with it, but I can see a scene in 5 years where a multinational corporation is in a big glass and steel building, having a meeting, and writing up this buzzword saying ‘ok we need to go glocal.’

But yea, that’s the idea, that you remove permission and trust from centralized authorities and you push it down towards the edges and let the market or network come up with their own ways.

Budapest School is doing just that. There are two kindergartens but they’re already different, so it’s always about the local needs. And the idea is to provide the framework which people can fork as an open source software which they can modify based on their own needs. When we have 10k schools, none of them will be the same. There are a few values that they will share, but that’s maybe only 50% and the other 50% is absolutely local.

As you’re thinking and rethinking these different systems, what is it that inspires you to question all of these things on a personal level?

Not to get bored, I guess. Going out and drinking beer is fun but doing that all the time…

I’m joking.

Of course I don’t want my kids to live in a messed up world, so we are ready to change the world ourselves, and we can change the world through our kids and the way we educate them and the stuff we show them.

What I’m doing right now with Shinrai for example, it’s only good to show my kids a good example for when they grow up. So that’s it. It’s to show them that they can bring change and they can have ideas and they can be creative and they have the power to change stuff.

It’s not that we’ve changed too many people’s lives — we still only have 10,000 customers, which is nothing, but hopefully this will grow bigger and maybe one day we’ll be able to change 1 million people’s lives or maybe we will fail in one year. But you know that’s also a lesson for [my kids]. Showing them how to make it happen. And then if you fail, then starting again, starting again, starting again.

And what are the major challenges or failures that you’ve faced in the past?

For a startup in general, usually the first challenge is to build something people want. We failed with our previous startup where we raised .5 million euros and completely failed by building something no one wanted for 1.5 years. Then we burned the rest of the money coming up with something that people actually wanted, which was a 7th iteration of the original project which had nothing to do with the original project. By that time we burned through the money, everyone was burned out and we couldn’t raise a next round.

With Shinrai, we are working with the challenge of building something that people want that didn’t even start as a business. People started asking us when the price of bitcoin was going up — how can I buy bitcoin? And we said, “Ok, you have to go to this website, and then you have to sign up, and it’s basically this brokerage account, you have to scan copies of your passport and utility bills and they’ll approve it in 2 weeks or not in which case you have to send a higher quality version of it. Then they’ll start to ask questions which you will have to answer.

That’s just the application. When it gets to buying you’re like…wtf. After the 3rd time you get to thinking, isn’t there an easier way?

So we created a super ugly website with a form that contained four fields: How many euros worth of bitcoin do you want, what’s your phone number, your email address and your bitcoin address.

It was completely manual. When it started growing, we programmed a robot that could take the orders, check the bank account, match the order number and then buy the bitcoin and send them out.

Same thing happened with the ATM by the way, that’s how it started. In the meantime, Instacoin and MrCoin was a super easy and fun way for someone to buy bitcoins who’s not a tech person.

Then we found out that we can grow faster and help more people if we go B2B. And so that’s how we pivoted towards Shinrai, of which MrCoin is just a B2C line of business. With Shinrai, we took all the APIs we built for MrCoin and we transformed it so any bank or ATM operator or currency exchange kiosk can be a bitcoin reseller in a super easy way.

So hopefully in one year, you’ll be able to go to any ATM here and you’ll be able to get Bitcoin or you’ll be going to the currency exchange guy on Vaci utca and you’ll be able to exchange your money for Bitcoin as you would with euro or zloty or whatever.

So that’s the idea.

Where it makes the most sense is emerging markets where you don’t have the financial infrastructure that we have here in the western world. The customers who utilize Bitcoin as a method of payment usually use it to receive money from abroad or send it to another country, mostly developing countries.

So now we’ve started building out the next phase, after we survive the growth in Hungary and Europe, which is a challenge for us right now, the next phase will be building out a cash out location in East Africa or West Africa. So when people receive bitcoin there they will be able to exchange it into Kenyan shillings or Nigerian Naira, USD, whatever.

There’s no infrastructure there yet. If you have the infrastructure there in Africa to change it back to their local currency then that will start the bigger money flow. And then if there are merchants then they won’t even need to change it into their local currency because they can use bitcoin as their local currency.

Two questions actually — the first phase is reaching out of Hungary and expanding across Europe — what are the challenges that are happening there?

Right now it’s a resource and operational challenge. It’s one of the good challenges to have and one of the hardest ones to solve.

So we have 3 people working 100% of the time on serving new customers, providing customer support, handling problems and stuff like that. Now we can’t really grow, because we’re growing, and that’s the paradox. We can’t roll out new features, personally I didn’t even have time to create a killer investor deck for the last 4–5 months because that would take 1 week off which is currently impossible.

To get through this we need new money, and all of the investors love this kind of problem, but we can’t get new investors, because we are serving customers 24/7. But again, that’s one of the better problems to have.

Second question stemming from what your previous remarks — what are the learnings you took from your previous startups? What is something you would have told yourself at the beginning of the process?

There was always a new learning from all of them. The previous one that failed was about building stuff that people want, and going out into the street and starting to sell from day 1. Even if it’s just a mockup on paper.

Start selling it and see if they want it. Because if they don’t, then why build it? We burned like 200–300,000 euros building stuff for 1.5 years that friends and family were excited about, and then when we sent them the first invite link they said, ‘Oh well, I don’t really want this.’

That was another learning to never trust friends and family — especially your mother because she will love everything you do.

But if you go there, there are the right questions to ask from her as well. If you go there and ask her ‘tell me about the last time you cooked’ and other open-ended questions, she’ll answer them, until you realize during the conversation that she will never use the recipe book, much less pay for it.

So, “Do you like this idea, and will you use it, and will you pay for it?” These are non-relevant questions. But if you go there and ask people to tell you stories about their experience about doing something, then if they have a big problem or some huge pain, they will tell you about it, it will come out. If they don’t have a problem, you can simply go to the next person and the next. After 20 people you may realize that ‘the taxi system works great,’ and you don’t have a use case for an uber.

But if they start telling you well, in order to order a taxi I need a phone number, and they usually rip me off, and the guy is going in circles, if they start telling you these problems with the taxis and they can hack the taximeter and things like that and the taxi driver is telling you ok 50% of the time i’m just sitting here not working, then you have a case for uber.

Taking a wider lens: As a Hungarian entrepreneur working in Budapest, what are your general thoughts and opinions on the startup ecosystem here in Budapest, the different resources that exist and what needs to be developed in the future?

It’s getting increasingly better. Although most of my friends have already fled the country, we’re still here and trying to bring change here, and I’m here to say it gets better and better with every year. First of all, I love Budapest and I think it’s the best city to live in. I only miss one thing — the sea coast that I had growing up in Algeria.

To make it better…Well, first of all many people are waiting for the government to subsidize stuff. But we are entrepreneurs, come on we have to do this ourselves, so we should do it ourselves and not wait for the government. The best thing that they can do is to stop interfering.

One thing to address is the influx of potential new entrepreneurs that come from high school and university. If these students would be more interested in building the ecosystem that would bring a huge influx of people and that’s where you look for your new entrepreneurs, that’s where you start to train and show them stuff, and get them excited and show them that it really takes so little to start doing something. That’s one thing.

If I had to ask for help from the government I’d say, make Budapest an even greater place.

Have a diverse set of shops and restaurants and make the city center even cooler, and a good place to live, let the longboard guys and cyclists come. Make it a fun place to live. It’s the same idea that uStream is doing by providing their own craft beer and an infinite amount of turó rudi. I’d say, make the workplace a fun place to be, make the city a fun place to be and of course don’t interfere with stupid stuff like excessive tax burdens.

I also really liked the Slovenian guys’ focus on social entrepreneurship which takes everything one step further, because the way you boost your economy is through entrepreneurship and startups, but then for one more leverage you add the social aspect to solve big challenges such as unemployment or health or education or energy or whatever. And that’s what they do in Slovenia which I really like.

A big thank you to Barnabas Debreczeni for taking the time to chat big ideas and ‘glocal’ issues with us. You can find him and the Shinrai team building the future right here at Mosaik or at a local Bitcoin Budapest Meetup!