In 2014, Ron Hose co-founded Coins.ph with Runar Petursson. Coins.ph began as a cryptocurrency marketplace, although the co-founders knew that they wanted to pursue the larger opportunity in creating a digital wallet of choice in the Philippines. Hose had the necessary expertise to build this product, having graduated from Cornell University with a master’s degree in computer science and serving as the co-founder and CTO of TokBox, which was acquired by Telefonica Digital in 2012.

Once Coins.ph focused on its digital wallet, its user base grew exponentially, eventually reaching five million customers by 2018. In 2019, ride-hailing platform and super-app Gojek, which had been thwarted from entering the Philippines by government regulators, bought Coins.ph in a deal valued at US$95 million.

Ezra Ferraz: After experiencing success as an entrepreneur in the United States, what beckoned you to the Philippines rather than building another business there or choosing to go somewhere else?

Ron Hose: I’ve always been purpose driven. One reason I decided to come here is because I wanted to create something big that can tackle bigger problems and that has a significant impact on people’s lives.

Each country has its own strengths and opportunity profiles. I felt that, across the board, the Philippines is good in all sectors. It has a large enough market domestically, but it is also a good base for a company in that region. It has a fast-growing economy, and GDP has steadily grown for the last couple of years.

In general, despite a lot of infrastructure design-wise, we had a lot of challenges, such as low Internet penetration. I think there’s still a lot of value to unlock in this market. For me, this lack of irregular infrastructure is a sign of opportunity. People here are tech savvy, but at the same time, there are a lot of improvements that can be made for everyday life with technology. There’s still a lack of access to basic necessities like healthcare, education, financial services, and commerce. And technology, in my experience, can help connect Filipinos to these services. I felt that if I were to spend five to ten years of my life building a business, I wanted to do it somewhere that I really felt at home. The culture and people of the Philippines made me feel at home from day one. This made me want to stay.

Ferraz: When did you first hear about Bitcoin, and what did you think of it? How did you go about purchasing your first Bitcoin?

Hose: The first time I heard about it was 2010, so it was very early on. I was in Silicon Valley and worked for a short period in venture capital. It was interesting, so I thought I should buy some, and then I got distracted, and I forgot about it. That usually happens when you’re in a venture capital firm. So it was off my radar for a while, then my co-founder Runar, bought me a bitcoin for my birthday. I held onto it, I think, for a couple of years, then it eventually got absorbed into the company.

Ferraz: What’s your first impression about Bitcoin?

Hose: I think back when we started Coins, which was in 2013, a lot of people were really looking at it as a speculative instrument. We realized there was a quick revenue potential with trading. I was not excited by that, basically because I was looking to create long-term value through the business.

I took some time off at the end of 2013, and I started thinking about the different options that might go hand in hand with it, and that was when I realized the impact that blockchain would have on financial services, and that really connected with my mission of building a business that had positive social impact. When I came out here, that was really when the vision for Coins sparked. We’re actually not interested in being an end but rather a means to connect individuals to financial services.

We started Coins because we wanted to deliver financial services in a way that was more adept to the needs of the Filipino market. This came about because we saw that eighty percent of Filipinos don’t have access to financial services. What struck me was that more Filipinos have Facebook accounts than bank accounts. For me, Facebook’s reach demonstrated that the distribution channel for reaching consumers is there, it’s just that banks and financial institutions have not figured out how to use it to increase banking penetration reach investment. We set out to be the ones to break the disconnect between banks and consumers.

When I studied more, I learned that the traditional banking models just do not work well for emerging markets. They need to maintain branches, tellers, and armored trucks, which are all very costly. At the same time, they are dealing with consumers that have very low savings rates. Every time a customer walks into a bank, the bank is actually losing money, because the economy is so fundamentally based on cash. The economics doesn’t work, and as a result, banks have to turn away most customers that can’t hold accounts for them. At the time we started our business, this equation accounted for four out of five households remaining unbanked.

And it is this exact equation that we set out to break.

At a high level, Coins is an access layer to financial services for the bottom of the pyramid—the eighty percent that didn’t have access to those services. We set out to be a bridge. What we do is really about lowering the costs of providing financial services. We do that through technology, partnerships, etc., and the more we reduce the costs, the more we can increase our reach to serve lower-income customers that traditionally are not being served by banks. That is the core business model of Coins. We have done this in many ways in terms of tech innovation.

In our sign-up process, you can create your accounts in sixty seconds, whereas banks take longer and have massive CapEx to set up branches. Today, we serve almost ten million customers—all from a 400-square-meter office with 150 employees. We can do that because we partnered with retailers like pawnshops, convenience stores, and banks, so that customers can easily cash in and cash out.

Ferraz: Can you take us into the earlier days of Coins? What was it like when you finally decided to found the company? How did you find your co-founders, and how did you build the product?

Hose: I came into the market with a very high-level idea about the problem I wanted to solve. Emerging markets were experiencing fast economic growth, but most people were still left behind when it came to access to very basic services.

What I saw was that mobile penetration was going to create a bridge, so that you could now offer direct access to these services. I actually met my co-founder, Runar, when I was already in Manila, and then we spent almost a year looking at various business models and trying to figure out where we could do something that creates value. This was in 2013. I figured the research I conducted would help other investors and entrepreneurs looking at the Philippines, so that was also when we wrote a Philippines startup report.

We spent a long time researching different business models. As we were doing this, the thing that kept coming up was that in almost every aspect of business, banking was a friction point, and this had an impact on everyone from consumers to SMBs, and all the way up to big businesses. To send money home, Filipinos had to pay six to seven percent extra. When they wanted to pay bills, they had to get on a jeepney in scorching heat or torrential rain, and then stand in line for an hour at the payment center. With no bank account, consumers and small business owners had no credit history, and so relied on informal “five six” lending, where they had to pay twenty percent monthly interest for a loan to grow their business.

Additionally, businesses here are fundamentally based on cash, and there is not a lot they can sell in a short time. So the two to three days for the money to come up are two to three days wherein funds are audited, as that is the economic cycle. This slows the GDP process, and businesses like sari-sari stores, because they’re not with a bank, cannot earn a lot of money or grow beyond that initial scale. Upward mobility is difficult for them, and they have a hard time developing. Basically, everywhere we looked there was a pain point with money, and that’s what made for the interest in the opportunity.

Ferraz: So as you set up, what lessons did you take from TokBox and your experience as a venture capitalist that you think applied to the Coins situation here in the Philippines?

Hose: TokBox was really like a mini-MBA for me. The environment and businesses are different, but a lot of the lessons I’ve learned mainly on entrepreneurship came from there. It made me focus on building the right team. At TokBox, I learned about the economic cycle of markets. We were lucky to raise funding just before the 2008 market crash, and we had investors who supported the company through ups and downs.

With this, I learned the importance of being conservative when everyone is bullish, and to know how to keep things in check when things go up and down. Another thing I learned is to get great investors who can support you through everything that your business goes through. You want people who know when to push back and challenge you, but also when it’s time to step back and allow management room to execute.

Ferraz: At what point did you decide to take on the movement to relieve the financial institution problem in the Philippines?

Hose: This was really baked into our vision from day one. Every so often, I go back and look at our early fundraising decks because I like to see how we are doing compared to what we promised investors and how on track I am with my mission and vision. If you look at our seed round fundraising decks from the very beginning, the mission always revolved around financial inclusion.

Ferraz: What were the challenges of building a cryptocurrency platform in the Philippines, and how did you go about addressing them?

Hose: One of the biggest challenges was that we were early in the crypto space. I think we were one of the very first ones who got into providing services on top of blockchain. We had a lot of firsts, which took a lot of trial and error. From a technology perspective, we had to figure out how to build it, what the product should look like, and how to make it consumer-friendly.

The second challenge was regulatory compliance. We needed to understand how the business would be regulated because at the time we started, there wasn’t any regulatory framework for cryptocurrencies. There was a lot of work and education. It involved learning about how to fit what we were doing into the right framework to make sure that consumers are protected and the risks were mitigated, and subsequently, with that to be at reach with other industry players. We’ve invested heavily in measures to assure that every aspect of the business is protected and following the rules.

Ferraz: How do you balance the need for regulation with the need to create a great customer experience?

Hose: We have always been very pro-regulation on this matter because we believe that when it comes to money, the two most important things are consumer protection and crime controls [e.g., money laundering, etc.]. Everyone who participates in this industry keeps the same measures, and we have always invested in these. There is a reason why there is regulation for financial services. We trusted that this is important even, though it added cost and friction for our consumers. If a person goes through us, they have to go through a KYC process. Having regulation ensures that everyone maintains the same standard of service.

Ferraz: Around the time that Coins.ph was rising, there were also several other cryptocurrency companies in the Philippines. When did you realize that there was a much bigger opportunity in mobile money compared to cryptocurrency? How did you set about pursuing this business direction?

Hose: It was from day one. That’s the difference between us and the others. We are looked at as a blockchain company, but for me, blockchain was always the means but not the end. We are focused on providing financial access to our customers.

Our customers need to be able to send money to their families, to get a loan if they don’t have credit history, to top-up their phones without having to find a sari-sari store, and to pay their bills without the pain of traveling far. So it is always going to be about alleviating pain.

Ferraz: On that note, were there challenges in distinguishing Coins from a crypto company or a blockchain company in terms of your branding to the Filipino public?

Hose: It took a certain amount of education. Especially when the markets were growing really quickly, and all everybody wanted to hear about was Bitcoin. But even at that time, we were out telling customers that they should avoid speculation. We looked at blockchain as a technology, and we stuck to that path. I think that the reason why Coins has been so successful is because when everyone was doubling down when the markets were going up, and all the competitors were coming in as the price was rising, we did the exact opposite. If you look, we actually lowered our exposure to digital currency.

We doubled down on financial services. As a result, our transaction volumes in the digital currency product went up by twenty percent, and then cash transactions went up by eighty percent. As the Bitcoin rally subsided, our numbers kept going up. The moral for that is very simple: when you build a company, there is often a tendency to focus on what makes money. If you’re building something that brings value to others, you will have a sustainable business.

Ferraz: Once you went into mobile money, you faced competition that had much larger war chests. How did you compete—and eventually beat—these companies as an agile startup?

Hose: The interesting thing is that it takes an understanding of how the emerging market functioned. The strength of this organization is not just the depth of our balance sheet but that of our relationships. There are two other groups in the market that have wallets and are backed by the largest conglomerates here, wherein their market power is much greater than their capital. To be honest, that definitely kept us up a lot of the time. At the same time, what helped is a lesson learned from Silicon Valley: when it comes to business, it doesn’t matter how big or small you are, it matters how fast you run. Building a startup takes risk-taking, agility, and speed. Big companies struggle with this. I guess we were also naive in that way and thought, “Okay, they’re big, formidable, and have a lot of resources, but I’m not going to compare myself to them. I’m just going to do my own thing.”

We did not carve five million customers away from any of those companies. I would not say we outsmarted them, but that we were able to grow faster because we were small and worked really hard.

Ferraz: What’s your edge over companies like GCash and PayMaya, and what is your mindset toward these companies with a bigger budget?

Hose: I recently heard that one of our competitors had $16 million worth of budget for 2018. We used about $10 million of our capital in five years, which meant that we always had to be focused, strategic, and diligent in our efforts. The team knows that this is the culture our company revolves around. Not all wars are won with money. What cannot be replaced is team culture. We were able to hire young and ambitious talent that really cares about what we do. They have worked hard for us and learned a lot. If you ask me, that is one of the things that made us successful.

Ferraz: Since fintech in the Philippines is relatively new, you could not recruit based primarily on domain expertise in the space. What do you look for in potential candidates when hiring?

Hose: In my first company, I had a joint investor, and I remember he had started a small company that was also struggling in finding the best talent. I guess it boiled down to two things. First, we looked for the diamonds in the rough. And really, you only get the raw material in these markets. The talent is here, but not a lot have experience. So we focused on hiring raw talent. A lot were hired directly from college, so we looked at their personal attributes and how passionate they were in what they were doing. Over time, that translated into experience. The will to learn will definitely outpace experience because passion is there. I really enjoy working with and developing that talent. They are very eager to learn. They are smart and humble, which is a really strong combination.

Ferraz: What are the differences between American employees and Filipino employees? How did you successfully navigate these differences as you built Coins.ph?

Hose: Maybe culture in general. We like to think that our company culture is kind of a blend of both. For example, we really focus on performance versus the environment. I think in general if you look at American mind space, it is very individual.

I think the culture of this company and the culture in the Philippines is much more group or community-oriented. We think of how we are working together. It becomes more of the group’s success within the team. I think it creates a very positive working environment. The relationships are very strong. It is very much more like a family.

Ferraz: Why did you choose to raise money from Naspers Ventures rather than other VC firms?

Hose: Actually, the leads of the series were Maximum Accelerate, Kickstart, and Wavemaker. I was looking for the investors that would really help us. I found it challenging because many US-based investors might not understand the nuances of the Filipino. They know the nuances of executing the American market.

Each of three investor leads brought something different to the table based on their area of expertise. Kickstart, being a corporate group, brought us local connections. Maximum Accelerate, which was a global fund, brought us direct industry expertise. Wavemaker is based in Singapore but has strong ties in the Philippines and understands the evolution of the business. So each one of them had local growth and technical expertise. That was our triangle for series A.

Naspers actually came in right after that. Every investor you bring in must be strategic. Basically, it is like hiring another person to the team. So, I really took the time to choose the best fit. Every investor brings value.

Ferraz: That’s really interesting because I think a lot of young entrepreneurs pitch to whoever is willing to give money, but you were really strategic on how you chose your investors, which I think is awesome advice.

Hose: Yes, that is why I advise you to raise money as early as you can. However, I usually raise a little late. Every time we raise, it is further than our actual break-even. I like going a little late because rather than focus on trying to get the highest possible valuation, we focus on getting the investors that are able to help us.

Ferraz: So in 2018, you reached five million users. I’m sure you used numerous strategies to reach this milestone. Which of these channels surprised you the most and why?

Hose: The people at the bottom of the pyramid spend their earnings on a day-to-day basis, and we thought that the market is not only sensitive to costs. While cost is important, and we work really hard to improve that, what is even more important is service and convenience.

Even the people at the very bottom of the pyramid value their time and convenience. It matters a lot. So we realized our value proposition to people is not in saving money.

If you go on our website today, you will see the main page of the website is about how much time we save people.

Ferraz: If focusing on the value proposition of time in your messaging helped you onboard more customers, which strategy didn’t work?

Hose: A lot [laughs]. Ninety percent of what we do. The key lesson is to try many things quickly. Test, learn, and improve. My decision needs to be fifty-one percent accurate. I need to make a lot of decisions. That’s how you improve.

We tried a lot of on-the-ground marketing. We are much better at digital. I think we are good at things we can measure and quantify. It is because we can justify exactly what is happening and how consumers are reacting. But even there, we do stuff that fails all the time. The biggest lesson is that in this part of business, you have to roll out ten products to be successful with one.

Ferraz: What’s your attitude toward failure?

Hose: I always say that success is about being able to deal with failure. How you work your way out of failure is what makes you successful.

There are so many things that I messed up when I was building this business. So many setbacks. So many times that I said, “Okay, this is it. We’re not making it another day.” Success is definitely your tolerance for failure and willingness to get up and keep running. That’s it. There is no entrepreneur that did not fail a lot of times. We live in this social media world now, where we only see the positive outcomes. All the people are going to hear about is how entrepreneurs and startups exited. They do not know all the blood we shed on the way. There were a lot of nights we did not sleep.

Ferraz: Can you share the story of the Gojek acquisition? How did the idea come up, and why did the deal make sense?

Hose: Last year, we were at a point in which the business was moving very quickly. We were looking at fundraising, and then in the process, we met some Gojek guys.

As the conversation was going, we learned that our ambitions and our values are very similar. We figured that we could do more together. We built up a market here for tech, and we built a really strong team. We think that Gojek has complementary products and complementary technology that can help us scale up a pretty sizeable balance sheet. I guess the math was actually very simple. This is our decision for a business to help us grow and to create a sustainable business. I look at this acquisition as a large fundraiser with a better path and better growth for business—from a CEO execution point of view. My true north is the growth of the business. This is the best possible path.

Ferraz: What is your vision now for Coins.ph?

Hose: It is still the same. There are 100 million people that need to have access to financial resources. The banks are the traditional financial providers, and we help connect the banks to consumers and segments of the market they are not able to reach.

Ferraz: What unconventional advice would you give founders in Asia who want to build a company as successful as Coins.ph?

Hose: If you want to build a business in this market, you really have to understand it in depth. You have to feel the same pain your customers feel every day. As an example, I’m still using a prepaid phone line. I’ve been living here for almost six years, but I’m still on a prepaid phone line. Why? Because most of our customers are using prepaid phones.

Ferraz: So you’re experiencing the same things as them?

Hose: Exactly. I’ll never be able to experience every last thing, obviously, but I want to be immersed because it helps me learn what I can do to make my customers’ lives and experiences better. In emerging markets, it is really important for you to live in the context of the consumer to really understand and relate to their experience.

Ferraz: What else besides the prepaid phone?

Hose: I minimize my use of banks in general. I do have US bank accounts, and a plastic card, but as much as possible, I try to reduce my reliance on financial services outside of Coins. I use Coins to pay my bills, rent, everything. It’s great! And when it’s not working great, then that’s good too, because I learn about the limitations of our product. And then we figure out what we can do better to address it for our customers.

Ferraz: You told other entrepreneurs to come here. What do you think they would feel when they actually see for themselves that more than 100 million people don’t have access to financial services.

Hose: I think the opportunity for using technology to improve people’s lives goes beyond financial services. There are opportunities for growth in agriculture, healthcare, commerce, and transportation. The important thing is that you need to experience them. For example, if you’re going to build technology for farmers, you need to spend time on the farm. You need to be in the countryside to understand what is driving them.

Living here, I get to know what a tingi-tingi [sachet culture] economy is. It is not just about getting a loan from the bank. It’s about thinking, “Hey, I need to buy butter. I’m going to buy a quarter of a bar.” And someone is actually splitting it. That’s a fact. That’s a financial product, right? That person is splitting the butter into four. He’s basically providing a financial service. Sounds like a food vendor, right? It’s not. Every sari-sari store in this country is a financial services provider. So the truth is that everybody has access to financial services. They are just informal or not optimal.

We have to spend some more time to understand all the social economics of their life. “How do I save money? Is there going to be money there when my turn comes?” Those are pains people experience here.

Ferraz: Can you share an example where failure to be field-oriented or user-centric has resulted in products that have failed?

Hose: I’ll give an example from Google, my favorite company. About six years ago, Google tried to build a mobile wallet.

They had a lot of capital to do it, but they were not successful. I suspect that one of the reasons is that it is much more difficult to launch a product that is what you think your customers need.

We want them to use our wallet because it solves a problem for them. To understand people’s pains, you have to live it. That is the answer. I was lucky enough to stay a whole year in the Philippines before I even started my business. I spent a lot of time in the province. I didn’t live a very luxurious life. I’ve been on top of jeepneys.

Ferraz: No way! On top of jeepneys?

Hose: Yeah, and I’ve slept in the barangay halls. Those experiences shape how we build our product. And the experiences with my team shape it, too, because when we launch something, we always think, “Does this make sense? Does it actually help?”