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Michael, really appreciate you coming and taking the time today to chat about Fireblocks.
Of course, thanks Eric for having me.
There's a lot to catch up on on the state of Fireblocks and what you guys are up to, but really the goal for today is to talk about the journey and how Fireblocks came to be. And to do that, I want to take a step back all the way and talk a bit about your childhood and your upbringing. So, yeah, what was that like growing up in Israel?
I was born in USSR and we moved to Israel when I was 6 years old. I think the unique thing is that as we moved, my stepdad actually taught me how to program, so that was a pretty important part of my childhood. A lot of what led me to all the entrepreneurial activities was the fact that in the '90s and early 2000s, there was a huge amount of magic in what you could do with software and just having access to a computer and knowing how to master all that. The worldwide web and the internet was just becoming a thing, and me and some of my best friends, we were thinking about all kinds of creative businesses that we were setting up online as kids.
As a kid. Yeah. When I was 14.
Well, so I think the first thing I've done when I was 13 or 14 years old, we actually created the unofficial website for the biggest Israeli boy band. And we basically put a lot of ads over there that people had to click so we would get some money.
And maybe the funniest project that we had was that my best friend, he went for a student exchange program to Germany and he saw when we were in 8th or 9th grade. So he noticed that in Germany they really liked nargillas or hookahs, basically those oriental smoking devices that you could have bought in Israel in the market for let's say like 80 shekels and in Germany they were basically selling them for €80. So there was a nice arbitrage between them. So we set up this website that was called go to... it was like a free domain. So it was go to Tilda Nargilla, the source for all your oriental goods. We took a bus to the local market. We took photos of all the stuff that they were selling over there. All those nargillas and tobacco and all that. And we set up an online website that we were selling this worldwide. It was semi-successful because we got shut down after a few weeks. But that's the kind of stuff that we did as kids.
Who shut you down? Was it the...
It's a funny story that maybe like, you know, kind of brings us back to a bit of the stable coins today, but we used some kind of free credit card processor or not free, but basically a credit card processor to process those orders. We went to the market. We took photos of everything that they were selling over there. So, okay, you had the nargillas, but you also had the tobacco that you used to smoke the nargillas. And we also listed the tobaccos. So the first few orders they come in and the people only ordered the smoking device that we shipped. Then after a few orders someone came in and also ordered the tobacco and apparently that selling tobacco according to the terms of service of that payment service provider, that PSP, was illegal. So they basically shut us down.
Payment processors, they have very heavy compliance checks for some of these folks. So that makes sense. But no, super interesting story from your childhood and I guess the beginning of a long journey in entrepreneurship. What happened then was that, and not many folks know, but you kind of need to go through screening before you go and you do your mandatory service. And that's where I got lucky and I was kind of selected to be in one of those elite technology units that really sets you apart in terms of what you know, your understanding of cyber security and all that domain. Also extremely entrepreneurial. I think a lot of the people that come or actually say like about 60% of the global cyber security venture market or not venture basically...
Market cap is folks that came from that unit. Would love to talk a bit more about the unit, but in terms of like the screening and the application process, like obviously maybe technical aptitude and ability was part of it. Maybe just like mentality as well, but like how did you get in and sort of what were they screening for at the time?
So at the time, you know, now those units are kind of more famous and everybody want to get in, right? Because it does pave a reputation. It does pave your career and those units are kind of very well known internationally. But at the early 2000s when I finished my high school in 2001, no one knew anything about that. It was all extremely secretive and it was just a set of random tests that you had to go to different locations and they will screen you and you have no idea what you're actually getting filtered into. And it's true that a lot of this was technical, some of it is psychological. But they truly were looking for high technical skills. I think intuition around cyber security. I think that still cyber security is an area where you can learn it but there is also just a lot of intuition around the thinking, a bit like adversarial thinking that is really helpful. So like a very linear thinking, let's put it this way.
Got it, makes sense. So you screen well, you join this unit, Unit 8200 for listeners. And like you're there for a few years and talk to me about like what that was like as a... this is like you're coming in what like 18, 19, super young, this is your first like real, real job. Um, yeah, what was it like?
Well, it's not really a job. You're being paid like $100 per month, but yeah, it is a very unique situation. So for those who are kind of unfamiliar, Unit 8200 and some of those comparable units, they are essentially what the American NSA is doing. And for those who've seen movies about the NSA, right, it's usually high-caliber professionals over there. They kind of throw all those problems on the very ambitious 18-year-olds. I think the main advantage over there is that you don't know what's possible and what's impossible. So when you're being asked to do things that are on the face of it impossible, you would still try to go and accomplish them. I remember vividly one of the most interesting occasions that I had there. We were working on some, you know, in a very stressful situation. To be fair, there was like some, you know, life at stake, you know, in that particular situation. And one of my commanders told me, well, like, you know, go and figure it out. And I told him, I don't think it's possible. And he told me, you're not here to tell me that something is impossible. Go and figure it out. And yeah, we went and we figured it out. That's really I think what's unique about those units is that you're kind of young, ambitious, you know, you have and also in some ways a bit stupid about the actual limitations that things have. And the biggest advantage is that you are surrounded with probably the most talented people that you would ever meet in your life and the smartest people that you would meet in your life and just the fact that all those people are being pulled together and working on those mission-critical problems. I think that's really what sets it apart and kind of drives the performance of it. Otherwise, I don't think that any of it can be, you know, you can't even imagine why something like this will work.
No, totally. And obviously now in 2026, Unit 8200 has become known in tech at least, as you said, just like a ton of cyber security that's come out of it. When you were there, was that something? This was pretty early. I don't know if Check Point was even a thing yet. Maybe for a little bit, but like was there some thinking at the time like in the early 2000s of Unit 8200 as a hub for tech and cyber security?
So when you were in the inside, yes, from the outside, no. I mean, even interestingly enough, the founders of Check Point and Palo Alto, they're also ex-8200. But they never talked about it in public. Yeah. Only when you got into the unit, you kind of realize because they would come in and they would actually do some presentations on tech in general and they will invite them as guest speakers to talk a bit about how do you build technology companies. But it was like very inspiring, right, that you as an 18, 19-year-old, someone like Gil Shwed or some of those folks are coming in and they talk with you about how they build. And by the way, at that point in time, Check Point was either the biggest or the second biggest Israeli publicly listed company, not even a cyber security company. It was very inspirational to basically see how far you can go in terms of the mentorship opportunities and like the people you're surrounded by.
Like it kind of feels like a fast-growing startup almost where you're just again people are like when you start your career the most important thing is just to be surrounded by ambitious passionate people where you can learn from, you can build a network and sounds like this was one of the nice byproducts.
That byproduct actually accelerated heavily after I've started my first startup. So there is a thing that is now kind of goes, I think people take for granted that this has always been a launchpad for startups, but it's not exactly the case. I mean, I think that the reality was that throughout the first decade of this century, basically from 2000 to 2010, cyber security was not a hot space. It wasn't actually a really big area of investment. Of course, you had some very successful companies like Check Point and Juniper and Fortinet and McAfee and all those, but it was not even sexy because it wasn't called cyber security. It was called IT security or infosec.
Yeah. I mean, just hearing those names, you think about some folks that are like in the back of the office, working on some firewall configuration. So it wasn't considered to be sexy. You know, actually a lot of the talent that came out from the unit back then was not even working on cyber security problems. They came up with extremely amazing other startups. For example, people that been with me on the same team, they came up with a company called PrimeSense that this was the first sort of sensor that was in Xbox that was detecting your movements and later on it was acquired by Apple and that's actually part of your Face IDs. So there was a lot of kind of deep tech but completely other domains that people were focusing on and only in 2012, 2013, cyber security became a very sexy and hot topic with a lot of investment that was funneling into the space. And I think that's actually where the real network, the mentorship, all those things started to become more established.
Was there a pivotal moment in terms of the industry that accelerated this in like 2012 or...
Yeah, I mean the most pivotal moment at least from my perspective was that I think in 2012 or 2013 there were a few big hacks that were revealed in the United States where a lot of the bigger companies like Lockheed Martin, RSA, Microsoft, all those companies were compromised by what was believed as a fairly widespread foreign, yeah mostly like Chinese related hacking campaign, what was called APT1. And Mandiant, that's now part of Google, they came out with this huge report about how all the American companies got infiltrated and that was the moment that I think the industry, or at least from my perspective, the industry moved from just calling it infosec to cyber security.
You know, you needed both. You need the rebranding and the sort of market catalyst. Okay. So, you eventually start your own company called Lacoon in 2011. What was that like as your first company? Sort of did you like, what was your mindset going in?
It was my first successful company. Before that I had another two unsuccessful startups. The first one was actually focused, where I was the VP R&D, the first one was related to social fashion which is kind of weird and the second one was related to distributed storage, something that is very similar to...
Yeah, very similar to Filecoin but way before distributed ledger existed. Nevertheless, Lacoon was focused on mobile security. So, securing mobile devices from getting hacked specifically for enterprise clients and that was essentially on the back of the fact that in 2011, people started to buy iPhones and Android devices. They would come to work and they would ask their employer and the IT to connect it to email. So there were a lot of concerns. I think we approached it with a lot of optimism. It was clear to us that this is a problem that is worth solving. It also felt like a problem that we have a very unique understanding of the problem space and the solution space. We were able to secure funding from really the leading group of angel investors. The seed round, the guy, I mean Shlomo Kramer who was the founder of Check Point and the first check in Palo Alto Networks. So he and Mickey and Rakeh who is Transmit nowadays but they sold the previous company Trusteer to IBM for a billion dollars, they put the seed round and this is actually where I really got my first mentorship. Spending time with Mickey who's still in my opinion absolutely the best product person I've ever seen in action and Rakeh who in my opinion absolutely the best go-to-market president that I've seen in action. This is where I think the mentorship really kicked in.
Why do you think they were willing to help you?
I remember that we went pitching and we went to all the VCs and we were pitching the VCs and the VCs were trying to make their mind. And then initially I actually asked a friend of someone who I knew to forward our pitch to Shlomo. He didn't respond. And interesting enough, this is probably a good advice to any entrepreneur: you need to be persistent. So somehow I found that there is a different angle through one of my best friends who knew someone who worked for Shlomo. So I forwarded that pitch again. Then Shlomo calls me. We had like 30 minutes conversation. He was in California over the phone and they told me okay I want you to go tomorrow and meet Mickey. So I go and meet Mickey and then a day later we basically getting a term sheet on literally like 30 minutes conversation with Shlomo and maybe like an hour conversation with Mickey. And the interesting thing is that they were not really focused on our solution or what we thought will be our first solution there. I think they were focused on us being individuals that were subject matter experts in that specific domain. I think they also probably appreciated that we had credentials of people that will work their ass off. And I think there was like something about us that they understood we have a chip on our shoulder that we really going to work hard and we're going to be humble and nimble and we'll figure it out. That was probably kind of the combination of those two things was probably what drove them to put the first check.
Got it. Okay. So, you end up raising a successful round. You end up selling to Check Point and you work there for a few years. Let's fast forward to 2017. You've been at Check Point for a few years and you see these crypto hacks and you see like just a bunch of stuff going on. Talk to me, like what was your mindset then?
I was interested a bit in blockchain but definitely I had no crypto. There's a funny story. I tried to buy crypto back in 2012 on Mt. Gox and I didn't pass the KYC, whether that's a good thing or a bad thing in the retro.
Surprised they had KYC in the first place.
Yeah, they had something. So I had no crypto but we got involved in investigating a small part of the investigation of the hacks that happened in South Korea where Lazarus hacked those four exchanges and they stole about $200 million worth of Bitcoin. And I was advising one of the VCs that were focused on cyber security. So I go to the next meeting with them. We were just spending an hour a week, you know, that they would ask me my opinion about different ideas. So I go there and like wow you don't believe what I just saw, someone just like $200 million was wiped out in a single moment from those exchanges. I think that there is something there, we should find a company to invest in. So, we go in, I go into this meeting, the two GPs over there, they start arguing with me that this is nonsense, that this is only used by criminals. Why are we talking about it? The other guy, the CTO, who is a good friend of mine till this day, he actually thought that it's interesting. So we convinced them to organize calls with companies. We didn't know anyone in the space. So the first call or the second call was with the COO of Kraken and then we had a call with Genesis, that's how I met Carl, and we talked with quite a few of those folks until we understood that there's actually a pretty big issue that needs to be solved.
And this was, and you like when you were having these calls you already had this idea of hey maybe there's something for us to build here if people are having these issues if there's these attacks maybe other folks have the same problem.
So yeah, so initially actually we were doing those calls just to understand if it's investable. So we thought that we will invest in a company or they would thought that they will invest in a company that will solve this problem. But as we were going through those calls, we started to understand the landscape. You know, you had Ledger Nanos and you had Xapo and you had BitGo and Coinbase. But like it was all of those cold storage clunky solutions that existed. And as you went deeper you understood that people actually had an issue with moving the asset and the transactional aspect of crypto. Keep in mind it was like 2017 or 2018 so there was already the ICO boom and then we understand oh okay they have solutions for the stationary stuff for the long-term custody but actually the most interesting narrative about it of making it the internet of money so to speak is not solved. And I think that it kind of matched a lot of the things that we worked on or the technologies like trusted execution that we were familiar with from doing a lot of the innovative work on the mobile security side. So it sort of all came together to be honest in a I don't know this kind of magical moment.
And you guys ended up using MPC for the product. Is that something you decided early on like hey this is our expertise and we're going to use it or was it more sort of emergent where you realized MPC was the right technology for the product that you're trying to...
Yeah so I think that was actually fundamental to the initial idea and you know for those who will look at our first patent they will see a strong emphasis on trusted execution basically what you have with AWS Nitro and SGX that now a lot of companies are doing it but clearly Fireblocks developed the most amount of expertise in that domain and we kind of tracking that domain to the origin of the origin of the origin. My co-founder Pavel was working on the father or the grandfather of this tech with Intel. So that was actually the technology that we were really familiar with and initially the first product funny enough was not built on MPC. It was built on multisig. So we rolled out a multisig solution. Well actually the Bitcoin implementation was multisig and the Ethereum implementation was MPC. And I had a big argument with my co-founder Pavel. I told him like this MPC, you know, it looks like very complex. There is no way that we will figure it out. Maybe we should license this. And he was like no no no we have to own it. We need to understand it. We will make it work. He was actually very bullish that we will be able to make it work. Before that there were essentially two companies, there was a theoretical article and Unbound which eventually got acquired by Coinbase were really the pioneers but they had some specific implementation that was not based on this article. And then when we started there was another company Curve that got acquired by PayPal that it was rumored that they're implementing it but they were not launched yet. So it was sort of unproven that you can actually make MPC work for it. And that's why we started with both multisig and MPC implementation. It just happened that very quickly after we've implemented the initial solution for Galaxy we saw that this multisig thing doesn't really scale. So we pivoted and put everything on MPC.
Got it. And were you guys already sort of experts in MPC? Is it something you had to maybe develop? Did you have to like bring in outside help? Like what was the...
We actually hired a few cryptographers that did their masters and PhD on it very early on. They were actually part of the founding team more or less, like they were part of the first five engineers, Udi and Nikos. They both joined us very very early and also Costi who been our first employee, he's been deeply involved. I mean all the folks that were there at the beginning actually kind of dove into this thing initially and we did bring some serious firepower very early on, also Professor Ron Rivest who came on our advisory board. So this is actually how it wasn't to be fair our personal know-how of the three co-founders. And I remember that I was in some meeting with a big financial institution that the feedback from the guy who looked at our solution back in early 2018 was like those guys talk about MPC but there is no one there that understands cryptography. That was basically his feedback. I was like sure but we have all those guys that just joined us that they do understand in this domain. So you know I think we I wouldn't say that we came with it from home but we were very very quick to...
Yeah. To productize it and then eventually within almost like two years to be the leaders in creating all the breakthroughs around how this technology evolved over the years.
Got it. So before I mean among the founding team like those are pretty early, those are very early hires for cryptographers. I feel like that's not something you typically see with startups.
Yeah. I mean but we had to do that.
Had to, fair enough. Okay so you have this, you're like talking to all these exchanges you realize they have this issue and like what did the next year look like? Like when you actually decide to, how did you realize hey there's actually an opportunity here to start a business?
