A new technology for Conn.
Bruno Z. Wu first met Shane McMahon in 2011 when both men were media entrepreneurs in China.
McMahon, son of wrestling magnates Vince and Linda, had a struggling video-on-demand business, a U.S.-based company that had already changed names and industries more than once.
“I said to him that I believed the video-on-demand business has no future in China,” Wu told me in an interview on Wednesday.
They became friends and co-board members, and remain so. Wu eventually invested in YOU On Demand, McMahon’s company. With the swagger of a guy on his way to making a billion dollars as an investor in TV syndication, technology and media-related businesses, Wu thought of it as a turnaround play.
Also in 2011, as it happened, Wu started investing in a process called blockchain, a form of electronic ledger that uses artificial intelligence and big data to record and execute transactions with ultra-high efficiency, literally in chains of huge information blocks — the same technology that underlies bitcoin and other so-called crypto-currencies.
By the fall of 2017, the picture came together. Wu bought a controlling interest in YOU On Demand, renamed it Seven Stars Cloud Inc. and maintained its status as a publicly traded, U.S. corporation — with an eye toward creating the first fully integrated blockchain business.
In the switchover from media to blockchain, from YOD to Seven Stars Cloud, the company needed a new center of operations. Its landing spot: West Hartford, Connecticut, a bucolic, if rundown, 58-acre former greater Hartford UConn campus.
‘Good Connecticut experience’
On July 3, Wu joined Gov. Dannel P. Malloy in a splashy announcement that Seven Stars would buy the West Hartford campus for $5.2 million, spend many millions more removing toxic pollutants, renovate the old buildings and invest just under $300 million.
The goal: a global hub for a blockchain-based incubator of companies, with Seven Stars at the center of dozens of firms in financial technology, or fintech. If it works out, Connecticut becomes part of something big that plays well off our existing industries.
If it fails, Connecticut suffers another black eye and, perhaps, loses $10 million in state assistance, a loan that’s mostly forgivable if Seven Stars and its affiliated companies create 330 jobs as promised.
McMahon, a former wrestler and vice president of his family’s business, Stamford-based WWE, remains on the board as vice chairman but every employee in his old business was fired or left.
The team includes an international star in the innovation hub world, Eric Van der Kleij, an entrepreneur and founding chief of London’s Level39, a tech incubator with more than 150 companies, some in the blockchain space. He, too, has ties to Fairfield County.
“When I created my first fintech company, it was before it was called fintech, and the place that we expanded it to was actually Connecticut,” Van der Kliej told me.
That was Adeptra, first in Stamford, then Norwalk, where it became part of FICO in 2012.
“So I have a good Connecticut experience, it’s brought me good luck in the past,” Van der Kliej said.
Wu, a round-faced, affable and gregarious American citizen living in New York but with many business interests in China, could not be more effusive with his discovery of Connecticut as his new Mecca. He loves the restaurant scene here, and the relatively low cost of living in central Connecticut.
Whether he knows it or not, this, too, is a turnaround play when it comes to jumpstarting engines of job creation.
“It feels great this morning to be here on the campus that we just purchased,” Wu said last week, his first public appearance at the site, which he’ll actually purchase in a few weeks. “I feel very honored and grateful to be a member of this community, and I look forward to staying here for good. This is fantastic….We’re going to do the best we can to bring innovation to the state of Connecticut…and to forever implant a new genre of DNA into its future growth.”
Malloy and Catherine Smith, commissioner of the state Department of Economic and Community Development, portrayed Seven Stars Cloud, known as SSC, as a worldwide financial technology company, precisely the kind of player Connecticut needs to complement insurance, health tech, business services, hedge funds and money management.
Those core industries would be users of the blockchain service, just as fire insurance and gun manufacturing nurtured the new typewriter and machine tool businesses in the Connecticut valley in the 1880s.
That’s the plan. But the part about SSC as an established company in fintech, or for that matter, blockchain, is not true. SSC is, in essence, a startup company using the framework — shell is a loaded term in corporate finance — of a former company. This way, SSC doesn’t have to go through the process of launching a new public stock issue.
Wu’s experience as a blockchain investor matters, and the SSC web of joint ventures includes blue chip companies As of March, when the company issued its annual report, it had just 70 employees including 23 in technology.
“Seven Stars Cloud is entirely a company in transformation,” Wu said.
One point lost in the excitement of this month’s rollout: SSC and its affiliated companies don’t need to attract the best and the brightest software developers and researchers to Connecticut on a grand scale in order to succeed. They’ll have some of that, but the hub in West Hartford, as Wu sees it, will populate with business applications experts, a handful from each of as many as 50 companies.
Some of those firms would be controlled by his holding company, Sun Seven Stars, which he owns along with his wife, China TV personality and media entrepreneur Yang Lan, who’s been compared to Oprah Winfrey by the New York Times and Forbes.
Sun Seven Stars is the entity that Wu uses to control SSC. Some of the Connecticut incubator firms would be under SSC. And some would be independent affiliates.
All of it would unfold under a handful of separate platforms such as commodity trading and financial services.
There is, naturally, no shortage of skepticism in a state that’s been snowed before by developers with big ideas. State Sen. Len Fasano, Republican leader of the Senate, fired off a letter to Smith at DECD, saying the administration didn’t do its due diligence. SSC has lost a cumulative total of more than $125 million, with last year’s loss amounting to $10 million against revenues of $144 million, he said.
“The company is losing money and burning through cash quickly. It’s not sustainable,” Fasano wrote. He added that financial ratios, stock market prices and an “unstable” profile point to a “dismal” and “severely depressed” corporation.
Fasano is doing his job well as a leader of the opposition.
Unpacking all that criticism, the first problem is that SSC’s stunningly complex structure, history and finances make it virtually impossible to understand based on public filings. SSC is a web of subsidiaries and joint ventures, some of them stemming from the old, legacy media business, some new, sone recently acquired.
And the company itself is just one in a constellation of firms controlled by Wu and Lan, under Sun Seven Stars.
Without sorting it all out, here’s what we need to know: Bruno Wu is not a novice dreamer like that guy from Long Island who had a $2 billion plan to develop the old Norwich State Hospital site on the Connecticut river. He’s not a shady character like the guy who ripped off the city of Hartford in a scheme to build a soccer stadium.
If the project falls flat, as could happen, Connecticut will have almost certainly gained far, far more than $10 million in value from the restoration of the old UConn campus alone. So if there’s risk here, it’s Wu’s, not ours, other than in the state’s reputation. And really, folks, are we in any kind of position to play it safe?
“People should not be shooting from the hip. It’s partially our fault because we have not have not been in the business of explaining things,” Wu told me.
For example, Smith touted the company’s quadrupling of revenues in the first quarter of this years, compared with the 2017 first quarter. A close reading of federal filings shows conflicting information — that the gains were in “oil trading,” or in oil services.
In any case, that’s not blockchain, right? Wrong, Wu told me. “It is actually oil supply chain,” he said. “Supply chain is part of the digital system. … It is now blockchain-ized.”
He was unable to answer my question, why SSC uses a tiny, unknown auditing firm in Colorado — after dismissing two blue-chip auditors over the last two years.
“They are very capable,” he said. “There is certainly a rationale behind that.”
Are there a few red flags? Of course. Who doesn’t have any of those, these days? If General Electric wanted to come back to Connecticut, we’d look at that floundering company and say, “No way!”
The point is, Wu’s history shows he’s the real deal and besides, no one has done what he’s trying to do in blockchain, creating a soup-to-nuts provider that aggregates innovation from many sources.
”Two years after Wright brothers invented the airplane, Boeing and McDonnell Douglas were both born,” he said. “We are the early birds ... and as we say in Chinese, we can turn this into a dragon that flies.”
He and his wife are celebrities and philanthropists in China, now Americanized, from prominent families. Wu’s grandfather, a lawyer in Shanghai, has been honored for sheltering Jewish refugees during World War II.
As for the money, Forbes says it’s real, listing Wu’s worth at $1 billion. He chose Connecticut from at least four other locations in Detroit, New York and New Jersey after Hartford lobbyist Patrick Sullivan brought his brother here.
And he’s now been to the site three times, once with his wife, with a good omen prevailing.
The last two times it was pouring down rain, which is very good luck, it’s a divine sign,” he said. “Water is good luck, water is making money.”