This Q&A spotlights Side Hustle with Neil Bergquist, co-founder with Michael Smyer of Coinme, a Seattle-based cryptocurrency exchange. Earlier this month, Coinme announced that the so-calledin, after a decade business, achieved sales of $1 billion with consistent annual growth of 164%.
Image Source: Courtesy of Coinme. Neil Bergquist.
What was your day job like when you began working on the side?
I used to be the Managing Director of the SURF Incubator, a community-supported space for digital entrepreneurs. In this position, I used to be one of two managers responsible for managing the organization. Day-to-day operations included supporting lots of of startups, managing our staff, securing corporate partners, overseeing 15,000 square feet of downtown office space, coordinating events, and doing all the pieces we could to assist our entrepreneurs succeed.
When did you begin your side business and where did you discover the inspiration for it?
I used to be inspired to launch bitcoin ATMs by working in the SURF Incubator. I knew that technology, particularly Bitcoin and the concept of decentralized money, held enormous opportunities for the future. My co-founder Michael Smyers and I believed that we could place Bitcoin ATMs throughout the city, including the incubator, and they might almost start themselves.
Our inspiration gained momentum after launching the world’s first Bitcoin ATM in Vancouver, Canada. In its first few weeks of operation, it processed over $1 million in transactions. This success confirmed customer demand for bitcoin and bitcoin ATMs as a vital channel for this recent “magic internet money”. This early validation and my long-term belief in the promise of Bitcoin led my co-founder Michael and I to found Coinme in early 2014 and launch the first licensed Bitcoin ATM in the US, one of the first 10 deployed globally.
What were the first steps you took to interrupt away from the game?
At the time, the entrepreneurial mantra was “build fast and break everything.” Unfortunately, we desired to run a money services business in the US. If you “break something” you risk going to jail. We found the most knowledgeable fintech lawyers who, fortunately, agreed to a deferred payment plan and then went to state regulators with a marketing strategy, money flow, and a presentation on Bitcoin.
I attempted to learn about the Bank Secrecy Act and the USA Patriot Act, which are the general framework for anti-money laundering laws in the USA. I also gained knowledge about state-level money transfer regulations. After investing what little money I had, my co-founder and I formed Coinme as an LLC and applied for a first-of-its-kind virtual currency money transfer license in the state of Washington. Our goal was to guard consumers by helping them buy bitcoin on a regulated and trusted exchange.
As a part of the licensing process, we needed to secure a checking account. Hundreds of banks that wanted nothing to do with Bitcoin turned us down. At one point it seemed that this was what would kill the idea. Fortunately, Michael’s girlfriend at the time unintentionally opened a checking account at a local credit union. We decided to envision if they might conform to this with us. Sure enough, they accepted our marketing strategy and provided us with a Money Services Business (MSB) checking account, which was required for licensing.
It took us several months to fulfill state licensing requirements, but a week after approval, we deployed the first federally registered and state-licensed Bitcoin ATM in the U.S.
What were the biggest challenges you faced in building your side team and how did you overcome them?
There were loads of challenges. On a every day basis, we only dealt with extinguishing fires. ATMs were malfunctioning, which happened every few days. The customer’s ID will get stuck in the ID reader and, reasonably, they’ll need it back as soon as possible. It didn’t matter how far-off you were; you needed to go to the ATM immediately. We abandoned the customer support cellphone when we answered the phone at all hours of the day before we hired someone years later.
The biggest challenge we faced was managing money logistics. Our customers inserted their physical bills into the ATM and the bitcoins were transferred to their bitcoin wallet. We had hundreds, sometimes lots of of hundreds of dollars in the ATM that needed to go to our checking account and ultimately to our Bitcoin liquidity provider.
Established corporations work with security corporations corresponding to Brinks, Garda and Loomis, but we needed to be greater for them to work with us. So we needed to do it ourselves. After long discussions, we decided that the best solution could be to alter into city clothes, go to the ATM late at night with a JanSport backpack and stuff it with money from the ATM. Then we anxiously waited for the bank to open, waited in line, and when it was our turn, we poured six figures of money on the counter. The expressions on the cashier’s face were priceless.
We did it this fashion for over three years before we could afford (and persuade) an ex-military with a concealed weapons permit to take on the role. Eventually we got sufficiently big to do a deal with the Gardai. As the team grew in the early days, making at least one money injection became almost a rite of passage. At one point, when we had branches throughout the United States, some people needed to run to the ATM to get money because our bank was too small and they didn’t have any branches in the state. This was a bag you actually took with you on the plane. Dealing with TSA and explaining money issues had its own challenges, but that is a story for one other day.
How long did it take for you to realize stable monthly income? How much did the side hustle earn?
Bitcoin ATMs achieved revenue on day one because our revenue got here from transaction fees, but our costs exceeded revenue for at least the first six years. It was brutal. We maxed out our bank cards, took out high-interest personal loans, negotiated payment plans with key vendors, and did all the pieces we could to preserve money.
I needed to work nights and weekends to run Coinme for three years, not receiving a paycheck and maintaining a demanding full-time job. At one point, my wife – who is also a business partner – and I took the proceeds from the sale of our headquarters in Seattle and infused those funds into the company during one of the now infamous Bitcoin downturns. Michael sold shares in one other company he co-founded to assist Coinme stay afloat. The funding has enabled us to maintain key team members employed while at the same time we try to extend revenue revenue.
Thanks to our persistence and a little bit of luck, Coinme received a $1 million seed round money inflow in the first quarter of 2017. This investment got here just in time as the company’s checking account dropped to $11.
What steps did you’re taking to transition from a side hustle to a full-time business?
Revenue from the three bitcoin ATMs was not enough to cover the infrastructure expenses associated with being a regulated financial technology company. About a 12 months after launch, it became clear that we either needed to grow or die. We increased our lending limits on peer-to-peer lending platforms and purchased more Bitcoin ATMs. This increase led to additional revenues, but was not enough to cover expenses. At this point, I began looking for outside capital as if my life depended on it. Fortunately, we found a like-minded bitcoin pioneer and technologist who invested from his early-stage fund. These funds provided us with the runway and limited pay vital to quit our day jobs and proceed operating at full capability.
What does growth and revenue seem like today?
On May 1, 2024, Coinme celebrated its tenth anniversary with sales of $1 billion. Over 10 years, we achieved an average annual revenue growth rate of 164%. We have survived three crypto winters, growing to over 40,000 locations where we have made crypto available to existing kiosks and ATMs. This shift from hardware to software has helped us scale and achieve profitability. We are fortunate to give you the option to double our revenue this 12 months.
What do you enjoy most about running this business?
I like building something recent that would not exist if it hadn’t been done, and that may help people while being financially self-sufficient.
We help people by giving them access to what we imagine is the way forward for money. The Bitcoin that a Coinme customer bought in 2014 for $20 could be value over $2,000 today if he had not sold it. But bitcoin’s gains aside, we imagine in a digitally native form of cash. This will be USDC (US Dollar-pegged stablecoin that we support on our platform) which will be sent or received anywhere in the world almost immediately and for free. It’s like sending an email, but it’s money.
The ability to send funds without borderlines and without permission also gives people in developing countries access to the US dollar, bitcoin and other blockchain-based valuables, which have been proven to guard their hard-earned wealth higher than hyperinflationary local fiat currency. Financial services is experiencing a once-in-a-generation moment of evolution, and it has been exciting to learn about the challenges that may make this vision a reality.
What is your advice for others seeking to start a successful side hustle or their very own full-time business?
You gotta like it. If you do not like it, you may hate it. Starting a business or side hustle will be scary, exhausting, and dangerous, and it’ll take all the pieces you’ll be able to provide and more. If you do something you’re keen on, you’ll have the energy, resilience, faith and confidence to persuade or at least attempt to persuade everyone you know or don’t know to assist in some way, shape or form.
Before you dive into the details, start small and validate your key assumptions. Who is my client? How much are they willing to pay for this service? How much does it cost me to supply this service? Is it scalable? Can it’s defended? How much risk do I have to take to check this concept? If I fail, what might be my acceptable loss?
There are many books on the market, but when it involves the ABC’s that even the most intelligent people miss, I like to recommend testing The Business Model Canvas and The Value Proposition Canvas. A great business idea consists of many elements. Make sure you have assumptions about the key features of your concept and plot them on the business model canvas and value proposition canvas. Think of this canvas exercise as a easy blueprint for your idea. This approach will allow you to refine your concept and determine which assumptions have to be tested and which have to be true for your online business to succeed.