The Bitwala Christmas party was a shock for me. Our team had grown to almost 40 people and we had just launched our new product after a tough year spent offline. It was shocking because the mass of people in front of me was such a stark contrast to how Bitwala started: three guys and a dog.
In a startup you’re supposed to focus on the future — the vision that drives the company forward. The reality is that in a startups there’s a million things to be done right now and it’s easy to lose connection with the big picture.
With the future and the present battling for attention, there’s no time left for the past.
At Christmas I made an effort to tell the story. I wanted the new employees to understand what we’d gone through to get here and to remind the older ones of the crazy journey that they’d been part of to get us here.
Part 1: The Consultants who no one listened to
I walked into a Neukölln coworking space in 2013 after seeing a Facebook post from a friend about a freelancer Wordpress gig. My first startup had just failed and I’d picked up some development skills that I wanted to leverage. The night before I read the Bitcoin Wikipedia page and thoroughly confused myself.
In the office I would find my future friends and co-founders, Jörg and Jan, in their first venture: Bitcoins Berlin.
The logic behind the business was simple.
- Bitcoin has enormous potential
- No one is using it
- Let’s get people to use it
Jörg and Jan would go to some of the biggest firms in Germany (Deutsche Bank, Deutsche Telekom, Western Union) and pitch the power of Bitcoin. Back in 2013, a few things were different. We didn’t really talk about Blockchain as much as bitcoin and you could still send a transaction with zero fees so Bitcoin was still a viable solution for micropayments.
They’d chat to various levels of executives who would nod and say ‘interessant’, but nothing would come of it.
Part 2: The Company Builder
After a while we realised that the path to mass adoption was not through the large companies who were too big to care, we decided to take matters into our own hands.
We began ideating and realised that the biggest obstacle to bitcoin’s world domination was spendibility (not a lot has changed in 10 years!).
Our solution was All4btc, an application which let you buy anything online with bitcoin. How did it work?
Obviously the technical execution was extremely difficult. In order to serve all websites, we needed to crawl the top 1,000 ecommerce sites to build abstractions of the checkout flows and…
Just kidding. It was a simple web form and we did everything manually. After we received the payment we would literally go to the website you specified and click through the checkout to buy the item on your behalf.
All4btc ran for many years (we sold it in 2017 to focus on Bitwala) and was our first successful product. The big learning for me was to start as lean as possible and you don’t need complex tech to have a startup.
Following All4btc came E4btc (an ecommerce store with electronics for Bitcoin) and Gold4btc (gold for bitcoin). We were trying to do the same thing we’ve done the entire history of Bitwala: connecting cryptocurrencies and the real world.
All4btc was by far the most successful of our products because it gave people the greatest choice of things to buy. But that still wasn’t enough.
Our customers (many of whom we knew personally) began asking for more. They didn’t just want to buy TVs with their bitcoin, they wanted to do everything with bitcoin. People asked us if we could pay their rent in bitcoin or send money back home internationally. They wanted to receive their salary in bitcoin, buy a house in bitcoin.
We realised then that we had to go far bigger than just offering Amazon products. We needed to fully integrate cryptocurrencies to the traditional financial world.
Part 3: Let’s get professional
Bitwala was bootstrapped and we launched our MVP at the start of 2015. Our first product was bank transfer for crypto.
The value proposition was simple. Imagine you owned bitcoin and needed to pay your rent.
- [Customer] sends bitcoin from cold storage to exchange (~1h for confirmations)
- [Customer] trades bitcoin for EUR
- [Customer] sends EUR from exchange to your bank account (~2 days for bank transfer)
- [Customer] sends EUR from your bank account to your landlord’s bank account (~2 days for bank transfer)
- [Customer] Enters in bank transfer details and pays with Bitcoin (1 hour for confirmations)
- [Bitwala] Bitwala makes transfer to landlord (~2 days for bank transfer)
We offered a convenient bridge between cryptocurrencies and traditional banking. People used us for paying bills, fast cash out and remittance. We charged a 0.5% fee and our business grew as did the bitcoin price!
We began offering a prepaid debit card to expand our product offering. Customers topped up a Visa card which they could use online, offline and to cash out at ATMs. One of the cool things was that we were serving some of the 1.7bn people who are considered unbanked and who couldn’t get a debit card elsewhere; they typically used the card for hosting and buying domains.
Through a chance encounter on a Thai beach, we got introduced to the idea of venture capital.
In my experience as a co-founder, I’ve had my ups and downs with the fundraising process. It takes a tremendous amount of time and energy to raise capital — time and energy that could instead be spent on building the company. One of the positive things (in addition to cash in the bank, of course!) is that you and your business get tested and challenged from every possible angle by a lot of smart people.
Have a business plan without exponential growth?
No secret sauce that will stop someone with more money copy your business model?
A product that you can’t explain in 10 seconds?
Things changed overnight, nearly all for the better. In the next month: the following happened:
- We started paying ourselves a salary 💰
- We moved into a beautiful office in Kreuzberg 🏭
- We hired our first employee 💁
- We began spending considerably more money that we were making 💸
It was a massive change. Now we were getting paid we could stop consulting and freelancing and focus on Bitwala 100%. Because we had our own office, we could go to lunch together (previously we had worked out of cafes and one person had to stay behind so we didn’t lose the coveted seats near the electrical sockets).
Bitwala grew in terms of team, customers and professionalism. Within 12 months we had grown to 11 people, 70,000 users and had managed to raise another funding round from Alstin.
In fact, we were making what’s considered a mistake in the startup space — we were almost profitable!
It all seemed too good to be true and it was.
4. The Disaster
In January 2018 one of our employees got a WhatsApp message from WaveCrest, the company through which we provided our prepaid debit cards.
Visa was terminating all of the cards for compliance reasons.
We can confirm that WaveCrest’s Visa membership is being terminated due to continued non-compliance with our operating rules. All of WaveCrest’s Visa card programmes will be closed as a result.
With no warning from one second to the next, all of our customers’ cards stopped working with the funds trapped inside. Bitwala was one of many crypto companies (including BitPay, TenX, Wirex) who had just got royally screwed.
It seems that when disaster strikes, it strikes twice. At about the same time, we heard that our bank was going to shut down our account. We had been fine for them as a little sandbox project, but our volumes were now too big to ignore and rather than try to understand our business (we had always been strict on KYC) they decided to pull the plug.
It was a horrible feeling.
Our customers relied on us and had trusted us with millions of euros which were now locked in cards that no longer worked. Our investors had believed in us and decided to invest when most still viewed crypto as being too risky. Worst of all, we’d convinced a dozen young, smart people to forgo much more stable (and probably better paid) jobs to work for Bitwala.
It’s a crazy journey being a founder. You go from being a few guys with an idea to being responsible for a lot of shit. Often you get these “can I really do this?” moments. When this happened I remember feeling that it was silly that we’d even tried.
5. The Plan
“Marc: “Do you know the best thing about startups?” Ben: “What?” Marc: “You only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both.”
― Ben Horowitz, The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
The first few days were a blur. We had to issue a press release, email all the users, shut down large parts of the product, all while dealing with the (understandably) angry customers. If memory serves, a girl in our customer service team was threatened with decapitation.
It was even worse when we were done with urgent tasks as then we had to actually address the question: does Bitwala have a future?
Back in 2014 when we considered ourselves a company builder, we used to run an event called “Crazy i-beer Night” where we’d come up with ideas for future ventures. There were no bad ideas and at the end of the discussion we would rate them on 2 categories: potential and craziness.
There were a host of wonderful ideas, some of which actually became products. There was one idea on the whiteboard which I’ll never forget: A bitcoin bank account. It scored perfectly: 5 for potential, 5 for craziness.
I could barely believe it as we presented the plan to the company. We were going to abandon the old product and business model and try something even crazier, even more difficult: we were going to build the world’s first crypto bank account.
Much to the credit of the employees, the reaction was very much “Ok. When do we start?”
It turns out that there’s some advantages to watching your business be decimated by a nuclear bomb. We got rid of every kind of debt you can think of:
- Threw away all the old code
- Ditched all our old operations and processes
- A complete company restructure
I know that if we hadn’t been forced offline, we never could have achieved the quality we can offer today.
While we didn’t have a running business to distract us, it was far from easy. The work was hard and long with nights and weekends becoming the norm. We were doing something that no one had ever done before and — surprisingly — a decentralised, immutable ledger doesn’t mix so easily with highly regulated and centralised bank accounts.
Ever since 2013, we’ve been trying to do the same thing. From buying Amazon products with crypto to bank transfers and debit cards, we had seen that the closer bitcoin is integrated in the traditional financial system, the more useful it becomes. The previous products were stopgaps — like duct tape over a crack. By integrating cryptocurrency directly into a bank account, we were providing the first real solution to merge the two worlds.
There are two things I’m very proud of during this time. Firstly, we only lost a single employee (she moved countries). Secondly, we managed to raise a funding round from the notable VCs EarlyBird (seed investor of N26) and Coparion, despite being offline with zero traction.
In a startup, you have periods of peace and war. You have to be good at both to succeed and I can say with confidence that we are definitely half way there.
6. The world’s first crypto bank account
On 16th December 2018 we breathed a sigh of relief. After one of the toughest years of our lives, through the hard work and dedication of our awesome colleagues, we had come back stronger than ever to launch the world’s first crypto bank account.
In the future cryptocurrencies and tokens will be part of every bank account. Bitwala was the first.
We believe that blockchain is going to do the same for finance as the internet did for information. It’s not going to replace the current financial system, but it’s going to upgrade it beyond recognition. The blockchain economy is going to need a bank and that’s why we’re proud to continue this story.
European residents can sign up today.