Coinme’s journey from a Seattle startup operating a single bitcoin ATM to a billion-dollar crypto exchange offers valuable insights into the challenges and opportunities of the industry. As the company celebrates its 10th anniversary and surpasses $1 billion in retail sales, CEO and co-founder Neil Bergquist reflected on the evolution of the enterprise and the broader industry’s development in a recent interview.

The company’s origin story is rooted in the early days of bitcoin enthusiasm. In 2014, Neil Bergquist was managing director at Surf Incubator, a community space for digital entrepreneurs, when he and co-founder Michael Smyers saw an opportunity in the nascent cryptomarket.

Bergquist recalled, “I knew the technology, specifically bitcoin and the concept of decentralized money, had great possibilities for the future.”

The spark that ignited Coinme’s creation came from across the border. “Our inspiration accelerated after the world’s first bitcoin ATM launched in Vancouver, Canada,” Bergquist explained. “It processed over $1 million in transactions in its first few weeks of operation. This success validated the customer demand for bitcoin and bitcoin ATMs as an essential channel for this new ‘magic internet money.'”

Navigating Regulatory Waters

Unlike many tech startups that could afford to move quickly and worry about regulations later, Coinme had to prioritize compliance from day one. This approach presented significant challenges but ultimately became a cornerstone of the company’s longevity and success.

But the process of becoming a licensed and compliant crypto business was arduous. Bergquist and his legal team had to learn the ins and outs of complex regulatory frameworks and convince skeptical banks to work with them.

“We found the most competent fintech lawyers, who fortunately agreed to a deferred payment plan and subsequently went to the state regulators with a business plan, funds flow, and presentation on bitcoin,” Bergquist said. “I learned about the Bank Secrecy Act and the U.S. Patriot Act, which provide the general framework for anti-money laundering laws in the U.S. I also educated myself about state-level money transmission laws.”

Cash Logistics and Early Challenges

Once operational, the company faced unique challenges related to managing large amounts of cash from its ATMs. The company’s early cash handling procedures highlight the unconventional nature of running a crypto business at the intersection of digital and physical finance.

Neil Bergquist described the logistical challenge of managing large sums of cash, often ranging from thousands to hundreds of thousands of dollars, that accumulated in the company’s ATMs. This money needed to be safely transported to Coinme’s bank account and ultimately transferred to its bitcoin liquidity provider.

“After much discussion, we decided the best approach was to put on street clothes, visit the ATM late at night with a JanSport-type backpack, and stuff it full of cash from the cash acceptor,” he said. “Then we’d wait anxiously for the bank to open, wait in line, and then, when it was our turn, we’d empty six figures of cash onto the counter. The bank teller’s expressions were priceless.”

These cash runs became a rite of passage for early employees, with some even flying to distant ATMs to collect cash when the company expanded across the U.S. “That was a bag you definitely carried with you on the plane,” Bergquist adds. “Dealing with the [Transportation Security Administration] and explaining the cash brought about its own challenges.”

Pivoting to Profitability

Despite early traction, Coinme struggled to achieve profitability in its first years. The infrastructure costs of running a regulated financial technology company outweighed the revenue from a small network of bitcoin ATMs.

“The bitcoin ATMs made revenue on day one as our revenue came from transaction fees, but our costs exceeded revenues for at least the first six years,” Bergquist said. “It was brutal. We maxed out credit cards, deferred salaries, took out high-interest personal loans, negotiated payment plans with critical vendors, and did whatever we could to preserve cash.”

The turning point came in 2017 when the company secured crucial funding. “Due to our perseverance and a little luck, in Q1 2017, Coinme received an influx of cash from a $1 million seed round,” Bergquist said. “This investment came just in time, as the company’s bank account had dwindled to $11.”

Scaling Through Partnerships

Coinme’s growth accelerated significantly through strategic partnerships with established financial services companies. It expanded its physical presence exponentially by developing an API and integrating the technology with existing Coinstar kiosks and MoneyGram locations.

“We pivoted from hardware to software and that has helped us scale and become profitable,” Bergquist explained. This approach not only solved scalability issues, but also addressed a key barrier to cryptocurrency adoption: trust.

“By offering bitcoin and other cryptos through branded partners in a trusted retail setting, Coinme helped solve crypto’s trust problem,” added Bergquist. “The days of meeting strangers in a coffee shop to swap cash for a USB stick with bitcoin are far behind.”

Weathering Market Cycles

Coinme’s decadelong journey has coincided with multiple boom and bust cycles in the cryptocurrency market. The company’s ability to maintain consistent growth — averaging 164% annual revenue growth since inception — speaks to the resilience of its business model.

“We’ve survived three crypto winters, growing to over 40,000 locations where we’ve crypto-enabled existing kiosks and ATMs,” Bergquist said. “We’re fortunate to be on pace to double revenue this year.”

Bergquist sees the company’s decade of experience and track record of compliance as a vital advantage.

“We’ve maintained a close working relationship with regulators since our inception,” he noted. “This commitment is further evidenced by our compliant operations in 48 states, with New York coming soon.”

The challenge for Coinme will be to maintain its growth trajectory while adapting to new regulatory requirements and technological advancements. Bergquist thinks the company’s crypto-as-a-service enterprise API, which powers MoneyGram Online’s crypto platform, is a new frontier in enabling traditional financial services firms to meet customer demand for cryptocurrency access.

Lessons for Crypto Entrepreneurs

Reflecting on his company’s journey, Bergquist offered advice for others looking to enter the cryptocurrency space:

“You have to love it. If you don’t love it, you’ll hate it,” he said. “Starting a business or side hustle can be scary, exhausting, and risky, and it will consume whatever you can provide and more.”

He emphasized the importance of thorough planning and validation of crucial assumptions before fully committing to a new venture.

“Before diving in headfirst, start small and validate your key assumptions,” he advised. “Who is my customer? What are they willing to pay for this service? How much does it cost me to provide this service? Is it scalable? Defensible?”

Cryptocurrency continues to mature as an asset class and potential medium of exchange, and companies like Coinme play a crucial role in bridging the gap between digital assets and everyday consumers. It’s a case study in how focusing on accessibility, compliance, and partnerships with trusted brands can position a company at the forefront of mainstream crypto adoption.