Raise in Fiat, Earn in Bitcoin: This is the Way

When is the best time to buy Bitcoin? This is a question all new investors are faced with. Will it drop right after my purchase? Or will it take off if I decide not to buy? The struggle is real, and we’re sure you can relate.

Bitcoin companies have the opposite problem. They don’t need to buy bitcoin, they already earn it. However, while operating on bitcoin-only revenues, a Bitcoin startup has to deal with a changing regulatory landscape, fend off the latest FUD, and navigate bitcoin’s extreme price volatility, which can either make or break the company.

Julian Liniger, the co-founder and CEO of Bitcoin startup Relai, explains how the company navigated its first year operating on bitcoin-only revenues in the highly volatile crypto markets.

Running (on) Bitcoin

Most Bitcoin startups earn revenue in bitcoin. Revenues typically stem from a fee collection model, with companies charging a small commission on trades or transactions. That goes for exchanges, wallets, and payment providers, which make up the majority of businesses in the Bitcoin ecosystem.

Earning income exclusively in bitcoin can be quite a ride for young startups, however. During bull markets, startups that are naturally long bitcoin suddenly have more funds available than expected to spend on growth and expansion. But during a sharp downturn, things can go wrong quickly, especially if a business gets caught up in the hype of a bull market and doesn’t hold enough funds in fiat currency to carry it through the difficult times. For example, during the crypto winter of 2018-2019, many crypto companies went under after failing to secure enough runway to survive lean times.

For Bitcoin startups, the solution to flourishing during bull runs and surviving market downturns is simple: raise in fiat, earn in bitcoin.

Most Bitcoin startups start out as an idea that is coded into existence by a small founding team. That was the case for Relai. Relai is a Swiss-made mobile app that provides simple, easy bitcoin purchases and an automated dollar cost average style bitcoin savings plan. It is primarily targeted at first-time bitcoin investors.

Once Bitcoin startups go to market with an MVP of their product or service, they typically go on to raise funds even if they are already generating revenue. Why? Because it’s essential for bitcoin companies to raise capital in fiat currency while earning income in bitcoin. This way, they can have funds in fiat when needed – such as during bear markets – without having to liquidate much (or any) of the bitcoin they earn.

Raising Capital in Fiat Currency

To build the Relai app, we were able to secure funding from two angel investors who believed in our vision. After Relai went live in July 2020, we managed to generate higher-than-expected revenues as the app was well-received by the bitcoin community as well as new bitcoin investors, who appreciated the simplicity of the product.

Boosted by the positive bitcoin price development following the bitcoin Halving, we came very close to covering all operational costs and salaries for the small founding team. To sustain and grow the business, however, we needed to raise funds from venture capital firms.

In the second half of 2020, we managed to secure seed funding to build a team to grow the business until it was time for a Series A round. After building out the team, improving the product, and setting our company goals for 2021, the bitcoin price exploded, boosting the value of our bitcoin reserves and our daily revenues. However, we didn’t use our bitcoin revenues to cover salaries and expenses. For that, we used the funds held in fiat currency from our seed funding round.

Bitcoin DCA, All Day

At Relai, we do exactly what our customers do: we DCA bitcoin. We do what we preach!

We generate daily revenues in bitcoin, which allows us to receive all the benefits of bitcoin dollar-cost averaging. Most importantly, it means we are able to build bitcoin reserves at an average market price as opposed to making large one-off purchases in an attempt to time the market.

That’s exactly what our customers do. They buy bitcoin regularly, regardless of the market price, to grow their bitcoin savings at an average market price.

Of course, that doesn’t mean that the price volatility of bitcoin doesn’t affect small Bitcoin startups like Relai. Before closing our Series A funding round in June, we had to rely on our bitcoin reserves and revenues to cover expenses for two months. This occurred right after the price of bitcoin dropped by around 50%, from $60,000+ to $30,000+.

Fortunately, our bitcoin reserves were sufficient to bridge us until the money we had raised arrived in our company bank account. But it was another lesson on the importance of raising in fiat when earning in bitcoin.