Steve Beauregard is serial entrepreneur, co-founder of cryptocurrency payment processing startup GoCoin and chief revenue officer at Bloq.
In this entry in CoinDesk’s “Bitcoin Milestones” series, Beauregard looks back on the day PayPal began accepting bitcoin – giving its stamp of approval to a technology many believed had the potential to disrupt it.
It’s a Monday in Bitropolis, but not just any Monday.
For nearly three months, the GoCoin team had kept painfully silent on the biggest bitcoin news story in the industry to date. In 12 short hours, the press embargo would lift, the news would jolt the financial world and GoCoin would be cemented in history alongside BitPay and Coinbase as the startups that ushered one of the world’s largest payment companies into cryptocurrencies.
Yet, on the eve of that very announcement, our inclusion was far from certain.
When I founded GoCoin along with Brock Pierce in mid-2013, we discussed that we may be too late.
BitPay had been offering payment services to online merchants for well over a year, touting they had signed up 10,000 merchants. Coinbase announced they had signed up the first major retailer, Overstock, to accept bitcoin.
GoCoin had raised a modest seed round and was “heads down” in development while BitPay and Coinbase continued to one up each other with increasingly impressive announcements – Gyft, CheapAir, Virgin Galactic and Dell.
It felt like every day GoCoin wasn’t live would mark another major merchant lost to BitPay or Coinbase.
In response, I was putting intense pressure on the development team to compress the Go Live schedule. My system architect, Margot Ritcher, and lead developer, my nephew Kevin Beauregard, agreed we could cut a month out of the schedule if we compromised on the multi-blockchain, multi-coin design. The downside of taking the shortcut, would be a major software rewrite.
As you will see later in the story, taking the extra time to keep the multi-blockchain design proved to be the right decision.
Finally, in December 2013, GoCoin announced that it was taking donations for the Boys and Girls Club of Santa Monica. We were finally in the race, and I ramped up my Series A fundraising efforts. With the price of bitcoin having gone from the $100 to over $1,000 in the previous months, booking VC meetings on Sand Hill Road was never easier.
In early 2014, GoCoin firmly planted a flag on the cryptocurrency moon by announcing support for litecoin and dogecoin payments. The bitcoin purists lost their minds: “You are ruining bitcoin, altcoins are a joke!” On Reddit, people decreed: “You are scammers taking these scam coins!”
Those were the nicest comments I can publish here.
While the GoCoin team learned to operate the business, I already had $2.5m committed of our $5m Series A funding with about $1m already in the bank.
But our fundraising efforts came to a screeching halt when news broke that Mt Gox, the largest bitcoin exchange, had been the victim of a major heist where about 25% of all bitcoin in circulation had been stolen.
The entire industry was in a state of shock and chaos, funding options instantly dried up and even those that had committed to our round never funded. My board decided, rather than fight the market, to just close our Series A, which together with the seed capital came to a skinny $1.5m.
Despite the modest raise, GoCoin was still the best funded LA bitcoin startup at the time. We had negotiated a very favorable top floor lease overlooking Santa Monica’s Third Street Promenade.
GoCoin also sublet space to fellow blockchain startups, developers, lawyers, accountants and provided space for meetups and the first bitcoin ATM in LA.
We named the space ‘Bitropolis’.
In the months that followed, GoCoin gained steady traction with our strategy of supplementing bitcoin payments with other alternative digital currencies.
In many cases, we convinced early adopters like CheapAir, KnCMiner and eGifter to add GoCoin so as to not “limit their customer to only bitcoin”. We also continued to shake things up by announcing Larry Flint’s Hustler brand as a high-profile merchant.
By 22nd September, 2014, the GoCoin directors assembled in offices of embedded Bitropolis attorney Adam Ettinger. Perhaps more importantly than the impact the big announcement would have on financial institutions, we were finally getting validation that our naysayers were wrong.
Bitcoin is not “only used by drug dealers”, “a Ponzi scheme” or a “joke”!
Why the emergency meeting? On the eve of the announcement, an email with the heart-stopping subject line “GoCoin AML Compliance” hit my inbox.
At the 11th hour, they are requesting a “full assessment” from our attorney and we had to decide how to respond.
The questions were flying around the room, did one of our competitor’s investors pull some strings to knock us out? By “full assessment”, did they want a legal opinion? Were they looking for an excuse to dismiss us? Was this simply a routine checklist and a box remained unchecked?
In the previous months, GoCoin had stealthily worked with engineers, business development, marketing, PR and, of course, the legal department of PayPal. The technical hoops to integrate GoCoin’s payment platform into PayPal’s PaymentHub were trivial compared to the due diligence process.
We had a full legal opinion from a top Isle of Man law firm. They reviewed our compliance program extensively, requesting we tighten up aspects of our on-boarding procedures and add payment monitoring features. Most importantly, we had to satisfy their legal team that our compliance program was not only solid, but that we were continuing to improve it.
Even with that, BitPay had raised $30m from Index Ventures and Coinbase $25m from A16z. It would not have been surprising for PayPal to toss out our small scrappy undercapitalized startup.
At 9pm, our attorney sent a carefully worded “assessment”, but certainly well short of a legal opinion. The response came back from PayPal: “Thanks. That’s all we needed.”
On the morning of 23rd September, PayPal announced it would begin accepting bitcoin, litecoin and dogecoin payments via GoCoin, and bitcoin payments via Coinbase and BitPay. Within minutes, the price of all three coins spiked.
Reddit was buzzing, and thanks to the superb strategy of my PR goddess Amanda Coolong, my phone was ringing off the hook with reporters asking about the GoCoin deal with PayPal.
History was made.
Yet, soon after signing this milestone agreement, parent company eBay announced they were spinning off PayPal. As a result, PayPal’s blockchain ambitions were pushed to the back-burner.
As I reflect on it, in terms of mainstream merchant adoption for online payments, I would have to say late 2014 to early 2015 was the first big peak. At the time, GoCoin was signing up about 750 merchants per month, including top brands like MovieTickets.com, Lionsgate Films and Re/MAX.
Even though many of the merchants didn’t get the volume of transactions they had hoped for, their brands were now regarded as innovators.
Bitcoin exchanges and merchant processors were the bitcoin 1.0 trailblazers that brought bitcoin out of the shadows of the dark web and started to lift the reputational stain left by Silk Road.
After four years at the helm, I have stepped down as CEO of GoCoin, yet I remain on the board of the parent company. GoCoin has been profitable for nearly two years now, and I still believe there is a bright future for the company and blockchain merchant payments. That said, the industry needs to mature in order to see the kind of growth we envisioned back in 2014, and I feel I can affect more change outside of GoCoin than I can from within.
Recently, I join the Bloq team founded by Matt Roszak and former Bitcoin core developer Jeff Garzik. I’ve always had tremendous respect for both, and I’m thrilled they have welcomed me in as a partner.
My thesis for merchant payments is that the largest and most successful companies will likely implement their own payment systems.
PayPal image via Shutterstock