We continue our interview series with Endeavor Entrepreneur, Stephen Pair. Stephen is the co-founder and CEO of BitPay, the world's leading blockchain payment processor. BitPay has raised over $72M from leading venture capital firms and operates in one of the most exciting industries in the world. We dive into cryptocurrency, the importance of blockchain and why Stephen decided to join Endeavor.
Tell us a little about your journey. How did you land in the cryptocurrency / blockchain space? Did you always know you wanted to start a company?
That’s a long, long story going back decades now. My background is in computer science. I started writing code as a kid. In the early 90’s I closely followed everything going on with Phil Zimmermann, PGP (Pretty Good Privacy), and encryption. I became very fascinated by technology and cryptography but was also very interested in markets, money and how money and banking fit in with technology. There was something called DigiCash in the early 1990’s which was the world’s first cryptographic payments system. I became a big fan and studied it deeply which got me thinking about the issues around money and payments. Not too long after, DigiCash went bankrupt and that payment system went away. The bankruptcy got a lot of computer scientists thinking about how to create a payment system that is a true protocol for the internet and isn’t dependent on one company operating it. For a long time a lot of people thought that it wasn’t possible, but then Bitcoin came along and really reframed people’s thinking. I read the Bitcoin whitepaper in late 2010 and was very fortunate to have this background in payments and understood the magnitude of what Satoshi had accomplished which was coming up with a true internet protocol that wasn’t dependent on a centralized company to operate it. I got very excited after reading it and started talking to my co-founder Tony. We shared a lot of common interests in markets and things like that so that’s when we decided to form a company.
To answer the second question, I was always attracted to the idea of starting a company. As a kid I read about Bill Gates and Steve Jobs and was very fascinated with the stories of Microsoft, Apple and others. I also was very interested in building software. I dreamed about being able to build something on the scale of the aforementioned companies. For me it was less about being an entrepreneur and more about having a company and building really cool things. So yeah, from an early age I was drawn to the idea. Many people are attracted to the idea of being an entrepreneur, but they need to make sure they’re attracted to the reality of being an entrepreneur. What I like about it is being able to have a team of people that work together and accomplish a lot. You can only accomplish so much as an individual, but you can do so much more when you’re a part of a team. It’s so much more impactful.
You've been in the cryptocurrency/blockchain industry since the early days and have seen the ups and downs. Why do you believe it's the wave of the future? What challenges still lie ahead to increase the likelihood of mainstream adoption?
First of all a blockchain is simply a type of database. From a computer science perspective that is here to stay. I also don’t believe blockchains will be just a small part of the software industry. Blockchain style database’s will eventually replace all current databases which will be secured by the big mining data-centers popping up around the world. You will start to see companies transform from integrating with one another via API’s (Application programing interface) to integrating with one another via blockchains. So the blockchain miners will be the ones securing the blockchain style databases and very literally will be the ones securing the internet.
A blockchain style database is a fundamentally different approach to creating ways for people to interact with one another. Traditionally you’d have a centralized database that you’d secure by preventing people from accessing it and making unauthorized changes. A blockchain inverts that by letting everybody in but limits their ability to create valid transactions unless they can satisfy whatever rules are associated to that database. An example of those rules may be that I must have a cryptographically strong digital signature on a transaction to prove that I have the authority to make changes within the database. That process itself is a game-changer. I believe blockchain as a database technology is here to stay and will eventually take over everything.
Now cryptocurrency or payments are specific applications of a blockchain database. I think there are many applications that blockchain databases will takeover but payments are a natural one and bitcoin was the first blockchain style database on a global scale. We not only believe that all payments will eventually be conducted on a blockchain, we believe all digital assets will be issued on a blockchain. We fully believe that cryptographic payments and cryptocurrencies built on blockchains are here to stay. That’s what gets me out of bed and very excited every day.
In terms of making it more mainstream, I think it’s only a matter of time. I don’t think there is one thing we can point to that needs to happen to make it mainstream. I think it’s simply happening. There’s not going to be one event that triggers everybody to use it. One day we’re going to wake up and realize that this technology is woven into our everyday lives. Very similar to email, the internet, and every other new technology that has worked its way into our lives. It just happens over time.
The entrepreneur journey comes with plenty of ups and downs. Any good or funny war stories you can share from building BitPay?
Oh yeah, there are a ton. But there’s one that always sticks out. In 2011 we launched BitPay right after July 4th. Later that year we had a DDoS attack while I was on vacation with family in Orlando. The attack started within hours of leaving our house and driving down to Florida, meanwhile I have young kids all excited about going to Disney World while I’m freaking out in the front seat. We finally get to Orlando and I have this distinct recollection of being with my kids outside the Dumbo ride at Disney, being utterly panicked looking at my phone trying to figure out if our servers have been compromised by these attackers. I remember standing outside the ride trying to go to Bitpay.com to see if the green lockbox pops up in the browser for a secure SSL connection. I was even asking my 8 year old son at the time to confirm whether or not he saw a green lock icon because I wasn’t 100% sure. Fortunately it was just a DDoS attack and nobody had compromised our servers. The attackers were just taking them offline by hitting them with tons of traffic.
Remember now, this was in September so we’re only a few months into launching the business. All in all we were probably doing 5-10 transactions per day so we still weren’t making much, certainly not enough to cover the bills. I was ready to throw in the towel and started to question if this was going to work. Tony fortunately talked me off the ledge there, but I’m pretty sure I made the whole vacation miserable for everybody.
Let's talk about fundraising. Bitpay has raised over $72M to date, closing your series B fairly recently. What is your advice to entrepreneurs on raising money? When should an entrepreneur raise money versus bootstrap the business?
Raising money is situational in my opinion. In our case we chose to raise money. When we started BitPay we felt like this was a game changing technology and that there was a very good chance venture capital would flow into the space in a big way. We felt that if we did not take capital we would be putting ourselves at a competitive disadvantage. So from day 1 we made sure we did the right things from a company formation and cap table perspective to make us an investable company. In our case the venture capitalists were just hungry to put money into this space and at the time there were very few companies that were truly investable. In fact, they were so hungry to invest that they tried convincing other successful entrepreneurs to start a company in the blockchain and bitcoin space. As an investor you’re always looking to mitigate risks so the idea was to take a successful entrepreneur and plug them into a hot space. In our case we didn’t have the proven track record going for us but we were able to show we did the right things. VC’s were able to see that we were operating in a great space, learned fast, and made the right decisions to keep the business moving forward.
Raising money is very circumstantial. It is very dependent on the type of company and industry you’re in. You very well may want to bootstrap and not take any money. You may be launching in a very mature market where you need to have some credibility in order to get venture backing. Whereas going into a new industry it’s more important that you can move fast and get innovative product out the door. Quite honestly, I don’t think there is one right answer about whether or not an entrepreneur should raise money. Using our recent Series B as an example, we decided to raise additional funds to put us in the best position to scale. We were already profitable but saw it as an opportunity to accelerate our growth around the world.
I know you're seeing a lot of growth in your B2B customer base. Why should businesses consider accepting bitcoin and other cryptocurrencies as a form of payment?
Great question. We’re seeing a lot of different businesses starting to adopt BitPay as a method of accepting invoice or recurring payments. This payment method makes a lot of sense for companies with a big international client base. You save a lot of money and time not dealing with international wire transfers and banks. For example, let’s say you’re in the United States and are selling to a company in Africa who tells you they’re going to write a check and mail it to you. As somebody selling a product or service to that company, are you really going to trust that that check drawn on a bank in the middle of Africa is going to end up in your bank account in US dollars? The answer is no. In order to mitigate that risk most businesses today use all kinds of different intermediaries, each getting their cut along the way. So when you’re talking about a cryptographic payment, you can transfer ownership of an asset from one company or person to another, and that transaction is instant and final. It’s like a cash payment but doing it electronically. That process eliminates all sorts of risks. For companies that need to pay vendors or suppliers we’re just finding that our customers are getting a tremendous amount of value simply in the cost and time savings.
Last thing to mention is that the companies sending and receiving payment want to transact in their local currency so one of the things we do is handle the conversion into and out of cryptocurrencies. As long as the company on the receiving end has a relationship with us we can simply accept the payment in bitcoin or bitcoin cash, and settle to the receiving business the next day in their preferred currency -- typically in dollars but we also support euros, pounds and a handful other currencies. Our customers never have to hold cryptocurrency on their balance sheet. We take care of all of those complexities and risk for our customers.
Why did you choose Atlanta as a place to found and scale BitPay?
We have a great software industry here. We have seen great success in a variety of industries including payments, security, marketing and sales, just to name a few. There’s a great infrastructure and foundation for software companies in this city. We at BitPay had an opportunity to move to New York or San Francisco and passed. We thought at one point in time we might have to go there but in the payments industry it makes much more sense to be based here in Atlanta. Not to mention the regulations for a fintech company are much more favorable here in Georgia versus New York or California.
What are some of the challenges the Atlanta entrepreneurial ecosystem faces?
From a BitPay standpoint we find that we oftentimes gets overlooked because we are not in Silicon Valley. That’s always a challenge we have to continuously work at to make sure people know we are here. In terms of Atlanta, one comment I hear often revolves around accessing more venture capital. The way I think we can get more venture capital is by having more success stories that grow up and have successful exits. Once that happens in a regular cadence we will attract more venture capital. I don’t think it’s fruitful for us to think about how we can get more VC’s to invest in Atlanta-based companies. I think it’s more worthwhile focusing on building great Atlanta-based companies and then the venture capital will come. Nonetheless it is still a problem. Most of our BitPay investors are not from Atlanta. Most of the capital is from Silicon Valley, New York, London, and Hong Kong. So we raised very little from local VC’s.
We borrow this question from Tim Ferris but if you could have a billboard with one piece of advice to entrepreneurs what would it be?
I’d say make sure you’re doing it for the right reasons. A lot of people love the idea of being an entrepreneur but aren’t quite familiar with the reality of being an entrepreneur. I didn’t necessarily get into this because I was infatuated with the idea of starting my own company. I really wanted to have bandwidth. I wanted the ability to create cool things and build a team of people that would work together to build it. That’s what drew me to it.
Why did you decide to go through the selection process and join Endeavor?
In going through the process of starting BitPay and having the success we’ve seen thus far, I just felt Endeavor was the perfect fit for helping us scale-up our company. I’m trying to learn how to take a company from 50 or so employees to hundreds and how to deal with the logistical challenges that it comes with. It becomes more of a question about resource allocation as opposed to getting the next feature out the door. It’s more about enabling the organization to function at this stage. I felt Endeavor’s mentor network can help us figure that out. Also for me personally, it felt like a good way to get more engaged with what’s going on in the local ecosystem and learn from other great entrepreneurs in the city.
Last question, what book(s) are you reading? Or what music is playing in your car?
Well let’s start with music. Lately it has been mostly classic rock and country. I listen to all sorts of music. Usually every six months I get tired of one genre and move to another.
In terms of books, quite honestly, I don’t have a lot of time to read. I hear about a lot of entrepreneurs that read voraciously and I’m always wondering where they get the time. When someone recommends a book to me I typically look for the cliff notes version or executive summary. I actually hear there’s some company that built their business on this premise and provide busy people with a shortened version of the book*. But in all honesty, there is a book I keep wanting to read and that’s a book on the Wright Brothers. It was actually a gift from one of the employees here at BitPay. I keep meaning to crack that one open and start reading it. I’m getting my pilots license so I’m really interested to hear the story about invention and the drive of the Wright Brothers.
* For those wondering there are multiple apps now that give you the ‘executive summary’ of books. One is Blinkist and another is Instaread