How I Launched A $35K/Month App To Calculate Cryptocurrency Taxes Without Knowing How To Code
Hello! Who are you and what business did you start?
Hi there! My name is Eivind Semb and I’m the founder of Coinpanda. I have developed a portfolio tracker and tax solution for cryptocurrency traders and investors with a heavy focus on ease of use.
Coinpanda offers a 100% free portfolio tracker in addition to a tax solution to help users report their cryptocurrency taxes. Our platform can calculate taxes and capital gains for more than 7,000 cryptocurrencies, and we are integrated with over 100 exchanges, blockchains, and services to support users from all over the world. By upgrading to one of our paid plans, you can download ready-to-file tax forms such as IRS Form 8949 and Schedule D for the United States with the click of a button.
Before the bitcoin and cryptocurrency boom in 2017, a lot of traders and investors did not report their capital gains and holdings because of a lack of regulation and guidelines from tax authorities. However, this has taken a drastic turn in the last couple of years. Tax authorities are now actively looking for people who have bought cryptocurrency. In countries like the US, Australia, Spain, and Denmark, more than 500,000 warning letters have been sent to those not reporting their taxes. In fact, every time you sell, trade, or even just pay for coffee with bitcoin (or another cryptocurrency), you might need to pay some tax to the government! As you might understand now, tax reporting can be both complicated and difficult, and this is the problem Coinpanda solves. More detailed information about cryptocurrency tax rules can be found here.
Starting as the preferred crypto tax calculation tool in Scandinavia, today we have more than 5,000 users from all over the world. Because most people prefer to do tax calculations close to the deadline for their tax return, Q1 is the most important time of year for our business. We just closed the first quarter with $85,000 in revenue with a roughly 75% profit margin.
What's your backstory and how did you come up with the idea?
I have a Master’s degree (M.Sc.) in Civil Engineering, and after graduating, I started working for one of the world’s largest oil and gas companies. I found out very quickly that working in a large corporation to benefit the shareholders who are cashing out large bonuses was just not for me. Every day going to work, I constantly thought about starting my own business and escaping the 9-to-5 lifestyle, or the “day job of doom” as I like to call it.
Two years after graduating, I decided to start my first business with one of my best friends and a colleague at the time. We created a preppy clothing brand selling suit accessories such as bow ties and lapel pins online, but also in retail stores in Norway and Sweden. It took us six months to realize that this was not our biggest passion, so we decided to quit and move on to new projects. Long story short, for the next three years, I dedicated every waking moment to trying to figure out how to make money online. The businesses I started included selling weight loss supplements, social media marketing for restaurants, a platform for influencers to get paid for premium content, and a long list of information products, including ebooks and online courses. Even though none of these businesses ever became profitable or successful in any way, the learning experience I got from them is the single most important reason I have now successfully created a profitable company after many years of failures.
I pitched the business idea to a few friends that were developers, but they were not very interested in working on this together. This left me with only one choice: hire remote software developers and outsource all coding.
During 2017, when bitcoin and cryptocurrencies soared in price and gained popularity, I went completely down the rabbit hole to learn everything I possibly could about the technology. I also invested some of my savings into cryptocurrencies that year, having no knowledge of the possible tax implications that would hit me hard in the face only a few months later. Soon after the bubble burst in early 2018, tax authorities required everyone to report their trading activity and also their capital gains. At this point, I was in a situation where I had been buying and selling cryptocurrencies on multiple exchanges and also investing in new projects (ICOs) with close to zero knowledge of how to calculate and report my taxes. With less than a month until the tax deadline, I decided I wanted to do everything according to the law, and I sat down to figure this out.
I researched the entire web looking for the easiest and best solution for calculating my own taxes, but I soon discovered that there were not many great products out there. I also talked to other friends and people online who were in the exact same situation as myself, and this was the moment I got the idea to create Coinpanda!
Take us through the process of designing, prototyping, and manufacturing your first product.
After I had finally calculated and reported my own taxes, I was ready to start working on creating a better solution for other crypto traders and investors out there. However, there was one big issue: I had no experience with software development or UX/UI design, and I didn’t even know how to write code! I pitched the business idea to a few friends who were developers, but they were not very interested in working on this together. This left me with only one choice: Hire remote software developers and outsource all the coding.
Soon after coming to this conclusion, I posted a project listing on a website that connects companies with remote freelancers. Having no previous experience with software development, I did some research online to learn the very basics of it so I could ask the right questions when interviewing candidates for the job. I created a simple Scope of Work outline in a Google Sheets document that explained the application functionality step-by-step, and one week later I awarded the project to a team I felt confident had the required skills to get the job done.
To come up with the first draft for functionality and design, I studied all the existing products on the market and used my own knowledge and experience with cryptocurrencies to design a better product with a focus on being user-friendly. It took us roughly four months to release the first minimum viable product (MVP), which had very basic functionality and supported tax calculations for Norway only. At the time I decided to go ahead with the project, I thought to myself that I could focus almost entirely on sales and marketing once the application was live. Oh boy, was I wrong!
After releasing the first MVP, I realized that I had to spend a lot more time on including additional functionality before users from all over the world could actually use the application to calculate their taxes correctly. One of the most important lessons from this phase was that I had not done enough research and planning with regards to the required functionality and how I wanted the final product to be.
Even though the first version was live after four months, it took another three months before I started onboarding the first customers. The total cost for the first version of the final application ended up being roughly four times what I had initially budgeted for. This was partly due to underestimating the complexity of the application, but also because I made several major, necessary changes to design and functionality before I could officially launch.
The feeling of acquiring my first customers and seeing that they were paying for a product I had spent more than half a year working on was just incredible and is hard to describe. The initial feedback from users was, in fact, surprisingly positive, and it gave me even more confidence and motivation to continue improving the application and growing the business. There were a lot of early bugs and performance issues, as can be expected when you are developing highly complex software, and I would not have discovered all of these if it had not been for the feedback I received from our first users.
Describe the process of launching the business.
You hear all the time that when you are an entrepreneur, the most important thing is to release your product or service as early as possible, and don’t spend more time than absolutely necessary to build an MVP. I took this advice quite literally and focused on getting users as soon as the first version was live, but I learned quickly that this created more issues than I had time to solve because the application simply could not do what the users expected and needed.
Even though releasing an early MVP and focusing on getting customers from the first day can be the right thing to do for some companies, it is certainly not the right approach for all. After learning this, I decided to instead focus entirely on building and improving the product for the next three months.
The second launch went much more smoothly. The first real users were my own friends and people I knew from online communities. I observed closely how they were using the application, what issues they faced, and what had to be improved. This gave me invaluable feedback, and after a few weeks, I started getting more users from organic traffic and word of mouth.
Being the founders of a startup, one of the most important things you can do is talking directly with your early customers. You will get feedback and discover things about your product/service that is invaluable.
From the beginning, I had bootstrapped the entire business and done everything myself except for writing the actual code. I worked 70-80 hours a week for the first six months. The work I had to do myself included creating the website and landing page, writing articles and blog posts, reading international tax laws to learn how cryptocurrencies are taxed in different countries around the world, UX/UI design for the application, and basically finding the solution to every technical issue.
I have lost count of how many times I asked myself, “can I really do this?” during this time, and I was actually close to giving up because I was not sure if I could figure out all the issues we had. The biggest lesson I learned from this process was that no matter how difficult a problem is, there is always a solution. I am 100% convinced that the most important skill to have, and what separates successful entrepreneurs from others, is the ability to push through resistance and solve problems that seem impossible. This applies not only to software development but to all types of businesses.
Since launch, what has worked to attract and retain customers?
With my experience in online sales and digital marketing, I have tried everything from paid ads on Google, Facebook, and Instagram to writing blog posts and organic traffic, influencer outreach, and outbound sales.
Most people think of marketing as synonymous with paid ads or blog posts, but they fail to understand that some of the most powerful marketing strategies are 100% free! Our first users were friends and people I already knew who I invited to try the application. Not long after they had signed up, I noticed we were getting a steady increase in the number of signups every week. At that time, we did not run any paid ads, and I also didn’t have time to write blog posts as I was focusing entirely on building the application. So where did all these new customers come from?
One of the first things I did when we launched was to install a live chat widget on the website. This enabled me to interact closely with all our early users and guide them through each step of using the application. I also asked all of them how they found us, and quite surprisingly, most of them said they had been referred from their friends who were already using Coinpanda. Most of our early growth was entirely based on word of mouth. I am pretty sure this would not have happened if I hadn’t spent so much time creating a better product that was easier to use than most of the competition, but there is also another reason: We talked to and got to know every single one of our early customers using the live chat, and this created both trust and a bond between us.
People love personalized experiences and knowing they will get all the help they need from someone they trust. I spent several hours every day talking to our first users myself, and I still do up to this day. Now, you might think that “talking to every customer does not scale,” and you have probably heard before that you should only focus on tactics and processes that can scale. Wrong! Being the founders of a startup, one of the most important things you can do is talk directly with your early customers. In doing so, you will get invaluable feedback and discover important things about your product or service, and this helps to guide you in the right direction. I learned a ton from talking directly with our early customers, and this laid the foundation for all the updates and improvements we made in the future.
We also have an affiliate program where our users can earn up to 40% commission from their referrals. People love to earn free money, and we had huge success in getting our users to sign up for this program. Not only did a lot of them refer 2-4 of their friends each, but we had influencers with 50-100,000 followers on Twitter use our application and tweet regularly with their affiliate link. The best thing about this is that it didn’t cost us a single dollar! When you have other people market and promote what you are selling for free, that is when you can really experience exponential growth overnight.
How are you doing today and what does the future look like?
The company is profitable today, but all profits are being reinvested into further development and growth. There are several hundred different cryptocurrency exchanges, blockchains, and services. Therefore, development is an ongoing process and requires a lot of expenses.
Our team has grown to five people in total, and we work completely remotely from different parts of the world. I always envisioned starting a business that is 100% location-independent, and I feel very proud to have achieved that today.
In addition to adding support for more exchanges and apps used for buying and selling cryptocurrency, we will be rolling out some very nice features later this year. Something we have been working on for quite a while now is integrating support for CPAs and professional tax accountants to assist our users directly from the application. Taxes can be very complicated to get done right, and many of our customers have requested this feature.
Another highly requested feature we will be rolling out soon is a tool for tax-loss harvesting. Tax-loss harvesting is when you sell investments at a loss in order to reduce your tax liability, and this can be applied to cryptocurrencies such as bitcoin as well. Using this tool, our customers can now pay less in taxes to the government than they otherwise would have. It is even possible to offset gains from non-investment income.
While we have been focusing mostly on the Scandinavian and other European markets so far, we will be expanding to other regions and countries around the world this year. Since taxation rules and regulations differ from country to country, it can be a lot of work to add support for other countries. Currently, we support the USA, Canada, Australia, and most countries in Europe.
The goal for 2020 is to position ourselves among the most popular tax solutions for cryptocurrency traders and investors in the world. This is a bold goal considering that our competitors have been operating longer and have a head start. To achieve this, we will be actively looking to form partnerships with reputable companies in the cryptocurrency space. We are already in talks with some major players which I can’t reveal right now, but keep an eye out for this in the next 2-3 months.
Through starting the business, have you learned anything particularly helpful or advantageous?
I think one of the biggest challenges I faced was my lack of experience with software development. Even though our team is highly skilled, I had to figure out all the technical challenges, UX/UI design, and the application functionality myself. I can honestly say that I have learned more in the past 18 months than I did working as an engineer in a corporate environment for five years. As a tech startup founder, you have to solve problems every single day, and I believe there are certain personal characteristics you need to have in order to be successful.
Here are some of the most important things I have learned:
You need to have a passion for the business you are starting. When starting a business yourself, you will be faced with so many challenges that will push you way out of your comfort zone. Without passion and a strong vision to succeed you will simply not overcome all the hurdles and obstacles. In most cases, you will need to work thousands of hours before you even become profitable (if you do become profitable), so it’s very important to have the motivation to work for so long without getting paid.
No matter how challenging, or even impossible, it seems, there is always a solution. Personally, I was close to giving up a few times because I was not sure if I could ever fix the issues we faced. Sometimes I had to work for weeks on a single problem without knowing if I would ever figure it out. Unless you are attempting to travel into the future, I can guarantee that there is always a solution to everything.
Surround yourself with people smarter than yourself. There is a saying that goes, “Being the smartest person in the room is the dumbest thing you can do.” Not only are you most often doing things for the first time when starting a business, but there are other people who have done the same thing in the past and already discovered what works and what doesn’t. You can save a ton of time (and money) by studying and learning from other people. I also find it very important to be humble and be able to admit to yourself that sometimes you need to ask others for help.
I am also very determined to succeed when I set goals for myself. I don’t mind working crazy hours and saying no to social events if I need to stay home and work. Sometimes you have to make sacrifices to achieve your goals.
I also believe that your lifestyle will have a big impact on your results. I personally don’t drink much alcohol, and I eat very clean and healthy by staying away from processed foods and sugar. Every day I try to do some sort of exercise like running, yoga, or going to the gym. And don’t forget to get good, quality sleep each night!
What platform/tools do you use for your business?
- Cloud computing and databases: AWS
- Payment processor: Stripe
- Transactional emails: Sendgrid
- Email marketing: ActiveCampaign
- Helpdesk and live chat: Intercom
- For organizing work tasks: Trello
- Communication: Slack
- Git code management: Bitbucket
What have been the most influential books, podcasts, or other resources?
One of the most important books I ever read was probably The 4-Hour Workweek by Tim Ferriss. Even though some of the content may be outdated and less relevant today, it certainly piqued my interest and inspired my passion for starting my own business. I would also recommend that every entrepreneur read The Lean Startup by Eric Ries to at least get an idea of the principles the book teaches. I can guarantee that it will change the way you approach creating and launching a new product or service. We can also use what the book teaches to improve our own personal lives.
I listen to podcasts almost every day, and most of them are related to health, fitness, politics, or economics. One podcast that has helped me in launching and growing the business is Startup School from Y Combinator which I think can be very helpful for most founders.
Because every one of us is so different, what worked for me won’t necessarily work for you. I could mention a lot more books, podcasts, and other resources, but instead, I want to encourage people to search for whatever they want to learn more about on their own.
Advice for other entrepreneurs who want to get started or are just starting out?
The best time to start your business was yesterday! Honestly, I can’t emphasize enough how important that is. I know too many people who just talk about what they want to start, but never actually get around to doing it. If you don’t take action today, you are even less likely to do it tomorrow. If you have been thinking about starting a business for a while, then ask yourself this: “Why haven’t I already started it?” I guess that the answer to that question is most likely excuses and not real reasons for why you couldn’t have already done it. The human brain is wired to come up with easy solutions when we face challenges, and the easiest solution is definitely to justify our own actions by creating excuses.
The second most important piece of advice I want to give is that it’s not necessary to reinvent the wheel. In 99% of cases, someone else has already done what you are trying to do. Learn from their successes, mistakes, and failures, and you will save both a lot of time and money. Study your competitors as much as possible. You should know everything about their business, which problems they faced and how they solved them, and figure out how you can do things even better.
In the end, I think the most important thing is learning by doing. I started several businesses that failed, and it took me five years to finally succeed and to get where I am today. Don’t expect your first company to be perfect or even profitable, but rather embrace the journey and enjoy it as much as possible.
Are you looking to hire for certain positions right now?
Yes, we are always looking to hire the right person to help grow our business. Right now we do have an available position for content writing, marketing, and SEO. We are looking to hire a person for a part-time position in the beginning that can become full-time down the road. Our entire team works remotely so we can offer a flexible working schedule as well.
The people we hire need to have some basic knowledge and experience with cryptocurrencies and blockchain, but most important are personal characteristics and a willingness to learn. Anyone interested can send an email to [email protected] to learn more.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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