Starting a Bitcoin mining company can be a daunting task. Sourcing hardware, finding cheap and reliable power, and maximizing miner uptime are just some of the issues new startups face. Compass Mining talked with David Kiger , co-founder and co-manager at Blockmetrix, a new startup mining company primarily focused on North American mining.

Timestamps

  • 05:44 Blockmetrix strategy
  • 09:54 Blockmetrix team  
  • 13:33 Deploying capital
  • 17:41 Choosing partners  
  • 19:09 Buying mining rigs  
  • 22:53 Finding facilities  
  • 25:40 Being a mid-tier miner  
  • 30:36 Texas  

Audio Version

Transcript

Foxley: Welcome back to the Compass Podcast. Today we're joined by David Kiger, co-founder and co-manager of Blockmetrix a midsize Bitcoin mining firm using its expertise in capital raises to grow market share. Blockmetrix recently completed $43 million Series B, and may even open up an interim round targeting family offices. We talked about the team's background capital raises in the Texas Bitcoin mining market. This podcast is  presented ad-free by compass mining, the largest marketplace for Bitcoin mining. Check out compass mining.io today if you want to buy, sell, or host in ASIC, and now on to the show. David, thank you so much for joining the compass podcast, really excited to have this conversation - just prepping yesterday on the phone talking about what we're going to talk about today, maybe really interested because you guys have a different perspective on the mining market, than a lot of people do out there today. So again, thank you for joining us on the show.

Kiger: Thank you for having me. And I think we definitely have a fresh one because it's a fairly new perspective. We started the company back in June, as you know, so we're learning a lot as we go. And I think maybe we're seeing things a little differently as a result.

Foxley: Definitely. So we'll just start off with a little quick intro bio, how you got into Bitcoin, how you got into Bitcoin mining, like you just said. You guys only started Blockmetrix back in June. So it's very fresh, but the team and yourself has a storied and varied career leading up to Bitcoin mining. That's definitely fed into your guys's strategy as a Bitcoin mining firm.

Kiger: That has, I guess I can go on to talk about the team a little bit, if that makes sense. Perfect. Sure. So I can I guess I'll start with, with myself since I'm on here with you. I actually started off in real estate development many, many years ago, and then from real estate development, I left and started a company called Worldwide Express. And that would be back in 1995. So again, a long time back. It's a three 3PL. So think logistics and shipping, except we don't own the assets, we own the customers in the shipment. So started worldwide in '95, as I said, and encountered all of the problems you would have as a startup, but much less efficient mechanisms by which you would raise capital as you would today. So I bootstrapped it, literally started it with $50,000. And then we've scaled it up significantly since then, we've had a total of five private equity transactions. The last one was finished last June, and the transactional amount was $2.5 billion. And then today, we're about a $4.5 billion run rate revenue company. So it's been a great run, learned an awful lot about startups and then scaling a company and making it a big company. And most importantly, just navigating all the twists and turns, you know, things that happen that you just never planned or saw coming, which is actually looking back a lot of the fun of doing this. So that that's my background, real estate development, and then third party logistics. As a result of that, I was able to make several private equity investments and I can go into that in a little bit. But to round out the rest of the team, co-founders Keith Spickelmier. I've known Keith for 35 years. He's a Texas guy, started off as a lawyer, and then got into the energy business. And over the years has done several transactions with energy companies that he started taking most of those public, several, at least three or four of those has extensive experience in SPACs, of course everything going with starting a company and taking it public. So transactional expertise, he has a lot of that raising debt, sort of everything you would need to do to take a company from a startup to then taking them public. Keith has that experience. So we're very fortunate to have him on board, the other co-founder and CEO Nevin Bannister, as again, an extensive energy background based here in Texas just like Keith Nevin has had several successful startups that he extracted from the most recent one was an exit of about $600 million. Again, it was in the energy business. He was a co-founder of that business, and it took less than 12 months. So you know, he's here for good luck as much as his expertise. We hope we can do the same thing, but I'm not so sure. But I think what the takeaway would be, in terms of management is we have a lot of experience from taking small companies and making them big. We obviously have an energy background here in Texas, which is extremely helpful. When you're Bitcoin mining, of course, I have a real estate background and of course, have taken a small company and made it into a fairly large one, and have private equity experience. So that has been extremely helpful as we started Blockmetrix back in June.

Kiger: Yes, $600 million in 12 months. I've talked about cooking. That's some some good cash flow right there. It's pretty impressive. Yeah. The Blockmetrix team is definitely stacked and the thing that was interesting to me in our conversation yesterday and excited to get into this more and more, is the way you guys are thinking about this is different than a lot of the miners that I've talked to obviously, I have miners coming on the show every week, whether it be like tiny guys who have a few rigs in their garage, and they're trying to bootstrap something for themselves stack some SATs on the side, all the way up to these large firms like marathon which have grown at an exponential rate. They have close to 20 exahash on the on the books by the end of 2023. So we have tons of different miners on the show. And you guys might be the first perspective I've seen and where you are basically leveraging your expertise in multiple different fields, bringing into Bitcoin mining, bootstrapping this company, and get it running off the ground very quickly. So let's talk about that. Let's talk about your guys's strategy as a firm and how you're feeding in all these like diverse backgrounds into it. You mentioned yesterday, we were talking about how your eventual goal is to go public with this fairly quickly, which is definitely a little different than a lot of small midsize miners out there.

Kiger: That's true. So we really started the company knowing that we would go public, certainly hoping we would go public. So, we structured it that way from the beginning. I think as part of that we knew how important it would be to raise money quickly, and then prove that we could deploy it and buy hash rate, prove that we understood the business that we're able again to raise money quickly, comparatively quickly. And then buy hash rate with it and scale. So our first round, for instance, we had targeted $5 million at a $25 million pre money val. We were able to raise 7 million and then quickly deploy that into buying rigs. And this is this is back in June. And it was a sort of an interesting time because a month after that China shut down mining. So our entry point was interesting to say the least because as you recall, spot market rigs were $15,000 and Bitcoin was probably $65,000 or so. And I had consulted with someone in the business who had been there a long time at Galaxy digital, her name is Amanda Fabiano. I'm sure she'll be okay if I mentioned her name. But I talked to her about it. And she said, look, the entry point is maybe not the best. She was enthusiastic about her approach. But then she was also cautious. So being an entrepreneur, I focused only on the encouragement, disregarded the cautious part of what she said to me and went back and we decided to get this thing going. So the good news was we were able to buy rigs for half as much I think they went down eventually to seven or $8,000 on the spot market. And we attracted investors that were long term Bitcoin, you know, there were a lot around when it was at 65. But they were sort of there for the froth and kind of playing the top of the market, at least at that point. So what we ended up having was some very confident and long term Bitcoin investors, we were able to raise that seven. And then through our relationship with Compass, which was the first group that we partnered with, we were able to get 1000 rigs fairly quick. We had a co-lo to put them in and start hashing away. And then that made the second round a lot easier, because they saw that we were able to, in short order, raise a decent amount of cash access hash rate, and then put it to good use and start hashing away. The second round, we started just a few months later. We went around to try to figure out valuations, which is always interesting, as you know, it's a little bit art and some science. And we went to the market, and $185 million pre-money targeting a $20 million raise. So at the end of the day, we raise $43 million, which was you know, again, more than a double from what we were trying to get. We weren't worried about the dilution, because we know the time to raise money is when you're raising it, not when you have to go get it. We also noticed a little shift in the investment investor base. They were more institutional had institutional backgrounds. They weren't investing as the institutions, but they were individual investors that knew what they were doing. So that was another vote of confidence. So we ended up at about 215-216 post. We were able to buy 5900 rigs again Compass was so helpful, because our mantra from day one, again, raise money, buy rigs as fast as we can. They were able to find the rigs for us and then help us find a home for them. Which after China banned Bitcoin mining became harder and harder. You had a flip of the equation. It was cheaper to buy rigs, much harder to find a place to put them so. So that's where we are today. We've got 5900 rigs that we purchased, we have 100 hashing away – another 1500 coming in in two weeks. The remainder of the 5900 will be coming in over the ensuing months. We have a credit facility that we've negotiated with Bank Prov they helped us a bit in the first round. We're putting the final touches on that here in the second round. And that would give us access to up to say 8500 rigs to 9000 rigs depending on pricing.

Foxley: Yeah, before we dig more into Blockmetrix and the rigs that you guys have on the ground and the financing and the raises, I want to dig back more into your guys's personal story and get a feel for that? How did you think about like the founders that you have on the team and the employees of the company drawing their expertise into bootstrapping this company? Because like, like you said, June was perhaps not the best entry point, depending on how you did it. I mean, if you did it successfully, then you're good, right? There's there's no questions there. But looking at bitcoins price at the time sentiment was drawing down mining rigs were so expensive until later that summer. It was definitely an interesting entry point. But you guys made it and now you're just closing a round recently, going quite strongly. So what would you say? Were some of the benefits of the team members that you have on the ground that enabled you guys to get to that point?

Kiger: That's a great question, I think we're an experienced management team, right. So we've all sort of been there and done a little bit of that. We've all started companies, we've had to raise money before. So that was was significant help. I do think the experience again, the fact that we have two of the co founders with significant energy experience in Texas, because energy is such a big part of what we do as Bitcoin miners. That was a clearly an asset. I had, you know, transportation background logistics background, which I didn't think would be all that helpful. But it turned out to be helpful with all of the logistical challenges we have. And, and we're all very familiar with those. So I think people had confidence in our ability that if they gave us that money, we would figure out a way to deploy that money rapidly. And I think that was really probably the key thing. As far as like individual contributions. You know, it's a very egalitarian company that we have. I think we all took the responsibility very seriously of raising capital, and everyone contributed to that. So whether it was was Nevin or me or Keith and we have two other guys I haven't mentioned who will be upset if I don't, Owen McCrory and an Axel Nussbaumer. Axel has a real trading kind of exchange background. He's our real crypto, like I said exchange trader, he gets all of that. And he also understands mining very well. And Owen is more of a connect the dot has a big legal background, and helps us keep track of all of the sort of the transactional details. And you know, that's a big part of what we do, especially with an eye on going public, we need to have all that button down. So I just think we have a really well balanced team and a lot of experience.

Foxley: Yeah, that's like one of the things that's really popped out to me over the last year. Specifically since I started doing this podcast is the amount of people in the space who have been here pretty recently, like they weren't doing this for the long term, like even people who've been in Bitcoin mining since 2017-2018, are now considered "OG's", and like, you don't find that in any other industry where someone's been doing it for like three or four years and they're now considered like a veteran. Typically, you know, 2030 years and you're a veteran. It's definitely different for Bitcoin mining. And I also love how you can have a different expertise bring into Bitcoin mining. And that expertise is like a gold mine for enabling you to get a business off the ground quite quickly, like you said, the logistics thing. How does that come into Bitcoin mining? Well, actually as a huge importance, especially after last year, we saw with the issues after China's Bitcoin mining ban. All the COVID supply crunch issues that we saw, like the Port of Los Angeles. I'm sure a lot of those skill sets fit into the package. Well, let's move over to the firm itself. So you guys have about 6,000 rigs on the ground, 5900, something like that. You guys are using JVs to set up these co-lo sites. You guys are definitely taking an interesting approach. Can you walk me through the business strategy as it pertains to deploying the capital you guys have raised?

Kiger: Sure, I can be happy to touch on the strategy. So maybe we're borrowing a page of this from our backgrounds – I certainly am from Worldwide Express, where everything was a partnership that we did or a joint venture. So, I did not notice a lot of that when we first got into Bitcoin mining. It seemed to me that you had a lot of companies that sort of did what they did. And then if you heard that you had to be doing something else, you would go and do that, right. And so we saw a great opportunity to stick to our knitting, and again, that core focus of raise as much money as we can, as fast as we can and buy hash rate. Now that'll morph as we get on down the road, but we knew we had to get scale fast. So we look to companies like Compass. Again, that was our first real partnership we had. And we have a view that if we are a partner of yours, we're going to go long and deep. So we don't have two or three other people that do what Compass does, it's Compass. When it comes to co-location, they obviously helped us there but we learned from our banking relationships that if we wanted to scale and if we wanted to be taken seriously, we had to have some control over power costs, and a place to put our rigs, which meant co-lo, which is fine because we have a great background in doing those things if we need to. But, we also made a mutual decision, sort of an aggregate decision that, you know, maybe we can joint venture with people that have real experience in that that are very good at that – put some money into the deal, in this certain case. And we do have a project in South Texas, that's 100 megawatts expandable to 200 megawatts. We don't want to do that ourselves, so we've got two or three groups we're talking to. The way that we see this going is it would be a joint venture. We would offer cash equity, or stock, or both. That's been discussed and it's attractive to us. The other group, the joint venture partner we would bring in would do the development and the operating of the co-location facility. So that leaves us out as a contributor of capital and probably some stock, in certain cases, a carried interest in that co-location facility. So if there's upside there, we would experience that. Our partner has the upside of owning a piece of a miner, which they all seem pretty keen on doing. And then we have a place again, to put rigs and control power costs, which really, that's that's the whole driver of this business. We actually have a package of four or five of those. And that's where Nevin and Keith come in handy because our deal flow being a Texas based miner, and the focus is, you know, for miners is now in Texas, thankful to Governor Abbott for passing real pro Bitcoin mining and crypto legislation. As soon as China shut down, they determined Texas would be the Bitcoin mining capital of the world. So, our timing was good again. But I think that's the approach that that we're going to take. It seems to be working well. We have a good audience. We have another four or five deals like that, that are smaller in the 15 to 30 megawatt range. And we'd like to do a package of those and then kind of go on down the road from there.

Foxley: So there's so many conversations, we could have about many things you just discussed there and I'd like to get to as many as possible. The one thing that's really interesting to me right now is seeing how you guys are structuring multiple different deal, dealing with multiple different parties within Bitcoin mining. I think that's something a lot of people who are just new to Bitcoin mining or don't understand the industry, or maybe taking a first look at it. They don't know that there's so many different players out there that are constructing all these deals. Take a facility for example. Typically, you have to have a purchase power agreements, where you bring in a local utility. Then you're bringing in a facility builder, then you're bringing in a Facility Manager, then you bring in someone who's purchasing the ASICs, running the ASICs there, managing the ASICs – you can have multiple different bodies for one facility. So when you guys are constructing these deals, it'd be great to get some description about like how you go through selecting the people you want to work with. What are the criteria you guys go through to enable like a profitable long term solution that's also ethical, and then what other players are you working with right now, if you can name any?

Kiger: So I can't name them because we're under NDA. I can tell you we have two or three different groups that we're talking to – all very serious about doing this with us. Their expertise is from developing to operating. So you've touched on the two parts that are the most important to us. We do have a lot of experience on the electricity power side, on the finding site side. So that deal flow came to us. So their interest was a you've got a site that we didn't know about, extremely low power cost. So we wouldn't have that if it wasn't for Blockmetrix. So we bring that to the table, we also bring our experience and you know, so far in an operating a successful mining company at the table. And then we rely on them for their development expertise, in one case, operating expertise in the other case, so the deal may well have three parties involved, and a joint venture between all three. And what's interesting is when you introduce one of those parties, like one of the operators with a developer there that's the first time they've really thought about working together. So it's fun for us to bring this element of working together in a partnership to the Bitcoin mining space.

Foxley: Yeah definitely, the JV deals are interesting. It does build some strength into Bitcoin, especially Bitcoin mining, to have those those joint ventures. Talking about deploying machines itself – I'd be interested to get some of the thoughts you had about that process. What was it like at the time buying rigs going into the market trying to purchase ASICs from China? Was it a huge hassle at the time? And how did you come to your decision to use Compass as a provider for ASICs? What was like the criteria? You guys at Blockmetrix were looking at in order to make a selection for your ASICs?

Kiger: Alright, well I'll share a somewhat funny story with you. We were trying to figure out how this business worked and you know, we'd heard from everyone how to do it or how not to do it. So, I went ahead and not knowing a lot I cold called Bitmain in Beijing. And I don't think that they've ever had a cold call. That's amazing. And no, it was. And it was what was what's interesting is Worldwide Express the company that I started a long time ago. It's founded on cold calling. So I was trying to figure out how do I get a relationship with Bitmain? And I thought, well, I'll just go do what we teach at Worldwide – I'll cold call them. So I did and it took about four or five calls. I finally got up into the part of the company where I needed to be met a guy named....Well, I won't mention his name, but he was very welcoming. He was very suspicious at first, then very welcoming. And he just said what's your hash rate? I said, zero. He's like, okay, he's like, zero. He said, Well, how many rigs have you bought that you just haven't plugged in yet? And I said, "zero." And he said "Okay," – I said, "the answer is zero to every question you're going to ask me, but we really want to get in this business." "We're serious about it – Here's our background", which he then checked, and that helped, again, our backgrounds. But it was quickly apparent to me I would have to wait a long time to get my rigs, A. B, they were priced up pretty good even directly from them because of the period of time that it was. And so I circled back, I think to Amanda Fabiano again, and I said, What would you do? And she gave me the names of two or three places to go. Compass was my first call. I just got along real well with him on the phone, and was very upfront, I said, Look, we're new, we have a little different approach to this business, we're good at raising money. And if you work with us, we will work with you over a long term. That's what we do. We'll go long and deep, and we're loyal, a loyal company. And so they jumped off with us. And we were able to quickly go raise that money having Compass alongside us and we were able to buy those first 1000 miners, which again, were so critical, because we were able to plug them in quickly at that point. Now that changed. As you know, over time, it's harder to find co-locations now, so, you know, we do some directly on our own. Our team gets together and we can find space. And it can be you know, three or 400 rigs at a time. So I think everyone else is experiencing that. That's our size. And then Compass, again, is helping us find space when we're ordering the larger number of rigs that we are from them. So that's kind of where it's ended up. I could see a time when we go back and do longer term orders directly from Bitmain. But we may not have to do that either. I'm happy to have the flexibility, these short term orders, especially with technology changing. We don't want to get too far ahead and miss new technology, like they're talking about it, various and other places. But that's that's kind of where we sit today.

Foxley: That's a great story. I haven't heard of anyone cold calling Bitmain.

Foxley: So that's this first for me is the first for me.

Foxley: In terms of facilities.

Kiger: I was a little rusty.

Foxley: No, no, it's great. That's that's the confidence you need when you're kicking down doors on Bitcoin mining. I love it. In terms of facilities, you dropped a little info about the 100 megawatt site that you guys currently are co-lo'ing at. And then you also hinted at difficulties of finding later facilities to add more miners into. Walk me back through from June until now what it was like to get machines into a facility and then securing that 100 megawatt site.

Kiger: Sure. So I think, you know, again, we were an I don't want this to be an advertisement for Compass, but it is. So I mean, that's just who we happen to be working with. Compass helped us find those co-location facilities. And you know, they were they were finding them. And what you learn quickly is that, you know, a delivery date of August 30, probably isn't going to happen, it may be September 30. And then it could be October 31st. And what was great as we were learning with them, because their business, as you know, is growing rapidly. They were learning which colo developers to work with which ones are not reliable, which ones not to work with. So our learning curve was simultaneous with theirs that way. We also then went out on our own and we were able to really scour the industry and find our own partners. And so you know, my hat's off to my team for doing that. We were very successful in doing that. So what we were seeing is, is this is not easy. For us to really scale, we probably do need to find a place where we have some equity and some ownership. And at that same time, we're also talking to bankers about our going-forward plans. We were up in New York recently doing that, and then they let us know it's a good idea for you to own and have equity and some control over that process. And that's when the joint venture came together. And oddly enough, you know, Nevin was getting calls from folks that had opportunities for us because of his background again. So the timing was really good for that. Two groups reached out to us, because they had heard that we had this 100 megawatt deal under wraps. And they were really interested in getting, you know, kind of getting to know us better and then potentially ending up in this this joint venture. So we start off with Compass, as we go off on our own, find it equally difficult. And then as we're again sort of, you know, tracking towards going public. Eventually we're talking to a bankers making sure we're doing the right things. And they said, you need some control. We didn't want to own and operate a co-lo ourselves. So that was, again where the joint venture really came in. And that's where we are now today.

Foxley: Awesome. So it's let's go back into the strategy playbook for a second because it might be one of the more interesting things about Blockmetrix. Looking at like the lay of the land, you guys have about 5900 machines at this time. You have 100 megawatt site in the future that you can build out as a joint venture, you have numerous joint ventures with other teams out there. And then you also have a team that has a background in raising finances, or raising capital. What is like the long term play for Blockmetrix? What is your guys's strategy? Just for another quick background here, I've talked to smaller miners, maybe from 1000 to 5000 deployments, they basically peak there and stay there. And then if you get a larger, maybe you can go public be a small cap. And then of course, like there's a huge players out there like the marathon, the Cores, and those players out there who have already gone public or did go public, through IPOs, SPACs, direct listings, what not. Interested to get your guys's perspective on the strategy as like a not a small but like a mid-tiered size minor.

Kiger: Sure, we noticed what you did. And that is there are so fragmented in that sort of mid size, minor category of around 5000 rigs. And we extrapolated from that, that that is sort of a natural sticking point for miners. And it becomes difficult for them to scale beyond that, unless they have a lot of experience. And that's totally understandable. And so again, we extrapolated, and we figured, hey, we're a midsize miner for a while at least. We have bigger aspirations, but maybe we could be the group that starts to roll up this mid size, minor segment. And that became our focus in terms of our strategy going forward. We had a few that have reached out to us because we finally did some PR – they saw that we were rapidly growing, and we're able to put some financing together. So it's something that we're looking at very carefully even now. And this is all just you know, I'm projecting this, this is no guarantee this is going to happen. But, it wouldn't surprise me to see us merge with another miner of equal size, maybe one that has some similar experience that we have an has shown sort of a similar growth profile, that would double our size fairly quickly. I think that would help us, of course, as we're sort of, not on our flight path or our glide path rather to go in public. But once we were able to go public, and that's, you know, market conditions permitting, we would then have currency to go roll up those miners that have had trouble finding a way to get out of 5000 rigs and scale. It would give them a place to go – be part of a bigger platform. And we just have to figure out how that's going to look. But we would have the currency which would be stock, a much easier ability to raise debt as a publicly traded company. And I think we're going to see some consolidation kicking in here in 2022. I suspect it will be with the bigger guys. We don't mind being you know, the smaller guy here at all. Because if you roll up a bunch of smaller miners, you end up with one big one. And so that that's really where we're going to head – I don't mind sharing that playbook with you.

Foxley: What is it about small and medium sized miners that doesn't enable them to grow as fast? Is it just like, there's so many constraints with a team? Is there just like not enough resources on the books to be able to do it? Is this similar in other markets that you've worked in?

Kiger: I tell you what, so in logistics, which is a massive market shifting, this has already happened. So the bigger the people, you know, UPS, FedEx all those guys, they've all gone through consolidation, many, many years ago. So that consolidation is now just hitting with smaller shipping companies and logistics companies. At Worldwide we've done several acquisitions, the largest one being a billion dollars. The smallest ones being rolling up all of our agents and franchises. And then, you know, that was probably 100 to 150 transactions there. So we've already seen that happen. And that not only logistics, but in other mature businesses. It's just not happened yet in Bitcoin mining. So I think the limitation is for the people that were earlier in who love Bitcoin mining, and they've done well with it, they may not have the team behind them, or they may not have the experience or even know how to coldcall, you know what questions to ask kind of how to get from here to there. We clearly have that so I think that's what we could offer them. And, there's a vast audience and a lot of 5000 rig Bitcoin miners out there for us to talk to. I think importantly, they proactively have reached out to us and we just listened to their stories. So I think you've touched on it and experientially I can tell you that so what we're finding out.

Foxley: Yeah, it's definitely an interesting playbook. I've seen a few people talk about similar things, but definitely not as upfront about like where the Bitcoin mining market is in terms of maturation. Obviously, you alluded to it. There's a lot of big players that are already out there. And they're typically publicly listed. I think, last year, we saw close to 20 firms go public, whether that be in Canada or the United States. And those players are big, they're out there, and they can leverage those capital markets to continue growing. But there is this huge swath like the middle class of Bitcoin miners, if you will, that somewhere sitting in a 5000 plus rig range. I want to move over to Texas itself and talk about the Texas capital market. So, I have this personal theory that it might be not overhyped, but overfunded at this point. And I want to see if you can dispel me of that. There's been so much talk about Texas, Texas, Texas, and Bitcoin mining. Everybody I know is planting down some roots here to set up new Bitcoin mining shop. Setting aside if it's bad for the network, or whatnot, I know that's a pretty common conversation. Do you think there is enough resources in Texas to deploy all this capital efficiently on a timescale that makes sense for a firm?

Kiger: I do. I do. I've been here for 25 years, I know you're a little newer to it. But have more experience with Bitcoin mining than I do. So in between the two, we shall meet. Yeah, there's plenty of capital out there looking for quality deals, I think as far as without going too far into the grid, and how they're operating and issues they've had. But as far as Texas is concerned, and ERCOT, I think they're looking at it now as a way to regulate and modulate the grid. So, you know, they're producing at any given time 10 to 15% more power than than people need. But if there's a real peak situation, or a traumatic situation, like we experienced not too long ago, with the snow and the freezing, rain, and everything else we had for three or four days, it wasn't that they didn't have enough, they just didn't have the ability to get what they needed, when they needed it. So they view it and I think, again, appropriately as a way to modulate and regulate the grid. So they view Bitcoin miners as a real positive in that regard. And you're gonna hear more and more about that I can tell you, from Sessions, and a few of the other politicians here that are national in scope. And I agree with them. So you know, we have found it a positive to be a Texas based miner. When people hear that they know that this is the mecca. This is probably the new center of mining worldwide. There is enough infrastructure here for sure. The energy is inexpensive, comparatively. Another thing I think I would make a point of is the fact that only 20% of the power here is fired by coal. The rest is natural gas and renewables. And there is a big focus on renewables, you know, in terms of what they're doing in Austin at that the state level. So, I think it's a great place to be – there is plenty of money for deals, but they're not indiscriminate with where they're putting their money. They want to see experience. They want to see people who have executed in the past, if possible. And so I think that's been a benefit for us as a Texas based bitcoin miner.

Foxley: That's really interesting as a solid argument to rebut what I was thinking there in terms of future JV projects, or maybe just co-location sites in general, are you guys looking throughout Texas and, and putting these machines as close to the energy sources as possible? Or are you pretty happy to find a location that just makes sense, for a logistical standpoint? Or maybe for like deploying a large megawatt mine?

Kiger: I think it's a great question. What we've done to this point is we put them where we can put them. So we got a lot of them in Oklahoma & Texas. We've got a few in Canada. And we're testing immersion cooling there. So we're sort of experimenting with some things that are going on now in the industry. So we've kind of gone where the space is. But again, that was the impetus for us to lock something down, listen to what the bankers are telling us the market wants, because that's usually a pretty good tell on where the where the where the market is going to go. And we want to focus in Texas. And again, with the backgrounds that we have the deal, flow tends to come out of Texas to us. And that makes it that much easier. So that 100 megawatt site that we're looking at in South Texas, is expandable to 200 megawatts, so we could put up to 60,000 rigs in there. That's a nice operation. And again, the power costs are very low. It's already been approved. So we're just taking advantage of what we know. So I think we'll probably continue to do both. We'll put our rigs where we can. To the extent we're successful with these JVs, we'll move the rigs over there once the term is up on our co-location agreement. But right now we're keeping our co-lo agreements to one or two years anticipating the fact we can move our rigs to the locations that we own part of.

Foxley: Awesome so two more questions for you as we wrap up. One HODLing strategy I always ask us this to every miner I have on. I don't know if you got can disclose it – some some teams can't. But what do you guys do with the mined Bitcoin? Do you immediately just go and liquidate it? Do you guys hold on to some of it, do you guys hold on to all of it? We even have one have one firm so that they actively lend out the Bitcoin they mined. Curious to get your take on what you guys do with your Bitcoin?

Kiger: We're long Bitcoin. So we're keeping all of our BTC right now. We're bullish on where it's going to go, I think, you know, selling it now would be selling short. And so we're not going to do that. I think that at some point, would we lend it out? We sure would. And we have some experience on the team again, with Axel, I mentioned him earlier. He has real experience with all of that defy. Whenever you get into anything exchange related. He would be our person, but we also have other people we can go to. So I'm not going to say that we're going to just keep it forever, although we're long Bitcoin for the term. Lending it out to me is why not leverage it to its fullest?

Foxley: Definitely. Have you found as a follow up here? Have you found that it's been easier or more difficult to finance based on your HODL strategy? Or do venture capital teams out there even consider that when they're doing a raise?

Kiger: They do? They all ask us. And you know what? I mean – If you're not long Bitcoin, why should they be? You know, if we're selling it...The first question we're going to get is, why are you sure? You want us to put the money in your deal? Right? So we're long and if someone doesn't like us be long, then we're not interested in working with them quite frankly.

Foxley: That was a great answer. Yeah, no, a phrase I've heard a few times I really like is that Bitcoin miners are the most long Bitcoin of anybody. You're buying a bunch of Bitcoin printing machine, so you better hope it goes up in the long term. Absolutely. Just closing out the conversation, I want to get your take on where the market is going from here and take the question, as you will maybe just want to focus on Texas, maybe you just want to focus on midsize firms like yourselves, or even if you want to be ambitious, just talk about the market in general. But what should Bitcoin miners be looking for going forward into 2022?

Kiger: First thing I would say is consolidation in the market. I'm sure if you don't have a strategy, now you're behind the eight ball, I can I can tell you that much. So you better be picking your targets or your partners. I think it's a time to do that, you know, pretty clear that, you know, we're focused on partnerships and JVs. That is where it's gonna go. That just that makes sense to me. So I'm sure that whether you're large or small, you're probably putting a strategy together in regards to that as well. Then the third thing is regulation always. What kind of regulation is coming down the pipe? Will it be beneficial? Is regulation always good? Because it increases adoption? And I think the tell air is pretty decent, because institutional adoption keeps increasing. And that's a great thing for us to see very encouraging, I think. But you know, if I'm running another Bitcoin mining company, I'd be focused on consolidation. How can I get big? How can I scale as we all know what's happening in a few years? And that'll be relevant. And then how do I partner? How do I really stick to my knitting focus on scaling and getting as big as I can without having to do the things that aren't my core competency, but those reflects our approach to the market. But that's that's what I would say.

Foxley: You can't give away too much Alpha. You gotta you gotta have your company successful as well. So we won't give away too many secrets. Thanks. Yeah, I want to thank you so much for joining us on the Compass Podcast. We can probably leave the conversation there. That's a really interesting take on just the mid market and in general, and also seeing where Blockmetrix is at today, so thank you again.

Kiger: Well, thank you. I really appreciate you having me on.

Hosted by Will Foxley