Announcing Foundry — Digital Currency Group’s New Crypto Mining and Staking Business
Foundry was publicly announced as DCG’s fourth wholly-owned subsidiary business today — August 27th, 2020. Behind the scenes, CEO Mike Colyer has been quietly building this business from the ground up for close to a year. He now leads a team of 8, the company has issued tens of millions of dollars in equipment financing, and has helped to procure nearly half of the mining equipment sold in North America this year. He’ll tell you the rest in this Q&A session!
Tell us how you got into crypto.
I got into crypto in 2017, right before the last big bull run. I discovered blockchain technology and went down the rabbit hole, spending hours a day researching it. It felt like the dawn of the internet, which was when I was in college in the 90s. I realized that blockchain could be as impactful, and address a lot of what’s imperfect about the internet today. It can drive tremendous efficiency and connect the world in new ways. I spent much of my career in the “old world” — manufacturing, distribution, operating and turning around businesses. The sort of ‘aha moment’ I was experiencing doesn’t happen much in a lifetime, so I decided to go for it and take a chance on this new world.
I fell in love with the mining aspect and building out the ecosystem infrastructure. Plus, I live in Western New York. It’s cold (fine, frigid!) and has cheap hydro-power. I thought, “when was the last time Western NY had an advantage in anything?!” So, I jumped into the mining space, and it’s been a wild ride since.
How did Foundry get its start and what’s the problem you’re setting out to solve?
After that initial leap into the mining space, I worked with a local company here (in Rochester) and then joined Core Scientific, helping them scale up to be a large enterprise miner. I met Barry (Silbert) about a year ago. He had avoided the mining space for many years because it is opaque and challenging to navigate, but was eager to enter, in order to bring more transparency and trust to this area.
The goal isn’t for the US to have a dominant position, but to spread the network around the globe.
Foundry’s tagline is “Empowering a Decentralized Infrastructure.” Why is it important to decentralize the hash rate? Are we too reliant on the Chinese market?
China has gained a significant foothold on the industry. Most machines are made there, and many of the largest miners, hosting facilities and mining pools are based there. We believe that for Bitcoin to survive and thrive over the long-term, it needs to be decentralized. China’s rapid growth has, in some ways, been great for the industry’s innovation and development. But, other places have strategic advantages too, and, with greater market understanding, they can catch up. The goal isn’t for the US to have a dominant position, but to spread the network around the globe. To us, it’s about balance — supporting the development of a truly decentralized, and thus more enduring, global industry.
How will being part of the DCG family help Foundry to execute on its goals?
DCG has an amazing reputation in the market. Its institutional expertise, long-term capital, and market intelligence are key differentiators in a mining space that is still somewhat underdeveloped and obscure. I’ve spent tons of time trying to figure out who’s real and who’s not — and many others face similar ‘working through the weeds’ challenges. They want a dependable, professional shop to turn to as a long-term partner.
From the start, Barry impressed upon me that we aren’t building a business for 6–12 months, but must think in terms of decades, 10–20 years out. Having a longer-term vision, and the foundation to patiently execute on it, is powerful in mining.
As experienced, active miners — we have machines spread across North America — we know firsthand the challenges and pitfalls these businesses face.
Foundry is launching with three core services — tell us about them.
We looked at the ecosystem and considered how we could add the most value in empowering decentralized networks. While the mining market has matured considerably in recent years, miners still have weak access to capital. So, the first product we brought to market was equipment financing. Some of our clients are building out operations; others are replacing obsolete machines. Because we appreciate their cash constraints and we’re in this business for the long-run, miners can use only the machines themselves as loan collateral. Our mining experience and strong relationships with the leading manufacturers in the space help here. We’re not just handing clients a check; we help them vet and procure the right equipment for their operations.
Second, we offer advisory and consulting services for individuals and organizations interested in entering the mining space, or expanding or optimizing their operations. As experienced, active miners — we have machines spread across North America — we know firsthand the challenges and pitfalls these businesses face. I’ve definitely stepped in many of them over the last three years, so we’re channeling the learnings to help our clients accelerate their growth.
The third business line, Foundry Labs, focuses on staking. We help different protocols set up nodes and do staking. We leverage DCG’s resources here. DCG has backed a lot of different companies and tokens across the space, and we’re now able to create the infrastructure to support them.
Outside of crypto investors and companies, what types of clients seek your advisory services?
As the mining space has matured, different types of organizations are taking note. We’re receiving inbound requests from energy companies sitting on a significant source and realizing they can potentially monetize it by setting up Bitcoin mining operations. Longer-term, we expect government agencies to participate in this market, too. If a country has a competitive advantage in cheap electricity, Bitcoin mining is a way for them to capitalize on it and diversify their economies.
You must be willing to make decisions quickly and, as with all shrewd investing, act counter-cyclically.
You’ve been at this for about a year now — what’s been surprising as you’ve kicked off the business?
How awesome working with the DCG team is!
The crypto space moves extremely fast and that’s certainly true of mining, too. You must be willing to make decisions quickly and, as with all shrewd investing, act counter-cyclically. If you’re able to do that, mining crypto can be a great business. What’s surprised me most is when experienced miners, that have been through cycles, are hesitant to act, then six months later, regret delaying a decision. You expect those in the space to be as fast-charging as the overall tempo feels.
When it comes to your relationship with clients, how is providing equipment financing different than selling the equipment?
Our incentives are aligned; we’re investing alongside our clients. If we didn’t think it was a good time for our clients to scale their mining operations, we wouldn’t provide them with equipment financing. Our goals is to help miners be successful long term, which means providing them with the tools and resources to make the right decisions along the way. We are trusted partners, not vendors.
What does success look like for Foundry?
Short-term, we have to smartly deploy $100M. Longer-term, success is North America’s share of global hashrate rising, contributing to a more decentralized and secure Bitcoin mining network. Foundry will have played a critical role in making that a reality!
Want to know the latest from Foundry? Follow them on Twitter at @foundryservices and check out the website for more information and getting in touch with the team!
Want to join Foundry? They’re hiring! Check out open roles and apply!
