Swedish Startup Space

Bitcoin startup KNC Miner downsizes, a fifth the workforce will be let go

Written by on February 16, 2016

Breakit can now reveal that KNC Miner are facing substantial downsizing. Around ten people will be let go.

“We are letting around 10 people go across the board from the Stockholm office. The data centers will not be affected”, Sam Cole, CEO and co-founder of KNC Miner, says.

Barely a month ago Breakit reported that the company had raised an additional $3 million. The company has raised a total of $32 million, from Creandum and Accel among others.

The company offers a cloud service for bitcoin miners who want to use its data power and also mines bitcoin for itself.

The cutbacks are a result of unexpected competition from China and the fact that the Swedish energy tax cut has been delayed.

“The new competition is mostly from China. Someone invested $200-300 million in equipment to compete with us there. That hit us hard”, Sam Cole says.

The Swedish energy tax cut is now expected in January 2017. KNC hoped that the tax would be cut already this spring.

Why did you hire people if you didn’t know for sure that the tax was going to be cut?

“We would have been able to handle the current taxes if the competition didn’t change so drastically. We would also have been able to handle the competition if the taxes were cut already, but those to factors together resulted in us having to let some people go. It’s really about maths at the end of the day”, Sam Cole says.

So it was a bit of a gamble for you then?

“We are effectively gambling all the time. That’s what it means to be a startup. We’ve won consecutively for two years. Now we just have to get back to winning.”

According to Breakit’s sources, one of the underlying factors of the downsizing is that recent investments in data centers have been delayed. This has reportedly resulted in the mining itself being delayed, and revenues along with it. However, Sam Cole denies that the delays are related to the downsizing.

“Yes, there have been some delays, but that hasn’t been a factor in the current situation. We would have had to let people go, even if the latest data centre was up and running ahead of schedule”, Sam Cole says.

As KNC-competitors are on the rise, there is a widespread crisis in the entire bitcoin community. International tech news outlets have recently reported about a bitcoin civil war. A month ago, one of the most prominent bitcoin developers declared the crypto currency to be “a failed experiment”.

“The price of bitcoin fell instantly, from $450 down to $380, when he left, and it hasn’t really bounced back since. It has affected the industry obviously but it’s not related to the changes here”, Sam Cole says.

The company had revenues of $75 million (640 million SEK) in 2014 and made a loss of $3.5 million (30 million SEK). Sam Cole says that the company currently is cash flow positive but are still operating at a loss because of large investments in data centers.

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