Hong Kong-based cryptocurrency exchange startup Bitspark last week announced its beta launch. Here at e27, we love speaking to startup founders, and George Harrap was more than happy to share his startup vision with us.
Read on to find out why this Australian Founder left his life back home to launch a Bitcoin exchange in Hong Kong.
How did your journey as a startup founder begin?
Six months ago I got off the plane from Australia with two suitcases. I came to Hong Kong with the intention of starting Bitspark and quit my job in Australia to do so. I’m a long-time Bitcoiner, having been involved since late-2011. I started out building computers in my own room as a student back in Australia, and then made a bit of money mining Bitcoin.
Through my journey I saw a lot of problems in the Bitcoin ecosystem and thought there must be a better way to do things. One of the main problems was with trust and transparency. Sometimes when you’re dealing with a Bitcoin exchange, you don’t know who you’re dealing with or where they are. Are they real people? Is your money safe? These were the kinds of problems I set out to try and fix with Bitspark.
We’ve launched products that look to address those things. We’re backed by a large entity and we have auditable reserve,s so you can see where your money is at any one time. We’re real people, we have company incorporation documents on the front page (of the website), we have a real address, and you can come and see us at many different events all around Hong Kong.
Where is Bitspark in terms of funding right now?
We are part of the incubator programme (at Cyberport), so we got HK$530,000 (approx. US$68,000) in funds. The rest of the money is self-funded. We’re on a number of crowdfunding platforms here in Hong Kong, and a few internationally. We’re looking to close another round maybe at the end of the year, but we’ll see how we go with the launch.
Are you looking for investors with experience in any specific areas?
Obviously somebody who has experience in the internet ecosystem is a great asset to us at this early stage. But we’re also looking for people who want to do something different, where there are not yet that many competitors. This could go huge and there is interest in the VC community around Bitcoin. It’s growing rapidly.
How much would you be looking to raise in the next round and how would you use it?
Probably around US$250,000. For us, it mainly goes towards employing people here in Hong Kong — it’s a tough market to find software developers. We’ll be looking to target Indonesia and the Philippines with the remittances, and expand to the Southeast Asia region in general.
How do you profit from your service?
We have three key product lines: exchange, remittance and payment processor. Each product line has a separate pricing model. The exchange is commission-based, with each trade attracting an industry standard commission (although our launch promotion is a no-fee period for early customers) of 0.2 per cent.
Our remittance solution again will be based on a commission model, cutting the costs of sending money overseas to one to two per cent. Our payment processor solution is a flat monthly subscription fee depending on the volume of transactions, starting at around US$30 per month or a free plan with no subscription but a one per cent per transaction fee.
We are targetting 40 per cent of our competitors’ trading volume after 12 months. Given that most of our competitors are also newly established in the market and are doing upwards of US$100 million per month in trading volume, we’d seek to capture some of this market. We see this as a conservative estimate as we are not just an exchange, and so can provide real incentives for customers to use our suite of other products too.
What do you say to people who say the Bitcoin space is overcrowded right now?
Not at all. There are a lot of people doing a lot of different things. Here in Asia, while development in the Bitcoin space has picked up in the last six months, it’s still pretty much an open field.
Most startups are targeting a few key areas: financial end of town, development of the technology, merchants and customer use cases. We are looking to target all three of those spaces in a relatively short amount of time with our exchange, providing the liquidity for many of our other business- and customer-oriented services.
An ‘exchange’ is basically a Bitcoin bank, so to have a proliferation of a number of exchanges is a normal thing, not to mention there are still not that many exchanges globally anyway. Having said that, we see the bar being raised higher every month and Bitcoin companies will have to offer more and diversify to stay relevant.
Why not be based out of the Philippines or Indonesia if those markets are offering the greatest growth potential for Bitcoin?
It’s a good question, but there are a few reasons we went to Hong Kong. One is the proximity to China, which is one of the largest Bitcoin markets in the world. The second one is support from different incubators like Cyberport. Thirdly, Hong Kong has a friendly regulatory environment. For us, those are good reasons.
What main differences in use cases for Bitcoin do you see between Southeast Asia and Western markets?
In most Western markets, there is a proliferation of payment services and credit card usage. The benefits of Bitcoin are taking off here as it is a lower barrier-to-entry way to pay for things and invest. However, we think the real opportunity is in Asia where there are still many nations that do not have developed financial systems — yet do have a rapidly increasing internet-connected population.
These are the markets that can benefit from Bitcoin’s alternative of ‘being your own bank’. If you are one of the 2.4 billion people globally who do not have a bank — many of whom are in Southeast Asia — why would you want to sign up for an expensive, slow, limiting traditional bank when you could download an app and use Bitcoin to pay for things, invest locally and abroad, or even crowdsource a loan for free? I know what I’d choose.
Give me a brain dump on your feelings towards Hong Kong as a startup location.
Hong Kong has a small but slowly growing startup scene. As a business-friendly, connected global city, it is an attractive location to be for foreigners. But I’d still like to see Hong Kong embrace more of an entrepreneurial spirit towards the development of a bigger startup scene, and more software developers — then it’s entirely reasonable that the next Google could come from here.
For a number of reasons Hong Kong is the ideal location for a startup — it is very easy to meet and connect with people here, there is a proliferation of co-working spaces in the city now, and there is increasingly more access to venture funding. Access to China is a big plus too.
How have you found startup incubators like Cyberport to be in Hong Kong?
It is a great way to launch your startup. At Cyberport, we have free office space, HK$530,000 (approx. US$68,000) in funding, many events, networking opportunities and resources to assist us in getting our product to the mainland. I think there are some bureaucratic improvements that can be made, but on the whole, if you are a startup in Hong Kong, you should be pitching yourself to get into an incubator here — it’s a no brainer.
How is Bitspark eyeing up the China market?
Over 70 per cent of the trading volume of global Bitcoin exchanges are denominated in CNY. It’s huge. For us, Hong Kong was an obvious choice in order for us to effectively reach the China market. And given Hong Kong’s status as a financial hub with a friendly regulatory environment, it seemed like a good choice.
Although the People’s Bank of China has made statements to the effect of, ‘If you are a bank, don’t engage in Bitcoin’, users are still free to buy, sell and use the digital currency. I see the growth in China coming from businesses looking to export to world markets using Bitcoin as a cost-effective payment mechanism.
Is the risk-averse side of Asian culture a problem for recruiting talent as a startup here?
Yes, absolutely. We are always looking for talented people to join the team, but not many are willing to take the risk and join a startup. I am mainly talking about the lack of software developers here. The universities are teaching outdated programming languages that perhaps are OK if you want to work in a bank for the rest of your life, but to build an exciting new product we are looking for developers with more relevant marketable skills.
Silicon Valley is great because it is where people go to take a risk. The first country or city to emulate this will have great success, but it will take a few trailblazers to show the way first.
What are the top risks to Bitspark going forward?
Working in the financial sector is a minefield, but luckily here in Hong Kong, we have a friendly regulatory environment towards Bitcoin. Having said that, we can’t rest on our laurels. The regulatory environment is not set in stone, so we must beware of any changes to the current situation.
What is your profile of a typical Bitspark user in Hong Kong?
Many Bitcoin users in Hong Kong come from a financial background to begin with and so are familiar with the financial instruments and tools out there right now involving Bitcoin.
Bispark’s exchange is initially targeting these people both here in Hong Kong, but primarily around the world, by providing our customers a secure, transparent and liquid platform to trade globally. Sparkpool, our cryptocurrency mining product, is targeted at the individuals in Hong Kong and Shenzhen currently engaged in cryptomining.
What have you learned so far on your journey as a startup founder?
Back yourself. There are many ups and downs, but as long as you research enough about a specific problem, you will eventually find the solution. I say this particularly in reference to designing a new product or identifying the best way to go about doing something.
You might be looking for a lower cost way to do things, or some way to improve your product to make it better. There’s always something and that something is usually only a Google search away. I’ve found that’s a very effective way to find the answers to the problems you encounter starting up.