How We Built A $100K/Year Crypto Tax SaaS (In Just 1 Year)
Hello! Who are you and what business did you start?
Hi there! My name is Carl and I am one of two co-founders of the startup Divly. We help our customers calculate and pay taxes on their cryptocurrency gains. We’ve built a system that can import transactions from 100+ wallets and exchanges, automate tax calculations for thousands of transactions, and provide on-demand tax reports localized for their tax jurisdiction.
Our business is seasonal and revenues vary greatly depending on the month for each country we support. Since our first tax season in 2022, we have sold for a total of 50k USD (8k per month). Most of the revenue came from our home country, Sweden.
Now that we are happy with the performance of the product we have begun expanding into many more jurisdictions for the 2023 tax season. With a strategy around hyper-localization, we are hoping to expand in a market that is getting quite competitive.
What's your backstory and how did you come up with the idea?
This is going to get fairly personal. When I was 25, I found out I had a tumor in my head under the skin. It was the size of a golf ball and stuck out like a bull’s horn from my forehead. The doctors told me on first inspection when they cut into it that the tumor was likely Sarcoma, a serious type of cancer that could be fatal. Fortunately, in the end, it turned out to be a very rare tumor called Sarcoidosis, and eventually, I was healed after it had been cut out.
The sense of mortality that I received from this experience changed my attitude toward life. I resigned from my finance job in Australia and left my girlfriend after approximately 6 years in a relationship that had turned stale. I could foresee where I would be in 10 years, and it did not feel like a life well-spent. I needed uncertainty.
So for a couple of months, I went on hiking adventures by myself in the wilderness before deciding what I should do with my life. I ended up at a bachelor's party in Cambodia when I had a skype interview to get into a Master’s program at the Stockholm School of Economics (CEMS). Fortunately, the internet in the bungalow held up, and it went well. I moved to Sweden, where I got introduced to crypto and the startup space.
After having entered the crypto scene in 2017, I realized in 2018 the pain and mess involved with declaring taxes on my cryptocurrency gains. At the time I had jumped onboard as a co-founder of another crypto startup building development tooling, so the tax problem was nothing I pursued at the time. However, after that startup had failed, I was once again looking for the next thing to solve.
This was when I recalled the pain of declaring crypto taxes and saw that the existing solutions at the time were heavily US-focused. Unfortunately, this was insufficient for most countries since tax laws and formats differ. Having previously worked in the financial services industry, the type of work that needed to be done was very familiar, and I saw an opportunity to solve this problem. I found a competent technical co-founder, and we set out to build Divly.
Be practical and try to get as far as possible without raising capital.
Take us through the process of designing, prototyping, and manufacturing your first product.
First thing we did was scout the market for existing solutions to figure out how they had solved it for other countries. There is no reason to reinvent the wheel unless you have to. From here, we devised our own opinion of the existing products and built a version we thought was more practical to use based on my previous experience with financial tools.
We had two months to build and launch the product in time for the Swedish tax season. If we had released it later we would have had to wait another year to get any decent feedback. We worked long days and weekends to build a beta. I began by speccing the database structure and tax calculations in an excel file. There are quite a few transaction types in crypto! My co-founder took those specifications and started working right away on building a platform that could automate it. Since he was familiar with Python in his previous projects and startups, he hacked together the MVP quickly using the framework Django. I had some limited experience with HTML/CSS, so I ended up making our first version of the external website.
To be able to onboard customers fluently, we had to make it easy for them to import their transaction history from different exchanges. At first, I had to manually retrieve information on the formatting and content of the exchanges’ transaction history export. I had set up a few accounts on different crypto exchanges. I made every kind of transaction possible so that we could use the transaction history to build our first integrations to help customers fetch their data. Eventually, users in our community were willing to share some transaction history files with us to help build our platform. Because of their help, we were able to build many more integrations over time.
Describe the process of launching the business.
We finally launched just in time for the tax season. We shared the link to Divly on Facebook groups and wrote a long crypto tax guide for Swedish users. The guide ranked well on google, and after a few weeks, we had a couple of hundred users. A few had even paid! We realized that content worked very well to market our product, and it was easy to rank in our domain of expertise.
At this point, there were only two of us working on the business. I had survived off my savings, and my co-founder was building the platform whilst studying at university at the same time. We realized that the concept was working and that we could likely build a functioning business around it. So we raised a small angel round to help us along the way. This allowed us to hire three key employees/contractors and even take out a small salary ourselves.
To grow into a larger company, we realized we had to make the system more modular to expand effectively to new countries. Sweden was going to be too small of a market. So we took the beta offline and rebuilt everything from scratch based on the lessons we learned from building the MVP. The experiences we had with customers during the MVP were very useful. In hindsight, I’m glad we took the quick and dirty approach of building an MVP. It helped us build a smarter scalable system in the long run.
Since launch, what has worked to attract and retain customers?
Since cryptocurrency taxes is such a new space, the best method of acquiring users was still very much up for debate. We had seen that our cryptocurrency tax guide ranked well on google, so we recognized that writing content would need to be a part of our strategy. When I managed to get some time away from looking at transaction history files, I was writing about cryptocurrency taxes. At the time, we hadn't given much thought to SEO and were essentially throwing darts blindly, hoping that something would stick. At first, we could not quite replicate what we had done with our original cryptocurrency tax article. So we knew we had to look deeper into the success of our first article to figure out what the difference maker was.
We got a subscription to Ahrefs, a tool for SEO metrics. We saw right away that there was a huge gap in content in the crypto tax space. Because of the relatively new field, the supply of articles was outpaced by the demand for answers. This in itself was a sign that we were solving a real problem. However, because we were going in blindly, some of our early articles missed the mark and were not addressing searchers' questions. We were able to revamp our content strategy to realign our content to provide meaningful answers to users in the areas that they wanted.
However, there was still a lot to learn, and duplicate content issues soon bogged us down. Although we wrote our articles in Swedish and English, it was possible to access both articles from the Swedish and English web pages. We were not aware of the extent of this when we put effort into content for countries we were just expanding into, such as Finland, Norway, and Denmark. It was because of Ahrefs that we became aware of this issue. Unfortunately, this meant that our Finnish tax guide only started to rank two days before the end of the tax season. If we wanted to focus on product localization, we would have to learn more about website localization.
Other than content, we also focused on partnerships. Filled with ambition, we reached out early on to the largest cryptocurrency exchange in Sweden, Safello. At the time, with little to show for our product, conversations stalled. However, a couple of months later, after providing some proof of our product, we were able to land this partnership. We officially partnered with Safello on March 13th of, 2022. Combining this with the Swedish Tax Authority opening their online tax portal on March 15th, We found a catalyst for rapid growth. We saw 4x higher traffic than we had had over the previous two months. Apart from content, we noted that partnering with important players would have to be another vital part of our strategy going forward.
Our affiliate program was another successful strategy. We managed to connect with popular crypto influencers in Sweden and so reach an audience of crypto enthusiasts while they watched/read their favorite content producer.
Another thing we tried with less success was advertising. During the tax season, we ran ads on Facebook and Instagram. During the campaign, we had an average cost per click of just $0.40, especially low for the financial space. Leaning on the playful side of cryptocurrencies seemed to be getting us clicks. Conversions, however, not so much. We readjusted some of our ads' goals on Facebook to focus on conversions to combat this. However, it was clear that we were spending more on advertising than actually earning revenue from it.
We would have to change our advertising strategy for next year. Perhaps the combination of SEO and paid google ads would prove more successful. Placing ads on important keywords could place us in front of the eyes of potential users who are directly looking for a solution such as ours.
How are you doing today and what does the future look like?
With the market economy and funding getting tougher, our first goal is to reach break even. I don't want Divly to be reliant upon external investments, and rather it should be an optional choice. With our current projections, I believe we can reach break-even within 18-24 months. We have our financing set up so that we have at least two years of runway regardless of where the market turns. This gives us a good chance to pull it off. Currently, we are burning capital faster than we are generating revenue, which is what was expected at this point. Our product is quite complex and has required a lot of initial development. However, this has paid off since our conversion rate has increased from around 7.5% to almost 20% in one year.
In terms of growth, this depends significantly on how successful our international expansion will become and how the crypto market evolves. We are hoping to 4-10x our user count in 2023. Last year's largest limiting factor was that we almost solely focused on Sweden. As such, the aim is to position ourselves in multiple markets for 2023, mostly European and Asian countries. As the crypto market is in a slump now, we do expect traction to be momentarily lower for the coming two years. Yet, with new countries coming online, we still expect solid growth for the business. Below are the countries that are ready now; more will be released in the next two months.
A continuously updated list of our supported countries can be found here.
Through starting the business, have you learned anything particularly helpful or advantageous?
We managed to avoid many pitfalls due to the mistakes we made in our previous startup experiences. Regardless of how cliche this sounds, it helps to have failed in a business.
Nonetheless, something we did experience this time was that timing is paramount if you are looking for funding. We began our fundraising journey in late spring just as the macro economy declined, war broke out in Ukraine, and the crypto markets crashed. This made us have to reconsider our path forward and expansion plans. It’s hard to get the timing of this right, but if it’s something I learned, it is that if you plan to eventually raise money and decent offers exist, take it now.
What platform/tools do you use for your business?
My favorite tool that we use is Intercom. This is a well-known tool that helps you handle all your support requests with customers. You can set up notifications on your platform to engage users and help minimize churn. You would rather want to provide users easy access to your support chat rather than leave quietly. It’s also a great way to make it easy for users to give you feedback. It is a gateway to learning about the actual user experience. Intercom also has a lot of functionality that you can play with and explore whilst you scale and need to automate certain support processes.
Apart from Intercom, there are many other tools I like. Most of them are quite popular and well-known in the tech industry:
Slack - for our internal communication, we integrate our platforms into Slack channels
Ahrefs - for improving our SEO
Grammarly - To ensure that the language we use on our website is easy to understand and to avoid grammar and spelling mistakes
Google Workspace - great for email/calendar/file management and video calls
Google Data Studio - a useful and cheap way to view data and progress
Notion - used for our internal documentation (we document 100+ wallet integrations)
Stripe - for handling most payments
Coinpayments - for handling crypto payments
Tapfiliate - for automating parts of our affiliate program
Mailchimp - for automating emails at different steps of the customer journey
I’m a big fan of using 3rd party tools to get ahead quicker. We ended up building our tailored content system to handle our wallet guides, tax guides, and FAQs. I would not recommend doing this for most businesses, but it made a lot of sense for us.
What have been the most influential books, podcasts, or other resources?
I wouldn’t say there is one book that has been the most influential. However, I have found a lot of solace in reading about stoicism. As a founder, you are constantly being rejected and flung through an emotional rollercoaster. That’s assuming you are a stable person by nature. The philosophy of stoicism has helped me persist through tougher times. I wear a ring that I look at daily that reads “Memento Mori” so I never forget that life eventually finds its end and, as such, not to take everything in life too seriously.
Advice for other entrepreneurs who want to get started or are just starting out?
Just get started and focus on the problem you are solving. You don’t need to paint a grand vision when starting out. Be practical and try to get as far as possible without raising capital. Raising money is not the goal, don’t let LinkedIn posts and media convince you otherwise. This should not stop you from raising money; just remember that it is just a means to an end. Life as a founder is better if the money in your bank is coming from customers.
Validate your idea as quickly and intensely as you can. You want to know if it will succeed or fail early so you can avoid wasting time working on the wrong thing. I spent way too long on my first startup on an idea that had no validation in the market. I could have saved at least a year of my time if I had taken my advice today. In Divly, we built our MVP in two months and released it to the market. We knew it was far from perfect, but it helped us understand if we should pursue the idea further.
Don’t focus on pitch competitions, flashy events, or looking cool by applying to random awards. Stay focused on your customer and solving their problems. Often I see first-time founders focusing on their social media accounts more than actually building the business. This is just a waste of time.
Are you looking to hire for certain positions right now?
Yes! As we are expanding to new countries we are looking for competent business graduates or generalists that have a few years of working experience. As we are a small startup the work is very broad. It includes researching tax rules for new countries, writing guides, building partnerships, and supporting customers via our online chat. Feel free to reach out to Divly for a full description.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Hey! 👋 I'm Pat Walls, the founder of Starter Story.
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