How Cryptotrader CEO David Kemmerer grew Cryptotrader to $10M revenue and 7K customers in 2024.

hello everyone my guest today is David Kammerer he's the co-founder and CEO of crypto trader dot tax a tax reporting platform guilty of cryptocurrency investors an easy automatic way of staying compliant with their cryptocurrency transactions he's also built partnerships with industry giants like Intuit TurboTax to bring crypto tax reporting into the mainstream David you already take us to the top let's do it are you one of these guys like got into like Bitcoin like in 2010 and you're filthy rich now and now I need to deal with like tax problems no I wish ya know I didn't get into it until kind of late 2017 when really like all the hype was happening so I'm pretty late compared to some of my peers so so help me understand actual problem here what do people have problem paying taxes or understanding how to pay tax on their crypto gains no the problem is calculating your capital gains and losses for it because everything's quoted on these cryptocurrency exchanges in cryptocurrency denominations right it just becomes hard because you have to report on US dollar values so right like I would need to know you know what the US dollar value of aetherium on July 17 to 2017 was when that information is like very difficult to come by and then you layer on like some people are trading thousands hundreds of times right it just becomes difficult to do those Cal Cal gains and losses calculations so that's what we automate can't you I mean I have most of my money with a family office and one of the things they do for me is make sure to take losses when they appear and then mitigate the gains to minimize tax exposure with the volatility of crypto I mean what regulates at what point in time you actually take and convert the dollar amount because if you're smart you could essentially take a lot of losses you basically carry for a loss and not pay taxes right yeah it is all depends on like so taxable events right and in crypto crypto - crypto trades which is very common right if I'm going from Bitcoin into aetherium that triggers a taxable event which right would realize a loss and this is another part of the problem right it's for all these crypto - crypto trades that you know thousands and thousands of traders are trading on like finance and other giant cryptocurrency exchange in one base every time exactly every time they trade one asset for another even if it has nothing to do with trading out to sea currency you trigger a taxable event which needs to be reported on form 8949 and so like in the world of stock trading which is what you could compare this to you know your broker will give you a 1099 be at the end of the year that details every single taxable transaction now these exchanges is a coin base and Finance and bit rest they don't have this ability because of the transferable nature of these digital assets right people can send them into coinbase from their wallet they can send them from Columbus to buy Nantz right and it just becomes this huge mess and tracking that turns into a net parents like that's where our solution really ties in and it is kind of hard to grasp but we just automate the whole process well I mean one of the things with crypto is it's decentralized and it's not tied any government so why does the American government feel like you should have to pay tax on it couldn't send some I just argue this wasn't this has nothing to do with it wasn't in America it's not American you know I don't know American government taxes yeah I mean that's one flavor of cryptocurrency right and I'd argue that it's it's becoming much more the opposite where it is becoming a legitimate asset class that you know know your customer rules are very much enforced at the exchange level so the government's actually do know the people who are transacting and cryptocurrency and you know it is being treated as an investment so you know if I invest $1,000 into Bitcoin I'm doing that because I'm expecting to see a return of X amount on my money so they know though how does the government know I mean that's the whole thing about crypto right is you're basically a big long numeric and you know alphanumeric chain of characters yeah it's a good question and so they know because of the exchanges so to be in exchange operating in the United States you need to go through know your customers so like you know you would have to upload your driver's license to even have a coin base account and so if you meet certain thresholds let's say you trade more than 200 times and you have more than twenty thousand dollars worth of total trading volume coinbase sends a 1099 k to the IRS alerting them base guys they have to by law correct if the license I uploaded draw my claim base account is in America correct interesting so won't people just start using things that are not coin based people that don't have a relationship with the US government yeah that's a he thing and it's it's sad because you know you have to be very careful when you're regulating and you know I've been to a lot of these types of conferences but it's pushing very innovative companies to leave the United States Jumping blacklist the United States and that's dangerous because you know you want this this next-gen finance movement being built in the US right that's very important and so you have to be very careful with how you regulate - you know attract those companies because it's very easy they all bitcoins use for money laundering and criminal activity but it's like not true it's it's very much becoming you know with Facebook get involved and all these things the industry is getting legitimized and you know if the United States you know doesn't regulate in a smart way it could completely miss out on this new wave of you know entrepreneurship and well that's the point right is like the reason crypto was invented is because government made basically the people governments are domination regulate finance and they shouldn't own the the currency at all so why doesn't the government just stay out of it why try and take tax on something that could be the future of a finance yeah I mean it's a hard question to answer and you'd get so many different answers across everyone you talk to in the space but I don't think any time in the short term government's gonna be completely irrelevant so I more take the approach that cryptocurrencies going to allow much more frictionless transactions it's gonna reduce the friction in capital markets and I think government needs to play a role in that especially in the short term yeah all right good hard tell me how you make money on this thing sure so we just charge a flat fee it's the exact same business model as TurboTax if people are familiar but you know if you're a trader of cryptocurrencies and you just want to pain free get your tax reports done for it you just upload your stuff into our software platform and then we'll generate the necessary reports that you need to stay compliant and then you just it's a one-time fee for that so is it like a SAS business basically it is a SAS business but the the time frame is more yearly right monthly doesn't apply to us because you know it's just people need to do this every year so what do they pay on average per year to use you anywhere it depends on the volume of the trades that they carry out so but they'll pay anywhere from fifty to two hundred dollars per report okay and how many were like on a customer how many of course they do per year I guess a little misleading a report includes everything so yeah they're paying anywhere from fifty to two hundred dollars a year correct okay got it um so I guess the next question to you is how how do you measure your success I'll take a stab at it by asking a metric question over the last twelve or last year whenever the last filing kind of sequence was how much the all the reports you generated they covered how much total kind of crypto trading spend and fee in American US dollars rephrase are you saying like everyone who's filing taxes with you how many are you answering yeah through you a small percent like there's so many so many people what's the amount of like a million or a hundred million or billion of people that are paying taxes or traders know people that used you who processed you did their taxes and what's the dollar amount of the taxes you essentially help them pay on so the number of people so we have just under 10,000 paying customers from this past year okay and so you know between presenting how much sham fee basically all right like how much transaction and like how many do you said I'm saying like yeah well we've we processed over a billion dollars of crypto currency through our tax engine I don't know if that ain't yeah that's what I'm going at yeah it's like if you filed my personal tax return and my taxable income I'm making this up was a million dollars and you did a hunter of those the your answer be we processed a hundred million through our platform right yes I know I can go pull this from our data but it's a massive number like I think it's over five billion at this point okay good I mean well that tells me then this is a real problem you're on to something and that's interesting okay so how did you land on this on kind of on this pricing model right so ten thousand people obviously pit you know paying over ten thousand so it's I mean okay okay so let's say seven thousand no pain no kind of a minimum fifty that brings in you caught three or fifty thousand dollars last year is that about right a little more than that but yeah we changed our pricing model to we were charging way too little for our product we started with just a forty dollar flat rate...