Lamassu @ The Block – Interview

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In this video, you will see Kevin Loaec interviewing Josh and Zach Harvey, co-founders of Lamassu. They are pioneers in Bitcoin ATMs, and they are hiring!

In the beginning, Josh and Zach talked about their interesting decision to manufacture their machines in Portugal. As they were looking for an industrial designer, firstly they found out that China is good for large production, but not so great when you are getting started with just a prototype machine made out of wood and assembled in their backyard. So, they continued to search, and by coincidence, they stumbled upon Claudio in Portugal, who managed to understand their needs immediately and they are working together ever since.

When asked the question, if they ever considered going into the operating business, they reply with a firm no. In their opinion, it is simply too much. It is a completely different business with so many different aspects. They respect the operators, saying that it requires a lot of hard work to operate machines, getting the cash flow, finding the locations, dealing with customers and of course dealing with banks and regulators.

Another point that Zach and Josh made is the fact that things are not moving fast enough and there are some countries where there isn’t too much competition, thus the fees are much higher. They mentioned Germany as an example where there are almost none Bitcoin ATMs due to the strict stance that the regulator took setting up really high upfront costs for obtaining the license in order to operate a Bitcoin ATM legally.

After that, they touched upon the Location topic, where they agreed that the bars and restaurants are probably a bad idea because of the disturbance that ATM users can cause to other customers and vice-versa. The best locations, as they say, would be the convenience stores, because people could go in just for the ATM without disturbing anyone else, and most importantly, they are available 24/7. The bottom line is that people just want a place that’s convenient.

That led them to one of the good points related to the operating business, and that’s scalability. In other words, if you managed to organize the operating business for one machine, it is going to be much easier to organize it for 30-40 more. The reason is that you already dealt with the regulator, you already dealt with the bank, you already have the server up, you already have some experience in picking and setting up the location. So, the point is that operators should definitely not focus on operating a small number of machines.

The next question Kevin had for Zach and Josh was about the problems involving the loss of funds. In other words, has anybody ever accused them of putting a back door, or in any way being responsible for money loss. They say that it happened before, but every time it was proven to be the operator’s fault. Usually, because they were using some shady wallet. As they say, nowadays it’s very hard to secure your Bitcoins, but their machines are holding pretty well in these circumstances.

Later on, they gave us some insight into organizing the Bitcoin ATM manufacturing business. Basically it is a combination of coordinating the manufacturing, actual shipping of the machines, sales, marketing, and all the software stuff at the same time. They also emphasize that the manufacturing business consists of two different segments: the software side and the actual manufacturing of the machine. That means that some manufacturers actually handle only the software side, and get the generic kiosks to put it in. While other manufacturers, like Lamassu, design and manufacture their own machines from scratch. That way they have something that’s unique.

Finally, they talked about the need to allow other coins besides Bitcoin. About a year ago, the fees for Bitcoin got super high making it unprofitable to buy through machines. Therefore, they had to have some other coins, with lower fees, that people would want to buy on ATMs to secure the cash flow. Currently, that is not the situation since the Bitcoin transactions make about 90%, but it is good to have multiple coin options in case that fees go up again.

Summary

To summarize, manufacturing and operating are two totally different businesses. In operating, you have to deal with many different aspects, but the competition in certain countries is low and scalability is high. If you are a manufacturer it’s better to design your own machine and allow multiple coin options.

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