Digifox Is Shutting Down
Hey everyone, Nicholas here 👋
Today, I’ve come to you to share the unfortunate news that we’ll be canceling our plans to conduct a Series A raise for Digifox Corp. and will plan to shut down operations effective June 1st, 2022. This is not a decision that comes lightly, but comes from my belief in doing the right thing.
In this article, I hope to explain in detail why I made this decision, both for our users and our investors. So please, if you have the time, I genuinely ask that you read through the entire article.
Many Ups And Downs
First, I want to share some background that I think is critical for all users and investors to know.
To start, Digifox was founded with one key goal in mind; to bring the next wave of users into the crypto industry. For me, the clear solution at the time was DeFi (decentralized finance), an emerging branch of the crypto sector that allowed people to earn high interest on their savings and trade seamlessly from one asset to another. And after initial conversations and feedback from the DataDash community, it was as clear as day that the biggest gap to broader DeFi adoption was the user experience.
That’s why from July 2019 to June of 2020, I went on to found and initially self-fund Digifox, followed by our seed round on Wefunder in June 2020, where nearly 1,000 unique investors came to support us from across the globe. To this day, I can’t thank you all enough for your show of support.
And after launching in June of 2020, we saw an immense surge of new users onto the platform. We got incredibly positive feedback. The kind words we received about our user experience, our dedication to customer support, and the overall vision brought many people to love Digifox. And within the first month, we saw thousands of new accounts generated on the app. Plus, we launched the app right at the beginning of the famed ‘DeFi Summer’ of 2020, where large waves of new users came into the DeFi sector of crypto. The timing of our launch couldn’t have been more perfect…or so it seemed.
The first major issue we ran into was with our breakthrough use of smart wallets, which didn’t require seed phrases to recover funds. When we launched, it cost no more than $1 to $4 to generate these wallets on the Ethereum network, which was an affordable cost at the time. But as mere days went by, the Ethereum network got dramatically more expensive to use, and those same wallets started costing $10-20, then $30-40, and in some cases $75+.
So instead of using investor funds, I took it upon myself to fund wallet generation with my own personal ETH coins, not to burden the company’s runway, until we could offset these fees. I drained a decent portion of my savings, covering the cost of creating nearly 10,000 wallets; it was incredibly painful. But it was a decision I made on my own, and I knew that, for the company, it’d be necessary for survival, and it did help us get to the next chapter.
From there, we continued to grow and stabilized our business model more, focusing on custodial services like Celsius, in parallel with offering DeFi services to a user group of power users. Deposits were growing, new users were still coming on board, but as we’ve written about previously on Wefunder, in Q2 2021, Digifox faced a severe wave of technical debt. This technical debt not only stunted growth, but was incredibly difficult for the team. Yet again, our integration of smart wallets, a cornerstone of our original business model, started experiencing wallet recovery issues.
During that time, I paused the vast majority of my efforts elsewhere. I delayed initial plans on raising capital and did everything I could in my power to resolve this issue at hand. We hired new engineers, delayed new feature deployment, and did everything in our power to do what was right for our existing users.
To those who were affected by this issue, please know that not a single night went by where I wasn’t trying my hardest to fix this issue, and that goes for many people on the team as well. But from any mistakes I made along the way, I will learn from them and take full responsibility.
But in the summer of 2021, we finally resolved the recovery issues. We made things right again for our users, and with these fixes, users could once again continue to use the app, withdraw their funds, etc. To put it lightly, what originally felt like the ‘end of the road’ for Digifox turned into a situation where we could pull through.
Not Raising Enough
After getting through the bulk of technical debt we faced in 2021, we started to focus on our pivot and began development of Get Paid In Crypto. But by that time, Digifox was severely limited on funding. The technical debt had put us into a situation where fundraising couldn’t be conducted, and with our runway shrinking, I took yet again the difficult step to self-fund the company until we could launch Get Paid In Crypto and begin our Series A.
Since August of 2021, I’ve effectively self-funded the company. I don’t share this out of pity, but I want to make it clear that everything that Digifox stands for, from the people who make up the company, to our users and investors are what drove me to effectively give Digifox a second chance.
Because of this belief and the improvements we took to better our team and operations, we completed all necessary steps, from conducting an audit on our financials to establishing our lead investor and filling our Form-C for our second equity crowdfunding (Series A) through Wefunder. In the end though, we weren’t able to gather enough investor commitments to help us secure the needed runway for our next chapter.
Was our valuation too high? Could we have landed more private capital before going live to drive momentum? Perhaps; and these are questions for me to heavily reflect on for the future. But it has and always will be my responsibility as a CEO to make sure that runway is secured, and for that, I want to apologize to those of you who supported us in the seed round back in 2020.
Regulatory Challenges w/ Partners
Unfortunately, due to the changing regulatory environment in the United States, we also hit some additional tailwinds. Our deposit partner, Celsius, recently announced the suspension of offering yield generating accounts to new users. It not only removed one of our unique selling propositions from the market of offering yield generation on crypto payroll, but it also limited us from launching Get Paid In Crypto, as the partner API doesn’t currently allow for us to generate new accounts as of now. In a 3-day-long notice of the change, it was impossible for us to adapt - as we’ve been building on the integration for months.
This inevitably pushed the launch date back, and gave us all the more reason to pass on conducting another round of funding.
The Team Has Given Their Best & We Accomplished A Lot
To our team members, I can’t express how much of an honor and privilege it’s been to work alongside you these past few years at Digifox. The Digifox team has grown from just 4 people back in 2020 to 20+ in 2022.
Our client success and marketing team have embodied everything I hoped and wished for as we scaled. You always maintained human-written responses, listened to our users’ feedback, and put our customers as priority #1. To put it in the words of one of our users, they compared us to being the “Chick-Fil-A” of the finance industry. When the times got tough, they were the foundation of our company; hands down. And we couldn’t have made it up until this point without their support and hard work.
Our leadership team also fought hard until the final minute, helping to navigate difficult times and shape major accomplishments, like the launch of Digifox 2.0, as well as the successful rounds of beta testing for GPIC. We all learned a lot along the way, but being truthful, I feel I’ve learned more from having the privilege to work with them.
And a big shoutout is owed to my fiancee, who has stood by my side through these past few years. I wouldn’t be the man I am today without her.
To Our Existing Users
If you have funds on the Digifox app, we’ve set aside 35 days to withdraw funds from the app. If you have any questions or need any assistance, our support team will be here to help you. We want to make the offboarding experience as smooth as possible, and want to again thank you for your understanding as we make this difficult transition. Funds must be withdrawn no later than June 1st.
In the following weeks, we’ll be communicating with our user base in order to make offboarding as smooth as possible as we close our operations.
Afterwards, I want to take the needed time to reflect on these past few years, learn from my mistakes, ask where I could improve, and finally, come out swinging if and when the right opportunity arises.
To our investors, team members, users, and any friends or family who’ve supported us along the way:
Thank you for giving me a chance.
Founder & CEO of Digifox
P.S. - If you require a direct point of contact to ask investor questions, please reach out to [email protected]