Chris Koerner·December 13, 2022

I Bought A Bitcoin Mining Facility for $750,000 | Chris Koerner

Chris Koerner, a serial entrepreneur from the Dallas-Fort Worth area with a background in e-commerce and electronics importing from China, acquired a Bitcoin mining hosting facility in Rockwall, TX for $700,000 in October 2021 — structured as $50k down with a $650k seller note whose payments float with the price of Bitcoin. The real asset was 3 megawatts of existing electrical infrastructure, which would have cost six to seven figures and 6-12 months to build out from scratch. Chris quickly discovered that hosting miners was most profitable when paired with reselling miners imported directly from China, leveraging his prior Shenzhen supply-chain relationships; miner resale became the primary revenue driver within months. A premium hosting rate of 12 cents/kWh — locked into year-long contracts during the bull market — provided a recurring revenue floor that has kept the business cash-flow positive through the 2022 crypto winter even as miner resale revenue fell 60-70% due to crashing hardware prices. By late 2022 the business had grown to 10-12 employees and had converted the Rockwall facility into a 'prep kitchen' for testing and configuring miners before routing them to partner facilities across the US.

Deal facts

purchase price: $700,000 (negotiated down from $750,000 ask)
multiple: ~3x annual cash flow (seller-derived; ~$240k/yr at close)
sde ebitda: ~$20k/month cash flow at acquisition (~$240k annualized)
financing structure: $50k cash down + $650k seller note over 5 years, with loan repayments tied to the price of Bitcoin
notes: Facility included a leased building with 3 megawatts of power infrastructure and ~300 older-model (S9) miners already operating. Seller was not using a broker; listed on BizBuySell. No SBA financing used. Seller was motivated to redeploy capital into a West Texas facility closer to his other operations.

Why this business

Chris had been in crypto since 2016 and had been trying to scale Bitcoin mining with his own miners but couldn't find adequate power infrastructure. He stumbled on the listing while browsing BizBuySell and recognized that the 3-megawatt power capacity already on site was the real asset — it would have cost six to seven figures and 6-12 months to replicate. The facility was 30 minutes from his home in Rockwall, TX, making it operationally accessible.

What's working

Charging a premium hosting rate (12 cents/kWh vs. competitors at 8-9 cents) because demand was so constrained at acquisition; those contracts locked in profitable recurring revenue through the crypto winter
Pivoting quickly to become a miner reseller importing direct from China, leveraging prior experience importing electronics from Shenzhen; resale became the primary revenue driver
Bundling hosting with miner sales — roughly 70% of customers need hosting, so the facility is a prerequisite for the resale business
Building a 10-12 person team and systems during the crypto bull run so the business is better positioned for the next upturn
Using partner facilities across the US for overflow capacity beyond Rockwall, converting the original site into a 'prep kitchen' for testing and configuring miners before shipping to partners
Trust-building strategy of offering in-person visits and FaceTime calls to overcome wire-money-to-China hesitancy among retail buyers

What's hard

Crypto winter caused miner prices to drop 60-70%, gutting top-line revenue even when unit volume held steady
Mining profitability stretched payback periods from 6-12 months to 3-4 years, making customer education much harder
The Rockwall facility filled up quickly with newer, larger miners that draw more power, leaving less physical hosting capacity than originally projected
Hosting contracts at premium rates will start expiring in early 2023, requiring price renegotiation or customer migration
The acquisition coincided with a severe family health crisis (daughter's double lung transplant), forcing Chris to manage the business remotely while relocating the family to Houston
Newer miners are twice the size and power draw of older S9 units, so the facility holds fewer miners than originally planned

Notable quotes

I wasn't really looking at it from like an EBITDA perspective — I was looking at buying the infrastructure and then the miners that came with it and the Bitcoin that miners were mining was just like a cherry on top.

The price looked good and so I started reaching out to the seller and he wasn't responding and he was getting hundreds of inquiries... I just annoyed him to death and we finally got him on the call.

I worked the loan repayments — I tied them to the price of Bitcoin. As Bitcoin goes up I pay him more, as Bitcoin drops I pay him back less.

What was really smart of us looking back was we charge significantly more for hosting than our competitors did. Our competitors were basically breaking even on hosting... our payroll is getting covered by the hosting bills and so basically every miner we sell is kind of like the gross profit is net profit.