A startup that wants to expand access to bitcoin mining raises $1.7 million round led by Galaxy

A mining firm looking to democratize exposure to the highly technical underbelly of the crypto market has raised $1.7 million in venture funding to scale its operations. 

Announced Wednesday exclusively to The Block, Compass Mining said the raise was led by Galaxy Digital and included participation from CMT Digital, CoinFund, Coinshares, Rarestone Capital, and BlockFi's Zac Prince. Galaxy's Amanda Fabiano and Coinshare's Meltem Demirors are joining the firm's board. 

The firm operates a two-sided marketplace—one looks much like sites like Hotels.com or Expedia—that pools together bitcoin mining hardware suppliers on one side and buyers looking to buy that hardware on the other. Typically, access to such machines is limited to those with a lot of capital, but Compass allows users to purchase individual mining machines.

The buyer then holds an ownership stake in the machine but the supplier operates it for them, transmitting the proceeds to the buyer as the hardware generates BTC. In some ways, the approach is akin to the cloud mining model, whereby an operator rents out or sells hash rate from their stock of machines. 

Since the firm began operations, Compass Mining has sold $11.4 million in mining hardware. In February, the firm mined 6.5 BTC across about 1,000 customers, according to CEO Whit Gibbs. The former television producer told The Block that its earliest customers "who bought in late October were able to make a return on their investment in mid-February."

Compass's fundraise comes amid a period of heightened activity for the North American mining sector, which has drawn the attention of institutional investors. Elsewhere, Galaxy Digital announced its own business in the market and DCG's new mining unit foundry said it would colocate $14,000 bitcoin mining machines in the US to target institutions.