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Ask HN: How to start a startup that requires a high amount of initial capital?

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Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#31

Post by break_the_bank »

Blackstone4 wrote: post #24

Check out Monzo in the UK. They started as a top up payment card with great technology. This meant they didn't need a banking license. They are now moving into the current/checking account space with a license. So do you need a license from the start? Impossible to tell from your comment.

The idea is heavily borrowed from Monzo. A Payment Bank in India seemed like the closest thing to what Monzo did initially. A full banking license requires 5 times more capital than a payment bank.

That is a good question. I'll see if I can still issue cards that links to one real bank account and if we can bypass being a payment bank.

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#32

Post by Cenk »

Blackstone4 wrote: post #24

Check out Monzo in the UK. They started as a top up payment card with great technology. This meant they didn't need a banking license. They are now moving into the current/checking account space with a license. So do you need a license from the start? Impossible to tell from your comment.

N26 in Germany worked around the same problem by putting the customers actual accounts into an existing bank and just acted as the front-end for those accounts. They later (1-2 years after launch) got their own banking license and moved everyone’s accounts over.

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#33

Post by sandGorgon »

we are a lending startup in India - also a YC alumni (RedCarpetUp YC S15).

We are (now) a regulated entity with specific licenses that took us a crazy amount of time from the Reserve Bank of India.

Two things - first, the business models of payment banks is kind of unproven. Those of us who are in the fintech space in India kind of agree that the regulators kind of screwed up here. I'm hoping you have answers to that. TL;DR - a payment bank cannot lend.

Second, the regulatory structures in India are setup to look at license grants not as a consequence of capital. Even if you had a 100 million USD (and I know of specific examples here), there is very less likelihood of you getting a payment bank license unless you can prove out a gold standard team and board experience. Just to remind you, bank CEOs in India are appointed by the Reserve Bank. They are NOT appointed by founders or investors. One of the CEOs of a very large bank in India just got fired by the regulators for dancing around stockholding regulations - https://economictimes.indiatimes.com/industry/banking/financ...

I feel there is a very low chance of you getting regulatory clearance for this. Indeed, we give out a t-shirt that says "Because, its regulatory" to fresh employees at RedCarpet ! We are tech founders, but we have spent countless hours sitting outside RBI doors trying to make case for several regulatory changes. We were one of the first to get license grants for non-standard lending risk policies to the unbanked in India (that's a billion people!).

Write to me http://scr.im/redcarpetup if you want to come work with us for a while. Maybe you will stay a while and listen to stories of regulatory pacman in India.

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#34

Post by bbulkow »

Yeah, I read all these comments and they miss the obvious answer.

Pitch large vcs and ask for a lot of money.

It goes against the YC grain, but it is the reason there are silicon valley vcs. It used to be that starting a company meant building chips and buildings and assembly lines, and some vcs are structured to write 30m series a, 50m total to build product, and then 50 to scale. A friend of mine is doing this in the database world right now.

If there is a 15m regulatory barrier, then your pitch is why your team is the right one to bet on, and you raise 30m. The money is out there, you can take it

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#35

Post by lmilcin »

It is critical to minimize the risk. Remember, you are taking somebody's money. Their main concern will be the payout and this is the likelihood of future income minus risk of losses. You probably spent some time thinking of future income (everybody does), now do your homework and work hard how to mitigate risks. With lower risks you can ask for more money for less stake in your budding enterprise.

With large amounts of money involved there will be more focus on risks involved and so it gets critical.

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#37

Post by ashraymalhotra »

bbulkow wrote: post #34

Yeah, I read all these comments and they miss the obvious answer. Pitch large vcs and ask for a lot of money. It goes against the YC grain, but it is the reason there are silicon valley vcs. It used to be that starting a company meant building chips and buildings and assembly lines, and some vcs are structured to write 30m series a, 50m total to build product, and then 50 to scale. A friend of mine is doing this in t…

> some vcs are structured to write 30m series a, 50m total to build product, and then 50 to scale

Could you please give examples of a few such funds?

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#38

Post by pokemongoaway »

Demo it without the license such that investors can see that everything is in place to the degree that they think it would work. They should feel like "now all this guy needs are the licensing fees." It isn't so much the large initial investment as it is the large gap between the typical MVP and actual product launch.

Re: Ask HN: How to start a startup that requires a high amount of initial capital?

#40

Post by Annatar »

gt2 wrote: post #4

Disruption. Begging for forgiveness instead of asking for permission. You can see it in many major players that got their start by going around regulations. Once you are onto something, the regulations can be satisfied by backers who see a business plan, cashflow from the side of the business, or perhaps new regulations will form around the new company's business model.

The financial industry is highly regulated and it's a good old boys club; shenanigans like that don't fly and it would land one in jail faster than one could bat an eyelash.
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