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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?

#71

Post by sandGorgon »

sjg007 wrote: post #63
sandGorgon wrote: post #33

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…

I would do a prepaid visa or something.

prepaid instruments in India are regulated. Beyond a certain limit you need to do a full KYC. Issuing a prepaid/wallet needs a license with fairly high capital and regulatory requirements (in the same order of magnitude as the payments bank).

You can issue a card in partnership with a bank or another license holder, but as i said before - in that case you better have a business model for that, because you aint gonna make money from MDR or anything.

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

#72

Post by blihp »

fsloth wrote: post #42
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…

Are there any concrete examples of these larger scale VC:s and the companies they've funded? The small-fry tech startup is the most familiar story.

Pretty much every large tech company you've ever heard of was VC backed originally. Facebook is a recent example with a couple of the VCs putting in 500 million in a later round (see http://fortune.com/2011/01/11/timeline-where-facebook-got-it...) Also see more recent examples with fairly capital intensive companies like Uber and Lyft. The odds of getting tens of millions of dollars in the very first round is unlikely. But that's also an unreasonable ask by unproven founders: you'd need to show that you have some clue what you're doing with smaller amounts in the earlier rounds... Apple got <$1m from their first investor.

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

#74

Post by jeletonskelly »

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…

It's worth noting that licenses can represent assets of a company and have value in liquidation scenarios. Someone else looking for a license may just buy your failing company for $11m and get a $13m license.

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

#75

Post by timwaagh »

well one way to 'hack' your way to bankdom is through founding a company offering sketchy financial advice then expanding to sketchier insurances and payday lending, then to banking. takes about 25 years and you get to be public enemy number one doing this. they 'sadly' went under during the crisis though.

because its so difficult most banks are very old and most new ones are established by existing players.

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

#76

Post by break_the_bank »

madradavid wrote: post #67

I have thought about this myself. I am from Africa and needless to say, we don't have an abundance of VC funds for startups. I have used products live Revolut and Monzo before and loved them, there is an opportunity being missed in places like Africa and other developing economies that have a huge growing youthful middle class that hates the way the established banks operate and is comfortable with technology. I spen…

We are in the same boat. Are you from Africa but working in London/Europe? I am from India but I am working in London.

I have identified millennials to be my main market as well. In India whenever I visited the bank with my father, the person at the bank would try to sell a new card. They always want to "sell" you something, we just have to suck less as a digital bank and the millenials will happily help us get rid of the traditional banks. I've discussed Monzo with a lot of friends, and they have loved the idea.

Curious, what part of Africa are you from? What is the cost of the banking license like there?

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

#77

Post by gt2 »

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.

I actually was thinking more about going around regulations by building a solution which wouldn't be targeted by those regulations, in one way or another (outside jurisdiction or innovative product that does something in different way).

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

#78

Post by break_the_bank »

netcan wrote: post #41

There are two ways to answer this question, two new questions basically. One is "raise over $13m." How? This is not impossible. There is more investor money looking for home today than ever, I reckon. However, this is not a level playing field. Who you are and who you know and how well will make a big difference. This is probably the wrong place for advice about this strategy. The second possibility is "what is an ea…

I'm 23 and I just started working last year as a software engineer here in London. I don't see myself having a network that allows me to raise $13M in capital.

Taking the longer route to creating a bank while working on something in that direction is really good advice.

I'll read the pg post :)

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

#79

Post by break_the_bank »

sonnyblarney wrote: post #9

Partner with a bank. Or get a hedge fund to buy a bank shell, have it as an asset, and use that bank. If your startup fails, they still have the asset. Or you may just need to have access to 13M, it's probably not the fee. So - you can just borrow 13M and use the 13M as collatoral. If you structure the deal right, it's 100% risk free. Moreover, you may be able to invest the 13M in which case you can still return an i…

True, the 13M isn't the fee but its money that you need to have to start a bank. You don't need to spend it but you need it in case you have some damages/reimbursements.

I'm closely looking at partnering with a bank. I could possibly look at banks that traditionally don't have a lot of debit card sales and see if they are interested in what I have to offer.

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

#80

Post by break_the_bank »

csomar wrote: post #47
break_the_bank wrote: post #31

Earlier quoted context omitted.

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.

You can re-issue international debit cards and sell them. The vendor will give you API and you build the interface. If you can convert local indian currency to USD, then it can work for you. From there, you get traction and then ask investors for cash.

I'll look at this. I didn't think of this, I am a little skeptic about Reserve Bank of India allowing this. Thanks for the lead.
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