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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?

#51

you can rent a licence, there are many banks doing that in EU. I think you need to do a better research..

Can you expand on this? Never heard of this but I'm not super involved in fintech/banking. Something like Solarisbank?

Not OP, but here's generally how you would do it [0].

However, in the EU there are a few other banks to try [1], [2].

In the US, you could try [3].

There's also companies which partner with multiple banking services to provide a cohesive offering [4], [5].

For anyone wanting to do this, here's two issues that I have found.

1) If you don't have banking licenses, the conversation will stop abruptly. Even if they advertise that they may work with you from their website. It's a big hurdle.

To overcome that, I know of 1 company that may help [6]. If anyone knows of any more, please reply.

2) It's rare to talk to VP/Management level operatives, which is where you want to be. Unless you manage to dig out the CEO/COO email and contact them directly. Going from the bottom (contact us form) upwards just means you'll end up speaking to a Z level employee who doesn't know the banking business at all.

Disclaimer: I've contacted over 100 fintech companies. The whole state of affairs is pretty bad. It's improving, but won't be there until 2020 at least.

[0]: https://blog.faisalkhan.com/money-transmitter-license-applic...

[1]: https://www.fidor.com

[2]: https://www.mambu.com

[3]: https://www.crossriverbank.com

[4]: https://www.railsbank.com

[5]: https://www.unnax.com

[6]: https://www.coinx.com

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

#52
post #27

Earlier quoted context omitted.

No you get an asset worth x and use it as collateral against the loan valued as x. You'd have to pay interest on the loan, presumably from making a basic investment. It depends on what the requirements of that 13M are. But if it's just plain 'paid up capital' ... then the company could take the loan, 'owe' 13M, but then 'invest' the money back in the entity they borrowed it from! The regulators may not like this thou…

So you'd still need an asset worth 13M. What sort of assets are acceptable these days? I ask purely out of curiosity.

Wouldn't "the bank itself" be the asset worth $13m? In the same buy-out as happens to a lot of sports teams, as long as you have friendly lenders, you can structure the deal to buy the asset, using the asset as the collateral (like a huuuuge car loan).

If it's always going to cost $13m to get a bank shell, then (although there might not be many buyers), the bank now has a $13m "thing" which they can take ownership of if it goes down the pan.

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

#56
Lots of crazy answers here.

As an industry insider, what you do is buy a bond from a company that specializes in these sorts of licensing bonds. It should only cost you a small fraction of the capitalization requirement each year to maintain.

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

#57
post #29
post #25

Earlier quoted context omitted.

No, because he isn't spending the money. He borrows 13M, and then the 13M just sits in an account, doing nothing, or earning say, the risk-free rate. There's no risk for the lender, because the money isn't going anywhere.

Except if the money gets used for reimbursements/damages that the new startup bank has to pay if it's mismanaged --- that is one of the reasons the money needs to be there, I assume.

[deleted]

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

#59
Do something in the banking ecosystem to get your foot in the door.

What I have noticed in Malaysia are startups effectively handling the {credit card, loan, insurance} applications & such other Web forms that banks are far too incompetent to do effectively.

Once you do this well, you will be on the right path.

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

#60
This isn't the sort of thing to do as a cold startup. The way to do this is what is sometimes called "intrapreneur", as a "startup" within an existing large corporation that can bankroll such a large project.

Are you an engineer, or a banker? If you don't have a track record in the banking industry, you're hosed. No one will give you that kind of money. If you've actually been there for the founding of a bank before, then maybe. Moreover, if you're an engineer without banking experience, you probably have no idea what you're getting yourself into.

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