
That'll do, pig, that'll do - exolymph
https://medium.com/@oscargodson/thatll-do-pig-that-ll-do-8998f9df9f77#.65ygnw6fy
======
Animats
This isn't about an "app". This is about a business that initiates transfers
of money from one account to another. The people behind this didn't realize
what business they were in.

If you want to initiate transactions in the financial system, you have to work
through what happens when things go wrong, and be prepared, financially and
operationally, to handle them. How does the money get from the parent's
account to the kid's account? Note that if the kid can get cash out, you can't
fund this with a credit card. Visa and MasterCard don't let you buy money with
a credit card; that's too fraud-prone.

So, as someone pointed out, you're back to ACH debits. Getting set up for
those is hard, for good reasons. It gives you a connection to other people's
bank accounts. So you need financial strength, bonding, and good references.

Note that the chore list has to be secure, too. Otherwise the kid can add "Mow
lawn, $1000", check off the item, and drain the parent's account.

If you try to do this by having the parent transfer money to you in advance,
and you then release it to the kid later, you're now a depository institution.
In most states, you have to be a bank or a money transmitter to do that. (It's
so tempting to take the money and run, and that's happened enough times that
such businesses are regulated.) Also, that's a pain for the parent. They might
as well use Venmo.

PayPal was successful partly because, back when they were above the bike shop
on University Avenue in Palo Alto, they started as a security token maker. So
they had security people and were familiar with the problems. A big portion of
PayPal's operating costs come from dealing with fraud. The legit transactions
are fully automated; the problems require a big call center.

~~~
StavrosK
I don't understand why they couldn't simply release the app without the money
transfer part, and it would just keep a tab of how much the parent owes the
kid. Then, when the parent gave cash or whatever, the debt would just be
wiped.

Pretty much "freshbooks for chores".

~~~
btcprint
Would be a perfect way to introduce kids to cryptocurrency. No need to deal
with regulatory agencies. The "points" (btc/ether) are actually worth
something (whether more or less in the future).

kid marks they've completed task, parent xfer bits to kids wallet. Kid can now
buy games at newegg or gift cards from tons of stores through Gyft.

the smart kids (like my oldest daughter) roll the dice and Alex p. Keaton it
for long term savings that has decent potential to multiply in value.

I do this with my kids already, but with no app..just verbal "do this and I'll
pay you $0.25 in bitcoin" an app with actual chore list they can work through
and automate fund transfers would be awesome.

If you're a rich VC make sure you PM me to partner up. There's only one way to
successfully monetize this, and I'm the only one who knows it.

Small target market but growing every day...the power of "frictionless
transfer of value outside the insanely regulated walled garden of fiat banking
and high finance"

~~~
codecamper
can bitcoin be converted into money outside the US?

~~~
Natanael_L
There's plenty of exchanges outside USA. Safello is currently the big local
one here in Sweden, and there's plenty of bigger ones in other European and
Asian countries.

------
qq66
I feel that there are structural problems with this business concept that
wouldn't be solved by a bank partner / additional capital / etc. Note that I
am not a parent.

The fact is that kids should not be paid for chores on a chore-by-chore basis.
This is perhaps the way that you should do things if you just need labor from
your children, and want someone who will rake the leaves for cheaper than a
hired gardener. But most parents also want to teach their children good
values, and one of the most important social things to learn is about
reciprocity in relationships. In transactional relationships, where you will
perhaps never see the person again, reciprocity must be established
immediately (paying for a cab ride, tipping a pizza delivery person). But in
social relationships, immediate 1-for-1 reciprocity actually damages the
relationship. If you were invited to a dinner party, would you try to pay the
host for the cost of your food? Of course not. If it's casual friends, you
might bring a bottle of wine, and if it's very close friends, you may not even
do that, as you know you will be inviting them over at some point. Paying a
child per chore teaches them to treat their family obligations as
transactional obligations, rather than teaching them about the nature of
reciprocity in a close personal relationship.

Also, when teaching kids about money, I think that many parents prefer to
teach kids about "the value of a dollar" with cash, rather than with a bank
balance. My parents opened a bank account for me in 4th grade, which was very
unusual at the time, to encourage me to save my money, but even then I found
that spending money was and is a lot easier when it's a number on a screen
than when it's paper money that you take out of your wallet. By first finding
pennies and nickels on the street, then getting $5 bills from their parents,
and then graduating into a bank account, people learn to appreicate just how
many found nickels it takes to buy a flatscreen TV.

~~~
zekevermillion
When I tunred 5, a beloved great aunt gave me a crip $20 bill for my birthday.
My mom helped me open a bank account, and deposit the money (along with the
contents of my piggy bank). About a week later, I wanted to know if I could
get my $20 back out to admire it. I was told that I could get _a_ $20 bill,
but it would not be the same one. I found this very upsetting, and I think I
may have cried.

~~~
cperciva
They should have told you that $20 bills are like electrons: Every one of them
is the same one. :-)

~~~
gruez
Not sure if the kid would believe it when he gets back a wrinkled old bill.

~~~
roywiggins
Whenever I've withdrawn money from a bank in person I've gotten nice clean
bills, fwiw

------
xigency
I'm not entirely sure why there needs to be a financial services or banking
contract to build this app and startup. What's wrong with PayPal? Or bank
accounts? Or Stripe/Square/Braintree? Paper checks?

This might be a little harsh for what seems like a sincerely useful app and
startup, but the problem with the "Yo" startups is that it's just raking
leaves (money) to compost them or light it on fire. If the value is in the
app, sell the app. If the value is in other people's products and services,
then there's no value in it. And if the value is in the "idea" then it's
hopeless. If the value is in the fundraising, then we're lost.

What I don't see is why the idea, PiggyBank, couldn't be functional in the
first week. Just like I don't see why a company needs $X billion with no
imaginable costs or expenses to put that money toward.

Let's say it isn't possible to do mobile-to-mobile payments (which I think it
is), or online payments, without owning a bank — then why not release the same
app and when you do the chores for your parents or your uncle they put money
in a jar? Beyond not making revenue, having users is at least some sort of
reward. When you have the revolutionary breakthrough, add that to the app.

And finally, don't leave your job over something you think is a good idea.
Make it a reality, and if it takes all of your time _and_ it can support you,
then make the jump.

Obviously these aren't things any founder wants to hear, but someone with a
greater risk aversion might be able to be as productive with a more realistic
focus than the average SV press release.

Edit: Obviously this is a little naïve considering all things, but I'd still
like to see the payments possible on a "small business" scale of things.

~~~
Xyik
I'm also curious about the bank integration issue, but I'm tired of people
saying things like why app x or website y "couldn't be functional in the first
week".

have you launched an app that you expect to build a company out of? it takes a
lot more work than most people think. people love to over-simplify building
software by saying 'its just an app', oh, twitter is just a list of sorted
strings, seriously try building a solid, fleshed out product you expect
thousands of users to use in 1 week. it's not that easy.

~~~
xigency
Fair points. I really am commenting as an outsider, so don't think that I
speak from experience. As a programmer, though, I am much more interested in
seeing something built than in selling it or seeing it become popular, which
fair enough are the next two places a startup can fail.

"One week" is also hyperbole because it isn't possible to deploy _anything_ in
that amount of time, so maybe in the first six-months is a fairer comparison.

~~~
lmm
> "One week" is also hyperbole because it isn't possible to deploy anything in
> that amount of time, so maybe in the first six-months is a fairer
> comparison.

Not true. One week is plenty of time to plonk down a website in a basic CMS
with an email form, or even a bit of code that sends you a daily spreadsheet
of orders or whatever. Often that's all you need to validate the idea.

~~~
schwarrrtz
Yup, and you can even spend $50 on AdWords and estimate your CAC by measuring
conversion rates.

------
pookeh
Some people here are commenting on how bad the idea is. There are worse ideas
out there that did and continue to do so much better.

The problem here I think was defining the MVP with a timeline. They could have
just started with some virtual currency (like a point system) ... kids don't
care about money or points as long as they accumulate something. This virtual
currency or point system could have been used by parents to say to their kids
"if you get 20 points I'll hand you a $20 bill".

You can make an app like that pretty fast, independent of any "partner
ecosystem" and then if the idea lifts off then invite the big players into
your ecosystem.

Everything they did was opposite.

~~~
swagasaurus-rex
Exactly.

> If you need to raise money to launch your product do that first. Don’t even
> think about building out your product outside of a very simplistic
> prototype.

There are products that need initial cash, but this isn't one of them. If they
had a fully functional MVP that people could use and enjoy, funding would come
to them.

------
themartorana
My comment is late, but the thing I take away from this (and I'm biased) is
that the VC-first track is as terrible as it's been made out to be for years.
Now they have a real business, helping people for money, and all the crazy
shit they had to deal with as a start-up isn't a factor now. They've
bootstrapped, successfully, and NOW would be the time to start working on a
product.

I get it, opening another consultancy isn't the most glamorous thing, but man
it gets you to solvent quickly. Then you build a product in your off time
WHILE being your own boss. The flexibility is awesome.

That's what we did. Somewhat accidentally, but it's awesome. Now we are a
product company with no investors and 100% equity.

Now that's not to say that someone shouldn't take money - but do it now, after
you're a business, after you stop wondering where the next dollar is coming
from.

It's not a bad way to go.

------
Cozumel
So basically this was a 'to-do' app like you can find on any beginners
tutorial (quick Google example:
[https://www.thepolyglotdeveloper.com/2015/03/create-todo-
lis...](https://www.thepolyglotdeveloper.com/2015/03/create-todo-list-mobile-
app-using-ionic-framework/)) the only difference was banking integration which
would have been trivial to add in, they could use paypal, stripe, take the
payment themselves and pay the kids out in apple credits etc

Somehow not only did they convince some poor sap to give them $100,000 for it,
but that wasn't enough, they had to keep 'fund raising'. They had no outlay at
all, just build the app and deploy.

I'm really struggling to understand the mindset here, not just of the
developers who didn't need any investment to write that app, but the people
who actually dumped money into it.

~~~
ChemicalWarfare
The app is reasonably simple, except of course it's a little more involved
than a to-do list from the get go since you have to maintain user's accounts,
assigned tasks with mutable states, transaction history etc etc. But yea no
rocket science.

Banking integration for this flow would be reasonably involved though. To get
set up with a merchant account to take the funds is reasonably simple although
you'd have to figure out how the payers tie their payment instruments to your
system so you can actually charge them and then develop the functionality to
drive that (more dev work). OK.

So now you have the funds that you need to be able to move to recipient's
accounts. THIS is where the fun begins.

Provided that you have the registration flow for the recipients in place
(which means more dev work but anyway) now you have to be able to disperse the
funds to their accounts, track payment statuses, reconcile data across
multiple sources so you are aware of the current state of the payment etc etc
ad nauseam.

And if you're touching a credit card number don't forget about PCI compliance
:)

------
giarc
I love these type's of posts. Very raw, very honest. Sure it's a pitch for
their new business but they deserve the free ad since they got me to read to
the end.

~~~
amiraliakbari
Agreed. Is there a maintained list of posts about startup failures/learned
lessons?

------
MOARDONGZPLZ
I may be totally out of touch, but why would someone give someone else
$100,000 for an app? And why wouldn't $100k be enough? By the end they needed
$700,000 "bare minimum."

I just don't get how this can cost so much.

Making something like this in one's spare time while getting paid with a
salaried "real" job seems like it would totally be sufficient to get moving.

But assuming it really takes $700k on hand to get these bank sponsors, why not
just change the model slightly. For example, integrate with Square cash or
something similar. Square is dead simple to use and the money arrives
instantly, not sure if it's integrate-able in this manner though, but the
concept stands.

And then maybe when the company is really successful with tens of thousands of
subscribers, partner with someone to add direct bank account integration.

Sorry if this sounds callous because I really don't mean it to be, I'm just
flabbergasted the amount of money involved for some app someone came up with
randomly.

~~~
vinceguidry
You really need about a million dollars to make a marketable product. (not a
lifestyle business) You can either put a million dollars of your own blood,
sweat and tears in, in which case it'll be the wildest ride of your life, or
you can deploy capital.

It looks like it's just code but it's not. There's a dizzying array of skills
and knowledge you must be able to deploy effectively. If your product is not
in an established industry and niche, if a bank can't understand you, that
makes everything much, much harder. There's a reason franchises do so well.

When you get started, you don't know what's going to hose you. It's easy in
retrospect to say that they shouldn't have messed around with a business model
requiring a bank partnership to get started without already having that
partnership before building anything, but they didn't understand that going
in.

~~~
mgkimsal
> It's easy in retrospect to say that they shouldn't have messed around with a
> business model requiring a bank partnership to get started without already
> having that partnership before building anything, but they didn't understand
> that going in

Doesn't have to be in retrospect. Why didn't any of the dozens of experienced
investors they met with tell them this? "You're too early" is too wishy washy
for them to have got the message.

~~~
cookiecaper
Because it's rarely in someone's self-interest to give honest feedback, which
is true for investors, potential employers, departing employees, and almost
anyone else in a position to issue some type of denial. Instead, they part
with something ambiguous, non-committal, and ideally flattering because it
covers their butts and allows them to backpedal if necessary. Since the stated
reason for declining the relationship is airy, you can't really get in a
shouting match over it if the applicant/founder/whatever disagrees, and you
don't offend them and preclude the possibility of future engagement.

Politically and socially, it's almost always best to speak in platitudes, be
ambiguous and non-committal, and refuse to give concrete information or
rationale that could be used in the future to show that you were wrong about
something. People usually _do_ have a specific objection when they're turning
down a request, but they just know that it doesn't help them to tell it to
you, which is why it's always wise to cherish those who care enough about you
to be honest.

~~~
Udik
> Because it's rarely in someone's self-interest to give honest feedback,
> which is true for [...] almost anyone in a position to issue some type of
> denial. Instead, they part with something ambiguous, non-committal, and
> ideally flattering because it covers their butts and allows them to
> backpedal if necessary.

I broke up with a girl a few hours ago and this sounds so cruelly true.

------
pedalpete
Two comments 1) If the investor had another idea of how to make the product
work, why did that not come up earlier? You should be working "with" your
angel investor, not selling your work to him so he can run it.

2) You took the wrong lesson from this. "Don't even think about building your
product" is the wrong mentality. Build it quick and get a few people using it.
Figure out what you need to do to get people using it. The MVP for piggybank
didn't include payments (possibly) or it had something else.

The founders here didn't find a way to make this product work. It's a great
idea (I think) and now the first Angel investor is going to take it and make
it work because for some strange reason the founders saw the hard road, the
one which could break them and destroy their dreams and they decided to run
straight into that wall with their eyes closed instead of finding a different
route around.

------
hristov
They got really screwed by their first banking partner. This is when having a
good lawyer would have helped.

The correct course of action would have been to politely tell the bank that
they would not free the bank from their duties under the contract but would
welcome any new introductions. Under their duty to limit their damages, the
startup would do everything possible to find a new bank partner, and if they
did the original bank partner would be free from their obligations without
paying any damages.

This way you get the bank to help you but still be liable under the contract
if things do not work out.

Of course nothing here is legal advice, every situation is different, so do
consult a lawyer for your own situation.

~~~
brianwawok
You think a big bank contract had them hold any liability?

------
paloaltokid
Echoing what many others on this thread have said - FinTech isn't just hard,
it's _insanely fucking hard_. The technology piece is truly the easy part.
Build the app, design a nice interface, and so on.

Then you have to deal with the banks, and yes, you absolutely must deal with
the banks. There is simply no way around it. Anything having to do with money
is heavily regulated and for good reason.

The first rule of creating a product that involves money is that people will
look for ways to exploit it (read: fraud). There are many great FinTech
startups out there right now wanting to do great things and the simple truth
is that it is orders of magnitude harder than just about anything else.
Barring, maybe, sending people to Mars or disrupting the car industry. :)

~~~
gerbilly
I worked for a startup where we had to take credit card payments.

The first bank we dealt with let us sign up for a merchant account, even
knowing the kind of business we were in would require 'cashing out' winnings,
without batting an eye.

Then in the first weekend with our shiny new merchant account [1] we racked up
5 figures in sales and they froze the account. They said they suspected fraud.
It was an insane hassle to get people their money back.

I assume the guy got a commission for signing us up; no loss to him if the
merchant account didn't actually work for us. ¯\\_(ツ)_/¯

Later on we found another way to pay people out, and signed up with a better
merchant account that has redundancy,[2] i.e. it is backed by two merchant
accounts behind the scenes, so we can switch to another one if one of them
get's 'upset.'

Credit card merchant accounts can be shut down on you for any reason at any
time, we've learned, leaving a complicated mess to sort out.

[1][2] After a considerable amount of development work to integrate with their
API.

------
theinternetman
Just seems a bit absurd to me the amount of effort put into an idea that can
be replicated in your own home by putting money in a jar for the kid and then
when it's full enough to buy skyrim or whatever put the money in your pocket
and order it off amazon for them.

Get to engage with your child on a person to person basis too… not parent via
an app and servers.

Not to mention I really don't understand where all the investor money went
with no product to show for it. Seen as the payment part never got fully
fleshed out we're left with a several thousand dollar todo list...

~~~
getmetheswan
The fact is that the solution needs to evolve as the kid gets older. This
specific solution - a card based one - is best suited for teens.

What if your 14 year old is going to soccer camp in another state for a month?
Handing them a jar stuffed with $400 of cash is not a great solution.

~~~
intellegacy
If your 14 year old is going to another state for a month then your 14 year
old isn't going to be doing chores and you won't be needing to tip them for
said chores.

I agree with theinternetman that this idea was ill-conceived and easily
replicable.

------
megablast
It seems like they concentrated on the easy stuff (design, app, marketing),
and ignored the hard stuff (banking). You need to do the opposite. Work out
what is hard, get that started asap. Visit it every single day. When you are
blocked and waiting, then you do the easy stuff.

~~~
kromem
Actually, they probably should have pushed the banking part to a phase 2, and
actually finished building the rest, and opening that up to end users.

The debit card is a nice add-on to the concept, but not at all essential to
execute the concept.

------
jhwhite
This sounds like a neat concept but then again is this something that really
needs to be automated with an app?

A friend of mine made a kanban board for chores. There's some chores that have
to be done within a week, and there's some that are optional. The optional one
has money clipped to it and when the card for that chore is done the child can
take the money. And the mother is the one that moves the card to done.

So kind of the same thing as this app, but a physical board. And I don't see
how moving this to an app really enhances or disrupts the physical board.

~~~
imtringued
This app is basically a todo list app with financial transactions just for the
hell of it. A simple points system would have been enough and then the kid
would show the score to the parents to get the money.

------
Zelmor
No better way to ruin children's motivation to do something for its own sake,
than paying them for chores. Nothing personal, but I'm glad thjs project
flopped. So many children are better off without external monetary motivators.
Those will lead to disaster in their lives and 9-5 jobs they hate.

------
orasis
The lesson here friends is to fail faster. The lack of momentum on the
kickstarter should have been a clear red flag.

~~~
kromem
Not really. Kickstarter for a software play is a fool's errand in the first
place.

Kickstarter works best as a marketplace for things that don't yet exist.

How does software that is "free" (I'm guessing they planned on taking a fee
off of transactions) have a value proposition for people on kickstarter?

Their big mistake was not having the payments backend as a secondary stage
goal. They should have built the chore tracking sans payment integration (or
using a typical payment processor like Stripe/Dwolla/PayPal to process), and
got that up and running with real people. If they had a proven model for
everything short of the debit card, fundraising would have been much easier
than "we promise guys, this is totally going to work."

------
ultimatejman
No MVP. No talking to users. No strategy. No surprise they failed.

MVP - build an app with parent login, child login and a points system for
chores.

Talk to users (parents) by having chat in the app.

Find how to acquire users cheap, retain them, and make them pay. Go for a bank
partnership when it is a compelling business proposition. Banks like money,
not startups with no profits and no users.

------
Johnie
A former Googler just launched www.nickel.co, which is an app for kids to
manage their allowance. Their backing bank is Sutton Bank.

My guess is one of the partners that they were referring to is CorePro
([http://corepro.io/](http://corepro.io/)) which was spun out of SmartyPig
([https://www.smartypig.com/](https://www.smartypig.com/)). Their backing bank
was Lincoln Savings Bank.

One of the consumers of CorePro was Qapital (qapital.com). It seemed like
recently, they switched models from Lincoln Savings Bank's individual account
to Wells Fargo's custodial account.

In any case, if you're doing anything in consumer FinTech, the
technology/product is the easy part. Banking partnership, customer
acquisition, and unit economics is the hard part. Focus on solving the hard
part first before building the technology.

Edit:

One thing that they could have done for an MVP is a bring-your-own-bank-
account model.

1) Parents would open a bank account for their kids (or the kid may already
have their own bank account)

2) Integrate with Plaid Connect to get ACH info.

3) Use Dwolla ACH API (free) to transfer funds between parent's bank account
to kid's bank account. (The downside of this is that this is a 2 legged ACH
transfer which may take up to a week -- but for this use case, it shouldn't be
a problem.)

This will get them the same value proposition that they would have had with
bank integration. Once they prove out the demand, they can then optimize:

1) [Reduce ACH lag] Use an actual ACH processor that will handle the transfer
between accounts. The downside is that this is expensive.

2) [Reduce ACH cost) Use a real bank (Wells Fargo, Chase, Citi) as an ACH
processor -- this cuts out the lag in transfers. The catch to this is that to
work with these banks, they want to see sufficient activity

3) [Eliminate need to bring your own bank] Partner with existing bank to
provide account opening service. If you can prove sufficient activity and
traction, many regional banks are interested in a lower cost customer
acquisition channel and innovative products. Alternatively, use custodial
accounts and they can earn float on the deposits.

What they were trying to do is jump to #3 before proving out the demand.
Secondly, banks are approached all the time by startups to do these types of
"partnerships". To banks, unless you can show traction or sufficient volume,
it's not worth their time to work with you. The large banks (WF, Chase, etc)
don't see much business from this area. The small banks don't have the
resources or risk tolerance to do this. So you need to find the sweet spot of
banks to establish these relationships. There are a number of regional banks
that are willing to work with startups (tip: scout the ToS of these fintech
startups to see who they have partnership with)

I'm not sure what their monetization strategy was going to be, but the unit
economics here don't really work out for low deposit amounts.

(I've spent a lot of time research this area in FinTech)

~~~
getmetheswan
Johnie,

Any chance we could chat? I am NY based and sounds like we tread similar
territory. This analysis is scarily on point!

G

~~~
Johnie
Sure, send me an email and let's connect.

~~~
getmetheswan
I am new to posting here - can't see your email. I've put mine in my profile.
Just pop me a note and will take it from there.

------
rjbwork
One of the things I see a lot of people screw up on is trying to get
"traction" and buzz and virality going BEFORE they actually have something
that is fully functional in people's hands. Seems to me that if your buzz dies
out before the product is actually ready to be used in it's basic
form...you're screwed.

~~~
ultimatejman
No, this is probably the only thing they did right. Getting early traction is
important for many reasons.

\- It gives you an opportunity to get early feedback from people interested in
your product. If you can get an email you can talk to your users. \- It gives
you some early KPIs and a limited, but important understanding of acquisition
channels. If you can't find any one who is interested in your product as a
concept, how will you get users? \- It motivates companies to get products out
earlier. \- It helps when talking to investors to mention that you have 1,000
people on a waiting list.

I agree though, you always need to get the product to market.

~~~
rjbwork
I get your point, but I think that if you're consumer focused, and your app
doesn't actually do it's core function when you start drumming up hype, you're
screwed. Consumers have a low attention span and want instant gratification.
You may only have that once chance to get them hooked, and a beta sign up list
has pretty low engagement rates. If they hear about the hype, find a beta sign
up page, and bounce, you've lost them.

------
harel
In the UK we have gohenry.co.uk. They partnered with Visa and the kids get a
debit card, chip&pin and all, that I as a parent can set how and where they
can spend their money, auto weekly allowances, chores and the payoff for them
etc. Its works quite well, and I pay a few quid a month for the privilege.

~~~
BukhariH
GoHenry haven't really "partnered" with Visa.

They're just on a prepaid card program provided by IDT Financial Services (if
scroll to the bottom you can see it listed).

Same company that provides prepaid cards to Osper.

There's a half dozen prepaid card providers in the UK.

There's also Marqeta in the US (used by doordash to by food on your behalf)
who they could have used also well as a dozen other prepaid card providers.

They just made it hard for no reason.

~~~
getmetheswan
'They just made it hard for no reason'. LOL. Osper has raised over 11MM. It
takes a lot more than a kickstarter campaign to fire up a card program like
Osper or GoHenry. Give Marqeta a call and check out their fee structure.

If there is constructive feedback here, it is that there were smaller, cheaper
hops PiggyBank could have taken to get a smaller product out there earlier to
validate assumptions. And if they had taken a few of these hops, they would
have learned along the way, and maybe one day would have had a chance to pitch
for a 10MM raise. But they didn't.

It feels like a typical 'first startup' experience - as founders, not
employee. At least there is some really great collective feedback in this
thread about how they could approach things differently if they were to try
again. Unfortunately, little of it is on tap when there are just two people in
a room trying to navigate a path.

Thanks for sharing Oscar.

~~~
BukhariH
> "It takes a lot more than a kickstarter campaign to fire up a card program
> like Osper or GoHenry."

No, it doesn't. At our startup we managed to get on a prepaid program without
funding (we are a London based startup). Infact, through negotiation we even
got the sign up fees waived.

And, we did all that before we had ANY funding.

> "Give Marqeta a call and check out their fee structure."

We did call Marqeta but they're not yet in the UK. Can't discuss pricing
because of the NDA they make you sign but I can tell you that we didn't have
to pay anything to Marqeta during development.

But, either way my issue is that they kept blaming their banking partners for
the failure of their startup instead of taking an actual critical look at the
mistakes they made.

~~~
getmetheswan
I can't comment on the UK eco-system, but things are definitely more difficult
in the US.

You first have to convince a prepaid provider to work with you. You'll need
runway for this. You then have to convince a bank to back your card program.
For this you also need runway. And if you get through that and start
developing, you are immediately on a clock since card program fees are
substantial when they kick in.

Let's say it takes you 6 months to get from scratch to launch and fees are
waived up to that point. I'd guesstimate you now need a minimum of 25K
retained users on your card program to cover costs. If you have a conversion
rate of 5%, that means 500K downloads. And that's before factoring in churn.

The PiggyBank team raised 100K. They were two people and iOS only. It is a
stretch to think they could achieve all of this before running out of cash.

I am with Johnie and a few others - the lesson is to try something less
ambitious first and use success there to raise money to build something more
ambitious.

------
forgotpwtomain
I really find it hard to empathize with these kind of founder stories -- what
I see is a technology that's trying to solve a problem where a problem doesn't
_really_ exist and then the frustration of failure. Maybe find a problem to
solve that actually matters?

~~~
fullshark
I'm not sure the writer wanted empathy

------
nhangen
I came into this thread and expected to read encouraging and/or consoling
comments, and instead all I see are people bashing the idea and its execution.

Of those bashing this business, how many of you have actually built something
of your own, and of that group, how many of you have become successful doing
it?

If you look hard enough, you can find flaws with any business concept. It's
the entrepreneur's job to stay alive long enough to recognizing and fix those
flaws. You don't fix them on day 1. Sometimes it takes years, even decades.

How about instead of tearing these guys apart for trying to build a business,
we congratulate them for going all-in and paving the way for future
entrepreneurs to get this concept right?

~~~
intellegacy
I agree for the most part. But this kind of effort needs to be criticized.
They made huge mistakes and they need to be pointed out so that others can
learn and do it better on their attempts.

Their execution, (and the idea), frankly, were awful.

Execute by all means but execute smartly.

~~~
nhangen
Sounds to me like backseat entrepreneurship

------
elif
The way I would have done it:

1) Parents are charged via typical merchant mechanism to fill their account
with "credits" worth $0.99 each, costing $1.00, and can optionally allow the
app to automatically top-up their account when low.

2) The service sends cash in a registered mail envelope at a frequency
configurable by users, with mailing fees paid for by credits.

Then the business can function and grow a user-base, and by holding the
balance, the company can build up a lot of cash-on-hand which will enable them
move onto the bank integration they originally wanted. Bonus: receiving
legitimate mail and getting cash in hand are very exciting experiences for a
kid.

~~~
Johnie
If you were to do this, you'd be violating multiple federal laws and
regulations.

You have basically created a stored value and money transmitter business
without the proper license. In addition, you've created a conduit for
criminals to launder money.

See:

* Liberty Reserve - [https://www.justice.gov/opa/pr/founder-liberty-reserve-plead...](https://www.justice.gov/opa/pr/founder-liberty-reserve-pleads-guilty-laundering-more-250-million-through-his-digital)

* Ripple - [http://www.americanbanker.com/news/bank-technology/fincen-fi...](http://www.americanbanker.com/news/bank-technology/fincen-fines-ripple-labs-over-aml-says-firm-enhancing-protocol-1074173-1.html)

* FinCen MSB fines list - [https://www.fincen.gov/news_room/ea/](https://www.fincen.gov/news_room/ea/)

Disrupting finance is hard for a reason.

~~~
codecamper
Wait a sec, so Uber, AirBNB, 99designs... etc etc, who all collect money &
then disperse it to service providers... You are saying all of these companies
require a special license?

~~~
getmetheswan
Yes. Amazon for example was a normal merchant for years and did not need a
money-transfer license. However, as soon as they decided to open a marketplace
for 3rd party stores, they required licenses. And they got them.

The rule is simple - if you take and hold on to customer funds, you need to be
licensed for money transfer in all the states you operate in.

Today, a few services like Braintree and Stripe offer a middle ground
solution. Essentially, they will open an escrow account for your merchant
customers, and you move any money your holding into the escrow. They will then
hold the funds until you release them. This approach is clever, but still a
legal grey area.

------
markbnj
I did a payment card thing back in the 90's with a couple of friends, during
the first Internet wave. We actually got some traction and signed a few bank
partners, but ultimately it is very hard to be disruptive when you require
access to a massive, privately-owned network that is controlled by the same
institutions you might be threatening. All you have to do is set eyes on
Mastercard's marble palace on the Hudson to know who is calling the shots in
that world.

------
shitgoose
Liberty Reserve would have solved all your problems, but Budovsky rots in
jail. And you guys go through emotional roller-coaster with banksters who got
lost in their own regulations.

Another observation - you had a great idea that delivers clear value. Didn't
happen. Now, by looking at your web site, you quite successfully sell some
bullshit to other bullshitters who sell their shit to VCs, who sell their shit
to innocent bystanders. Hell of a transition.

------
mywittyname
I don't understand why they gave up the company instead of pivoting to the
cashless approach that the original investor wanted anyway.

~~~
monk_e_boy
The only thing the app did was: list the chores; pay the kid. Without the
payments the app was a list app.

Not really going to pay the bills.

~~~
imgabe
Why do you even need an app if you're paying your own kid? Presumably, their
account will be at the same bank as your account. I've had accounts with BofA
and USAA and they both have super easy ways to send money to anyone else with
an account at their bank. I'm sure most other banks do too.

~~~
cityofdelusion
This is what I am wondering as well. Both of the banks I have used in the past
(one large national, one tiny credit union) have special "youth" checking
accounts that can be co-owned by parent and child. Both of these banks had
apps that let you transfer money between your own accounts super easily, and
like you mentioned, between any accounts at their institutions fairly easily.
You mentioned USAA, and I believe they actually let you send money to any old
e-mail address (method of transfer depends on recipient and who they bank
with).

The banks themselves aren't really sitting on the sidelines and waiting for
disruption. Lots of them run "incubators" for their internal teams precisely
to stay relevant. Apps like this face a real uphill climb.

------
swalsh
My backseat quarterbacking here... I feel like these guys focused on the wrong
things, the fascinating thing though is that with all the help they had, no
one told them.

I would have got a marketing person in on day 1. Who needs a "back-end
engineer" if you have no users using the product. I wouldn't have rewrote the
app. Who cares how maintainable the app is if you have no users. I would have
looked for a more realistic back-end route that can work today while I work on
the bank integration (why not top up gift cards? I've paid people to write
blog articles for me in Amazon Gift Cards. They're as good as cash.)
basically, just keep plowing until get from zero to one. Even if one looks
NOTHING like your original vision.

------
bikamonki
Great post-mortem thanks for sharing.

Did you try a model where your app would be a great vehicle to sell (yet
another) credit card to parents plus additional cards to their kids? In that
model transfer transactions would be internal to one company and maybe they
would already have an API to interact.

In my country risk investment or VCs are nonexistent so every time I think
about funding one of my ideas a possible option is to use a big business where
they serve as the distribution channel while the app serves to drive sales. In
telcos for instance, apps could be a selling point in corporate sales; say a
job tracker that helps a telco nail a contract with a contractor firm.

------
hoodoof
This story rings a bell on so many levels.

Not because my stories are the same, but because the entrepreneurial journey
is so long.

You have to try over and over and over again and keep learning every time and
every time it fails for a new reason there's a new lesson.

------
eljimmy
It sounds like they were near bankruptcy right before they gave up the app.

How do you go from near bankruptcy to starting a consultant firm and
generating income in your first month? Would love to hear that part of the
story.

------
graycat
Sounds like "Don't count chickens before they hatch" or, in this case, don't
allocate time or money or sign deals or promise things before are darned sure
can do them -- better yet, have those things already done.

Or basically have a plan that has the startup go live and get revenue enough
for break even before making promises. Then, when one of the unexpected things
happens, the launch date is just pushed out another month or two but don't get
into trouble with investors, bankers, lawyers, employees, etc.

------
ohazi
> We were behind on payroll taxes

Don't ever do this:

[https://news.ycombinator.com/item?id=8080884](https://news.ycombinator.com/item?id=8080884)

------
sakopov
Something I see a lot of in my area. A couple of people, usually friends, pair
up for an app or a saas idea. It falls through for one reason or another. A
little later the same folks end up launching a web dev agency, work on random
contracts and make a ton of money. I have no idea why more people don't just
pursue that to begin with. I have a friend who makes very good money doing
this while keeping his full time job.

~~~
kromem
Much less of a sex appeal vs a successful B2C startup app.

But yeah, typically lucrative business isn't sexy business.

------
brett40324
What parent really wants to complicate the fundamental lessons and experience
that chore assignment and reward teach their kids?

Every thing, process, or task out there isnt always improveable by an app.
Maybe all that wasted capital could of gone to kids who wont ever be given an
allowance?

------
rdlecler1
The irony here is that their banking partners may have had cofidence in the
company if YC had accepted them, bringing in more investors. You just can lean
startup everything, and yes, money can often buy you what you need.

------
sgtpepper
So... ChoreMonster but with cash?

~~~
andrewfromx
I was waiting for someone to mention ChoreMonster. That's the first thing I
thought of [http://techcrunch.com/2014/04/03/choremonster-an-app-to-
get-...](http://techcrunch.com/2014/04/03/choremonster-an-app-to-get-kids-to-
do-their-share-now-free-parents-rejoice/)

------
HillaryBriss
At least the lunch looked pretty good

------
homero
Reminds me of knox payments which seems abandoned

------
mahyarm
Andddd shit like this is why bitcoin was invented.

Fund via coinbase!

Thanks for the post mortem.

