

Why The UK Startup Scene Is Doomed - PStamatiou
http://zachinglis.com/2011/why-the-uk-startup-scene-is-doomed/

======
Loic
Just to put a bit of nuance in this article. I am French living in Germany, I
created 2 UK limited companies without putting a single foot in UK. I am
banking with Barclays Wealth (the side of the business dealing with foreigners
and very rich people) and have everything with them. They are simply
excellent, you never ever touch a call center in India, always UK people in
UK. No more than 30 seconds to wait on the phone for an inquiry and extremely
polite.

And yes, this includes merchant account, accepting payment by card, Internet
banking with a real security (smartcard), etc.

The thing is: you need to be extremely professional in the way you present
your business to them. Follow their procedures, be polite on the phone,
explain clearly your case. They are a business like you, when you have a good
customer in front of you, not by money but simply because polite, patient etc.
you always end up walking happily the last mile for her. Be the the nice
customer and profit.

Edit: By the way, I got everything without a single deposit, only references
from my personal banker and my company secretary banker.

~~~
sceptre
So, how did you find out that the person talking to you was in UK, "Mr french
staying in Germany"

~~~
arethuza
They probably told him that their call centers are in the UK - it's seen as
something customers generally much prefer.

e.g. For RBS

"At The Royal Bank of Scotland, all our call centres are based in the UK."

[http://www.rbs.co.uk/private/current-
accounts/g2/switching.a...](http://www.rbs.co.uk/private/current-
accounts/g2/switching.ashx)

------
tow21
With all due respect and without being snarky, your steps are wrong. Try these
ones:

1\. Register a business (Ltd, LLC, etc)

2\. Open a Business Bank Account

3\. Implement Paypal to get yourself up and running,

4\. Prove that there's a market for your product, people will pay for it,
people will continue to pay for it, you don't have lots of chargebacks, you're
capable of managing sensible customer relations, and generally are as small a
risk as possible for any merchant account. As a bonus, this also validates
your business plan before you invest too much time in irrelevant admin.

5\. Go and talk to your bank. And every other bank out there. Shop around,
shop around, shop around.

(As an aside, read David Mytton's blog:
[http://blog.boxedice.com/2009/05/20/taking-payments-
online-m...](http://blog.boxedice.com/2009/05/20/taking-payments-online-
merchant-account-payment-processor-fees/) )

6\. Profit!

EDIT: fixed formatting

~~~
zachinglis
I've used Paypal before and they've been nothing but hassle. Getting your
money down from Paypal is often the hard part. The random freezes, and
goodness knows what else.

~~~
tow21
I'm not advocating using them long term, I'm advocating using them to get
yourself off the ground. There's no setup cost, and integration is fairly
trivial.

It almost doesn't matter whether you can get your money down from Paypal. It
matters whether you can persuade people to hand over their credit card. Not
much point worrying about anything else until you can prove that, and paypal
is a very cheap & easy way to manage that.

~~~
zachinglis
The reason we did not go for Paypal first was handling the transition from
Paypal subscriptions to a different payment gateway would be a pain. We didn't
want two sets of funds. Knowing possibly we would probably not get our hands
on the Paypal funds for a good 5 months.

~~~
lamby
Using an "abstraction layer" like Recurly or Spreedly would solve this problem
for you (although you would have to convince PayPal to accept payments without
CVV numbers, which is an extra couple of hoops)

------
JonAtkinson
Ignoring the completely unnecessary headline, I still think that this
highlights the naivety prevalent among geeks in business.

Despite how your bank may appears in their own adverts (and this applies to
all banks in the UK, as far as I can tell), they’re still not run as service
providers. They’re not friendly by default, nor do they take a neutral point
of view on you as a customer. Your relationship with your bank is just that, a
relationship. You need to build it and work on it, on at least a monthly
basis. You need to know your bank manager by name, the football team he
supports, and the names of his children (side note: if your bank says they
don’t have bank managers, bullshit. Ask to speak to someone in their local
business team. They still exist, under a different name).

You need to take him out for dinner, send him a card at Christmas, and above
all make him believe in you as a business person and entrepreneur. I’m lucky
to have a very trusting relationship, and mutual respect for the head of the
business team at my local branch, and he’s opened countless doors for me,
expedited paperwork, and, yes, setup merchant accounts for me.

If you want to make money, you’re not only a programmer, you’re a business
person. And successful business people network.

~~~
zachinglis
To be honest, I do network. I have access to plenty of business contacts in
and outside of my family. (Thus the reason I asked my father to help. As his
businesses are run through Lloyds.)

However, Cardnet is a separate entity to Lloyds technically and that's how
they saw it.

I've recently come back to the UK from living abroad so I have been rebuilding
contacts.

But you are correct; networking is incredibly important.

~~~
ig1
Is it possible the fact you were living abroad meant that you were a higher
risk for the bank ?

I've heard plenty of people bitch about the pain to get a merchant account set
up but it seems that the 50k thing is unusual.

------
ErrantX
Ignoring the fact that setting up a merchant account is not a good way to get
a startup going...

We have just had an identical problem with Lloyds:

\- It took ages to get the application sorted in the first place

\- They demanded changes to the TOS

\- Then we got "questions" about the business (selling our software online),
which showed they had clearly not read one part of the description & business
plan (the one they asked we write..)

\- Then the underwriter apparently decided that they couldn't risk it as they
"had a policy of not underwriting software retailers" :S So back to square one
on the progress...

\- Looking for a new underwriter took a month, and only happened because we
spent a morning calling them constantly to ask if our business manager was out
of his meeting yet or not...

\- Then everything went silent for a week. So we phone Barclays, had the forms
and everything arranged within 3 more weeks and away we went.

The day after we went live the merchant agreement from Lloyds arrived by
mail...

 _head_ _desk_

------
showkhill
Irish startup. Paypal don't even offer payments pro here even though their
euro hq is in North Dublin.

For my MVP I did the following: I was reading HN, similar thread to this and
one of the Stripe boys was giving his tuppence ha'penny - having read his
contribution I emailed him for a beta invite (I have a US SSN and bank
account). I was able to get payments running with active merchant in a very
short time despite the fact I'm very inexperienced. No dealing with the
disaster zone that is the Irish banking system, no paypal worries. For someone
hacking together an MVP (me) it was a massive hurdle overcome with relative
ease. Sadly I think Stripe require the ssn (it is/was possible to open a us
bank account without), perhaps one of their reps could confirm this?

Agree with the UK poster it isn't easy doing startup stuff in this part of the
old world, it certainly pays to have one foot in the States if you can manage
it.

------
mootothemax
_Register a business (Ltd, LLC, etc), Open a Business Bank Account, Open a
Business Merchant Account, Sign Up For A Payment Gateway..._

Why do you need any of that to get started? You can trade as a sole trader,
and use PayPal to take payments in the interim. Not ideal... but it does the
job.

For merchant accounts, there are plenty of third parties that will do the job
as well. Again, it's not ideal... but at least you get started.

* You just simply don’t see the level of entrepreneurs in the UK as you do the US in my experience and I feel that is not helped with the bureaucracies.*

 _And with only a £3100 ($5000) deposit._

I highlight these quotes to illustrate the fact that there's still a problem:
what if you don't have a $5,000 deposit? At that point, whether it's $50,000
or $5,000, it doesn't matter: you still have to use some ingenuity to succeed.
The same ingenuity to doing things in a less than ideal manner at first - but
that can be "fixed" soon enough if you start to succeed.

~~~
tick80
Another point is you don't need a business bank account to be a sole trader.
The business bank account has fees attached to it, which is why a bank wants
you to use it rather than the free alternative.

This makes it ideal if you want to 'bootstrap' some ideas to see if they are
worthy of pursuing - without the pressure of investors, business plans etc.
You don't even have to register with the tax people until a few months into a
business.

------
ig1
What a good approach to take is simply to approach other businesses with
models similar to yours and ask them who they use and get an introduction to
their contact at the merchant account provider. If you're working with someone
at the provider who's already familiar with your business type then things
will move much faster.

If the person you're dealing with has never worked with a company that's does
SaaS subscriptions before then naturally you're going to have more problems.

Chargify even lists specific contacts at BarclayCard and HSBC for people
looking to setup merchant accounts that work with them, and because Chargify
direct all of their users to specific contacts it means these individuals are
extremely clued up about the SaaS business model and the process will be a lot
less painful.

------
AshleysBrain
UK startup here. We signed up a Barclays business account in about ~2 weeks
and they were happy with a £100 deposit just so there was something in the
account. Relatively straightforward. Paypal set up and seems to be working OK.
Not sure why it all went wrong for you.

~~~
rjd
Having lived in the UK a few times and having to go through the process of
bank accounts and stuff, and a lot of friends who did the same, the problem
usually isn't the bank.

Its usually the case manager you get. My first account was with HSBC, I
waltzed in filled the forms out. Walked out. My friend I travelled with came
with me, got a different case manager ... took over 4 weeks and eventually
moved to Ireland before his account was even opened.

The differing service you can get from one bank is amazing. Just take this
example from a trip I took a few months ago.

I went to Thailand with 3 mates from the UK, all Llyods customers. One had a
friend as his bank manager who OK'ed his for use in Thailand. He had no
trouble at all.

Second guy OK'd his but he withdrew 20,000 baht in one transaction and his
account was locked as he wasn't told there was a threshold. He had to ring
help desk to unlock his account, it was fine after that.

Third guy didn't realise he had to OK the account, every time he used an ATM
his account was locked. He would ring help desk every few days to unlock his
account. It seemed he could only draw down 10,000 baht a week, if he tried a
second transaction a few days later it would lock again.

No matter what he asked for they just unlocked his account and promised it
would lock again. But we where there for a month, and he was always on the
phone to the bank.

------
ed209
That's kind of a big claim based on your problems with "the process for
receiving payments on a website". Although I don't disagree that the UK
startup scene is fragmented and less of a force than it should be, I don't
think the fault lies with not being able to accept a payment on your website.

Although I'll take your title as british humor and say the word "doomed" in a
dark echoey room.

There are people working to build a startup culture over here (i.e.
<http://www.startupbritain.org/>) and I think the solution lies a little bit
before your step 1. So here are my 7 steps to prepend to your 7 steps:

    
    
        1. If you've successfully gone through building a startup, reach out to other startups in the UK and offer advice. Don't wait for Seedcamp to ask you to mentor, make yourself known and help out. Hell, no one's tweeting with #UKStUp so introduce yourself
        2. If you're trying to launch a startup in the UK, tell other startups that's what you're doing, so they can follow, and you them. Hell, no one's tweeting with #UKStUp so introduce yourself
        3. Be vocal about your failures.
        4. Be vocal about your successes.
        5. Organise or attend meetups in your area.
        6. Meet up with UK people at conf abroad.
        6.5. ...and probably some other stuff...
        7. Profit!

~~~
zachinglis
I whole heartedly agree. :) I do some of this as is but I need to get better
at it.

~~~
ed209
great! If you know of any regular meetups, I'd be interested to hear.

~~~
ig1
Where are you ?

You can barely throw a stone in London without hitting a startup meetup, there
are roughly 40-50 meetups/month these days.

~~~
ed209
Actually I'm based near Birmingham, but I'm only an hour from London. Where do
you find out about these meetups?

edit: just saw you profile [http://blog.awesomezombie.com/2010/06/london-
startup-event-g...](http://blog.awesomezombie.com/2010/06/london-startup-
event-guide.html)

~~~
ig1
That's a bit dated now, the scene's moved on a lot in the last year. The best
way to learn about events tends to be by following startup people on twitter.

But if you're not a twitter user there are a couple of people who do weekly
emails about startup events in London:

Startup Digest London: <http://startupdigest.com/london-startup/>

London Silicon Roundabout (a meetup in it's own right but they also send out a
weekly newsletter): <http://www.meetup.com/london-silicon-roundabout>

If you search meetup.com there's also a bunch of other startup events listed
on there, including the monthly HN meetup.

------
corin_
I've had nothing but positive experiences from Barclays and HSBC (can't
remember who handles card payments for my current company, but if not one of
the above two then a third can be added to that list).

------
marcin
It's true that UK banking system is totally wrong (which is interesting,
considering that they invented modern banking). There are multiple regulations
that make bankers life hard, most prominent being the anti-money-laundering
regulation. Generally a completely useless regulation that doesn't protect the
financial system in any way (but that's a different story). This system can be
hacked though. Normally it will take a foreigner a couple weeks (if not
months) to set up a business bank account. But if you will set up a personal
account with that bank first, and follow up with setting up the business
account later - no problems and instant service. Lesson learned - you need to
know your way around, and there's plenty of people that will help you (other
startups). You have to consider that London is the financial capital of the
world (or used to be), hence the number of fraud and cheating is enormous.
They need some ways to structure it, otherwise it would all collapse. Also, if
opening a bank account is something that can kill the startup, please - what
will you do when US competitors actually take notice of you?

------
prpatel
While the OP's frustration is understandable, I would say that this is simple
example on why the UK startup scene is non-optimal. Allow me indulge in some
over-generalization. (And for the record, I /have/ started a tech business in
both the UK and USA.)

* A culture of over regulation. It's not just the UK govt that does this - you'll find most large businesses like the bank mentioned putting up roadblocks. * Concentration of talent in financial services. Investment banks pay alot of money for top talent. Heck, when I first moved there I was working for an investment bank and enjoy the cash and perks - I should have been doing my own startup but money in hand now is hard to turn down. * Expensive everything. I would say that you need at least 2X more cash to start a company in the UK than compared to 2nd-tier-startup-markets like Atlanta, where I currently live. Sure, you can economize in creative ways, but that takes you away from your core mission in a startup: to build awesome products/services.

------
_grrr
Wow, we had EXACTLY the same experience.

A lengthy process (about 3 months) to get signed up with Sage Pay only to be
declined the merchant account (yet to give us a reason although they said they
would tell us, that was 2 months ago).

We ended up settling on PayPal just to get started, not ideal for taking
recurring payments, but quick, easy and better than nothing.

~~~
mootothemax
_A lengthy process (about 3 months) to get signed up with Sage Pay only to be
declined the merchant account_

Did you give any other options a try, e.g. <http://www.paypoint.net/> ?
Genuine curiosity :)

~~~
_grrr
No, paypoint looks very good though.

------
kgtm
_I already had a business account with Lloyds so next I needed to apply for a
Merchant Account [...] After jumping through some hoops they came to me with
an offer that I could use their service if I give a deposit. [...] they asked
me to put a deposit of £50,000 ($81,000.)_

I nearly choked right there; 50.000 pounds? What the hell? This is not right
by any definition. No wonder the US steams ahead in the startup game.

What would really drive this post home though, would be the second half the
author fast-forwards through. Understanding the technicalities and nitty-
gritty details of setting up a startup as a European would be very
interesting. Especially tax handling. Perhaps a Part II!

~~~
mootothemax
The UK is easy, honestly. If you want to form a LTD company, pay someone
twenty pounds and it'll be ready within a few hours. Have a 20 minute meeting
for you business account (I admit this might have changed - it was about five
years ago and with Barclays), get everything set up within the following
couple of weeks.

In the meantime, trade as a sole trader. Register with the taxman, phone up
their _very_ helpful advice line for what numbers to fill in where. Job done.

Now Poland, on the other hand...

~~~
weego
I didn't even have a meeting for my business account, everything was handled
over the phone/online with 1 set of paperwork having to be sent out to me and
back. The only thing they wanted to know was how much I expected to deposit a
year and they insisted the first deposit be from a UK source (supposedly some
anti-terror funds requirement).

------
bugsy
This is an amazing article. The level of dysfunction and inappropriate
external control demanded in setting up payment processing was far beyond what
I would have imagined was possible setting up a business outside North Korea.

------
SteveC
Did you ever consider going with WorldPay instead? That's what I did after
seeing the ridiculous measures you need to go through to get a merchant
account.

~~~
zachinglis
It was a possibility but I have not heard of enough people using it to have
been sure if it was wrong or right for us. :)

~~~
inovica
Worldpay is used quite extensively. Frankly I think the interface is a little
clunky compared with others but it works. Also SagePay do the merchant account
side for you also these days and I know a few people who have received one
with NO trading history. Frankly I believe the UK market is quite positive
toward startups and I think its down to the individual to look at what the
options are and do something for themselves instead of (just being honest)
whining about the problems they've had

~~~
zachinglis
Honestly, I was going to go the SagePay route. However, they wanted the Lloyds
Cardnet stuff in place first.

I'm whining about my problems because I know countless others have had the
same issue. I want to incite discussion on what problems people should expect
to face and how they can go about it. So others can learn.

~~~
inovica
When was this? SagePay USED to only work with people who had existing merchant
accounts, but no longer. We have just had one of ours accepted for a new ltd
company with no trading history. Provoking discussion is great and most things
can be improved, however I think the term "doomed" is a little bit over the
top. That being said, if you want any advice, get in touch and I'll give you
some pointers

~~~
zachinglis
Oh. Doomed was taken out of context. I meant it in a light-hearted way. :)

However, I think we had the issue that Lloyds Cardnet wouldn't play nice with
SagePay as it didn't do 3D-Secure. I could be wrong though.

And thank you for your offer. :)

------
Luc
I have been using <http://www.swreg.org/> (now part of Digital River) to
handle all the billing and credit card payments for my downloadable software
for about 10 years. I honestly wonder what the conditions are under which it
doesn't make sense to outsource all this trouble to one of the many service
providers.

------
stevoski
The steps should be:

1\. Find a helpful, competent accountant who deals with small businesses
(because that's what you'll have at first - a small business) 2\. Tell the
accountant the nature of your business 3\. Follow the accountant's advice.

I'm almost certain the accountant would have given you advice on a simpler
path to getting a business bank account.

~~~
smiler
He could get a business bank account, it's a merchant account which is
notoriously difficult to get without a long trading history in the UK

------
quattrofan
I think the title is wrong, but I would agree with the problems with Banks
over here. They really REALLY need to get broken up and sorted out. It also
doesn't help all the ridiculous red-tape that New Labour put in force at the
behest of the US and anti-terrorism etc, none of which occurs in the US
ironically enough. I know I lived in both countries.

------
whosKen
It's well known to any UK resident that the bank system here is broken, made
for and run by the large corporate companies. They are not used to dealing
with startups, and I have a feeling that they don't want to either..

------
Uchikoma
I always hear a strange sound when I read "doooooomed".

------
greengarstudios
No mention of Bitcoin? :)

------
pointyhat
I do get his frustration with Barclays. They sent my wife a basket of flowers
and a bottle of wine with a "sorry for your loss" card and closed my personal
account.

Apparently something had broken somewhere leading to them assuming that I was
deceased?!? I never did get a proper explanation.

That took a whole two weeks to get sorted out.

~~~
panacea
What happened to the money in the account they closed when you died?

~~~
pointyhat
It was transferred to an "internal account" which they keep for assets
awaiting solicitors to approach them with respect to wills and inheritance.
They stuck it all back in a new account without too much hassle after a couple
of (very awkward and strange) phone calls and a visit to the branch to make
sure I was indeed still alive and breathing.

