18 ms·

That'll do, pig, that'll do

409 points by exolymph 11y ago

xigency 11y ago
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 11y ago
  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 11y ago
    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 11y ago
      > "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 11y ago
        Yup, and you can even spend $50 on AdWords and estimate your CAC by measuring conversion rates.
  - xigency 11y ago
    Reading a bit more into the financial side of things — PayPal users must be 18 or must be using their parent's account. Adults can have one personal and one business account, so that wouldn't really work. It also isn't easy to get a plastic PayPal card. I hadn't thought about the minor accounts which obviously complicates things. It would have been harder to pitch but easier to start with small payments between friends in the app and work back around to the chores/PiggyBank idea. Still seems reasonable to expect a parent to set up a bank account for their child and then facilitate PayPal deposits into an account. ACH deposits have low fees but they're delayed one or two days. Was instant gratification the blocking factor? Why not use Bitcoin, for the hell of it. So I don't see what the problem is with — supply your own debit card, child's bank account, and adult PayPal account — then sign-up and press on.
  - 11y ago
- MOARDONGZPLZ 11y ago
  I agree with all of this except the one week thing. But the thing is, these deadlines were self-imposed. It wasn't like someone else was imminently about to release a similar app and they had to race to get it working. At least spend the time to get it working and fully-functional before really shopping it around. Rather they wanted to churn out some half-baked, random "good sounding" idea and then when they got funding race to make it work. In my experience when I'm building an app or something, I learn a lot about what features make sense and what's going to be really hard to implement while building it out privately or with a small team. I/we address those issues and look for solutions or other ways around and aren't on a schedule to ship some product and hire some backend database developer to fill some huge knowledge/experience gap on short notice. Of course hindsight is 20/20, but I think not jumping the gun like this should be good business practice. Really I see no reason why someone had to quit their job for something that wasn't even functional. If it's functional and getting some traction and has funding, great, quit your job and do it full time, imo. As an aside and maybe an unpopular opinion, I really doubt the founder's long-haired look was helping the brand's perceived legitimacy. Though I don't have a problem with it personally, I know the "out there" look can turn a lot of people off.
- madelinecameron 11y ago
  I was rather surprised that the founder who came from Stripe failed at this. You would think coming from a bank startup would make you acutely aware of these problems. Apparently not.
  - hkarthik 11y ago
    The difference comes from experience with banks versus experience with credit cards. These are very different in terms of implementation. Companies like Stripe initially focused entirely on inserting themselves into the Credit Card ecosystem. Banks are inherently slower to innovate and process because they are financially motivated to hold your money and collect interest by being slow. If you want to move money fast between banks, you will pay for that right with high transaction costs. Credit card companies, on the flip slide, are incentivized to go faster because they make money through transaction volume. They want you to use the credit card more often so they can collect tiny fees on every transaction. Payment companies typically focus on the credit cards first since frankly they are way easier to work with. They want to move money and they are happy to help with that process.
  - JeffreyKaine 11y ago
    Founder came from Bank Simple, not Stripe. (I'm pretty sure you knew that already and made a simple mistake, but I wanted to clarify for others who may comment.)
- ChemicalWarfare 11y ago
  Long story short here is this app isn't acting as a "merchant" rather as an intermediary between counterparties in financial transactions which requires banking relationships to be established to drive the flow of the funds. Also keep in mind that Stripe/Square/Braintree etc are processors not banks. They will help you move the funds around but as far as where those are moved from/to that's on you even if you're a Merchant. Once you get into the "middle man" business the plot thickens quite a bit.
- superuser2 11y ago
  PayPal, Stripe, Square, and Braintree (which is PayPal) are interested in helping merchants accept payments for goods and services. Dunno about Square, but PayPal and Stripe explicitly disallow the use of their platform to build any other money-sending service. In generally children need to be driven to the bank by their parents, so why we'd also loop in a 3rd party (instead of the parent writing the child a check) is unclear. My family solved this problem by maintaining an informal ledger and settling by transfer between our (linked) accounts at the same bank, but there's no way a random startup would get that kind of API from all the major banks - AFAIK even Mint is still screen scraping.
  - infinite8s 11y ago
    As a side note, your informal ledger and settling is basically how the entire securities industry is run (look up DTCC).
- hrabago 11y ago
  > having users is at least some sort of reward. When you have the revolutionary breakthrough, add that to the app Actually this approach "MVP" works well with web applications, but it doesn't work too well with mobile apps. In fact, it's quite the opposite. With mobile apps, you have to make a big splash in your launch, get most things right, and just minor tweaks once you're launched. The alternative approach is to launch your MVP in a small and/or isolated market (a non-US country), hash it out there, and once you have your approach all figured out and your "revolutionary breakthrough" working, then do your main release worldwide.
mywittyname 11y ago
I don't understand why they gave up the company instead of pivoting to the cashless approach that the original investor wanted anyway.
- bpchaps 11y ago
  My guess is that the lure of cash is so deep that it clouds original goals. I get a waft of it every now and then and it takes every ounce not to fall into that lure since getting out of that mentality is really, really hard.
  - deleted 11y ago
    [deleted]
- monk_e_boy 11y ago
  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 11y ago
    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 11y ago
      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.
MOARDONGZPLZ 11y ago
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 11y ago
  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.
  - gearoidoc 11y ago
    "You really need about a million dollars to make a marketable product." wat? There are countless examples which disproves this (eg. Basecamp)
    - jerf 11y ago
giarc 11y ago
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.
- andreasklinger 11y ago
  agree - sad i had to scroll down so far to see a comment like that ;(
- amiraliakbari 11y ago
  Agreed. Is there a maintained list of posts about startup failures/learned lessons?
- getmetheswan 11y ago
  Agree.
Johnie 11y ago
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)
hristov 11y ago
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 11y ago
  You think a big bank contract had them hold any liability?
Cozumel 11y ago
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-list-mobile-app-using-ionic-framework/ https://www.thepolyglotdeveloper.com/2015/03/create-todo-lis...) 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.
- MOARDONGZPLZ 11y ago
  I agree with the sentiment of convincing someone to give them money and then continuing to fundraise without a plan, but I think this is getting downvoted because you're acting like all this integration is trivial. It's really not. There are a million little things that take much longer to build/integrate than expected. But my contention is that even if it took a while to build/integrate/"pivot", there was no rush to do this part before seeking initial funding.
- ChemicalWarfare 11y ago
  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 :)
Animats 11y ago
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.
- deleted 11y ago
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- unethical_ban 11y ago
  Buyer beware. May of the things you mention are regulated or banned should be allowed, and let the buyers and businesses handle differences in court via contact law.
  - vertex-four 11y ago
    Contract law is just ~wonderful~ when you can't track down the person who's just run off with your life savings, or has invested it all badly and lost it entirely and no longer has any money to return to you. But let's punish people by destroying their lives for making bad decisions about who to trust, right?
deleted 11y ago
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rjbwork 11y ago
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 11y ago
  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 11y ago
    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.
qq66 11y ago
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.
- naveen99 11y ago
  If the host accepted money for food, they'd be opening themselves up to liability and be violating restaurant laws. Agree with you in spirit though.
- rossdavidh 11y ago
  As a parent, let me say that I think it's ok to pay kids for chores, as long as it's clear that not everything you ask them to do gets them $$. Just these specific things. Then, when my kid has dropped yanked on her tablet power cord one to many times and has to buy another for $8, she appreciates those $8 more. I agree that physical money teaches that lesson better, though. This app seems to be a solution in search of a problem.
hoodoof 11y ago
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.
orasis 11y ago
The lesson here friends is to fail faster. The lack of momentum on the kickstarter should have been a clear red flag.
- kromem 11y ago
  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."
elif 11y ago
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.
- exolymph 11y ago
  This is a great idea. It wouldn't have supported every use-case, but it would have executed the minimum viable requirements to get traction (I'm guessing, anyway).
  - StavrosK 11y ago
    I am completely clueless when it comes to finance regulations, but how does "sends cash in a registered mail envelope" not raise any red flags for people?
    - startling 11y ago
      Why should it? Mailing cash is totally fine. There are a couple of other red flags though.
- Johnie 11y ago
  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-pleads-guilty-laundering-more-250-million-through-his-digital https://www.justice.gov/opa/pr/founder-liberty-reserve-plead... * Ripple - http://www.americanbanker.com/news/bank-technology/fincen-fines-ripple-labs-over-aml-says-firm-enhancing-protocol-1074173-1.html http://www.americanbanker.com/news/bank-technology/fincen-fi... * 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.
eljimmy 11y ago
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.
jhwhite 11y ago
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 11y ago
  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.
harel 11y ago
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.
- twic 11y ago
  There's also Osper: https://osper.com/ https://osper.com/ Which is MasterCard rather than Visa.
- BukhariH 11y ago
  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.
  - harel 11y ago
    Fair enough. They used the word "partnered" so I went with that.
  - getmetheswan 11y ago
    '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.
pookeh 11y ago
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 11y ago
  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.
- deleted 11y ago
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sakopov 11y ago
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 11y ago
  Much less of a sex appeal vs a successful B2C startup app. But yeah, typically lucrative business isn't sexy business.
HillaryBriss 11y ago
At least the lunch looked pretty good
sgtpepper 11y ago
So... ChoreMonster but with cash?
- andrewfromx 11y ago
  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-kids-to-do-their-share-now-free-parents-rejoice/ http://techcrunch.com/2014/04/03/choremonster-an-app-to-get-...
megablast 11y ago
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 11y ago
  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.
themartorana 11y ago
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.
homero 11y ago
Reminds me of knox payments which seems abandoned
forgotpwtomain 11y ago
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 11y ago
  I'm not sure the writer wanted empathy
markbnj 11y ago
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.
paloaltokid 11y ago
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. :)
- mianos 11y ago
  First sensible comment in a long long thread.
- gerbilly 11y ago
  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.
ohazi 11y ago
> 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
mahyarm 11y ago
Andddd shit like this is why bitcoin was invented. Fund via coinbase! Thanks for the post mortem.
shitgoose 11y ago
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.
graycat 11y ago
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.
pedalpete 11y ago
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.
swalsh 11y ago
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.
Zelmor 11y ago
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.
bikamonki 11y ago
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.
theinternetman 11y ago
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 11y ago
  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 10y ago
    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.
ultimatejman 11y ago
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.
nhangen 11y ago
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 10y ago
  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 10y ago
    Sounds to me like backseat entrepreneurship
rdlecler1 11y ago
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.
brett40324 11y ago
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?

409 points by exolymph 11y ago

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 11y ago
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 11y ago
  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 11y ago
    > "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 11y ago
      Yup, and you can even spend $50 on AdWords and estimate your CAC by measuring conversion rates.
- xigency 11y ago
  Reading a bit more into the financial side of things — PayPal users must be 18 or must be using their parent's account. Adults can have one personal and one business account, so that wouldn't really work. It also isn't easy to get a plastic PayPal card. I hadn't thought about the minor accounts which obviously complicates things. It would have been harder to pitch but easier to start with small payments between friends in the app and work back around to the chores/PiggyBank idea. Still seems reasonable to expect a parent to set up a bank account for their child and then facilitate PayPal deposits into an account. ACH deposits have low fees but they're delayed one or two days. Was instant gratification the blocking factor? Why not use Bitcoin, for the hell of it. So I don't see what the problem is with — supply your own debit card, child's bank account, and adult PayPal account — then sign-up and press on.
- 11y ago
MOARDONGZPLZ 11y ago
I agree with all of this except the one week thing. But the thing is, these deadlines were self-imposed. It wasn't like someone else was imminently about to release a similar app and they had to race to get it working. At least spend the time to get it working and fully-functional before really shopping it around. Rather they wanted to churn out some half-baked, random "good sounding" idea and then when they got funding race to make it work. In my experience when I'm building an app or something, I learn a lot about what features make sense and what's going to be really hard to implement while building it out privately or with a small team. I/we address those issues and look for solutions or other ways around and aren't on a schedule to ship some product and hire some backend database developer to fill some huge knowledge/experience gap on short notice. Of course hindsight is 20/20, but I think not jumping the gun like this should be good business practice. Really I see no reason why someone had to quit their job for something that wasn't even functional. If it's functional and getting some traction and has funding, great, quit your job and do it full time, imo. As an aside and maybe an unpopular opinion, I really doubt the founder's long-haired look was helping the brand's perceived legitimacy. Though I don't have a problem with it personally, I know the "out there" look can turn a lot of people off.
madelinecameron 11y ago
I was rather surprised that the founder who came from Stripe failed at this. You would think coming from a bank startup would make you acutely aware of these problems. Apparently not.
- hkarthik 11y ago
  The difference comes from experience with banks versus experience with credit cards. These are very different in terms of implementation. Companies like Stripe initially focused entirely on inserting themselves into the Credit Card ecosystem. Banks are inherently slower to innovate and process because they are financially motivated to hold your money and collect interest by being slow. If you want to move money fast between banks, you will pay for that right with high transaction costs. Credit card companies, on the flip slide, are incentivized to go faster because they make money through transaction volume. They want you to use the credit card more often so they can collect tiny fees on every transaction. Payment companies typically focus on the credit cards first since frankly they are way easier to work with. They want to move money and they are happy to help with that process.
- JeffreyKaine 11y ago
  Founder came from Bank Simple, not Stripe. (I'm pretty sure you knew that already and made a simple mistake, but I wanted to clarify for others who may comment.)
ChemicalWarfare 11y ago
Long story short here is this app isn't acting as a "merchant" rather as an intermediary between counterparties in financial transactions which requires banking relationships to be established to drive the flow of the funds. Also keep in mind that Stripe/Square/Braintree etc are processors not banks. They will help you move the funds around but as far as where those are moved from/to that's on you even if you're a Merchant. Once you get into the "middle man" business the plot thickens quite a bit.
superuser2 11y ago
PayPal, Stripe, Square, and Braintree (which is PayPal) are interested in helping merchants accept payments for goods and services. Dunno about Square, but PayPal and Stripe explicitly disallow the use of their platform to build any other money-sending service. In generally children need to be driven to the bank by their parents, so why we'd also loop in a 3rd party (instead of the parent writing the child a check) is unclear. My family solved this problem by maintaining an informal ledger and settling by transfer between our (linked) accounts at the same bank, but there's no way a random startup would get that kind of API from all the major banks - AFAIK even Mint is still screen scraping.
- infinite8s 11y ago
  As a side note, your informal ledger and settling is basically how the entire securities industry is run (look up DTCC).
hrabago 11y ago
> having users is at least some sort of reward. When you have the revolutionary breakthrough, add that to the app Actually this approach "MVP" works well with web applications, but it doesn't work too well with mobile apps. In fact, it's quite the opposite. With mobile apps, you have to make a big splash in your launch, get most things right, and just minor tweaks once you're launched. The alternative approach is to launch your MVP in a small and/or isolated market (a non-US country), hash it out there, and once you have your approach all figured out and your "revolutionary breakthrough" working, then do your main release worldwide.

mywittyname 11y ago

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

bpchaps 11y ago
My guess is that the lure of cash is so deep that it clouds original goals. I get a waft of it every now and then and it takes every ounce not to fall into that lure since getting out of that mentality is really, really hard.
- deleted 11y ago
  [deleted]
monk_e_boy 11y ago
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 11y ago
  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 11y ago
    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.

MOARDONGZPLZ 11y ago

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 11y ago
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.
- gearoidoc 11y ago
  "You really need about a million dollars to make a marketable product." wat? There are countless examples which disproves this (eg. Basecamp)
  - jerf 11y ago

giarc 11y ago

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.

andreasklinger 11y ago
agree - sad i had to scroll down so far to see a comment like that ;(
amiraliakbari 11y ago
Agreed. Is there a maintained list of posts about startup failures/learned lessons?
getmetheswan 11y ago
Agree.

Johnie 11y ago

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)

hristov 11y ago

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 11y ago
You think a big bank contract had them hold any liability?

Cozumel 11y ago

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-list-mobile-app-using-ionic-framework/ https://www.thepolyglotdeveloper.com/2015/03/create-todo-lis...) 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.

MOARDONGZPLZ 11y ago
I agree with the sentiment of convincing someone to give them money and then continuing to fundraise without a plan, but I think this is getting downvoted because you're acting like all this integration is trivial. It's really not. There are a million little things that take much longer to build/integrate than expected. But my contention is that even if it took a while to build/integrate/"pivot", there was no rush to do this part before seeking initial funding.
ChemicalWarfare 11y ago
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 :)

Animats 11y ago

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.

deleted 11y ago
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unethical_ban 11y ago
Buyer beware. May of the things you mention are regulated or banned should be allowed, and let the buyers and businesses handle differences in court via contact law.
- vertex-four 11y ago
  Contract law is just ~wonderful~ when you can't track down the person who's just run off with your life savings, or has invested it all badly and lost it entirely and no longer has any money to return to you. But let's punish people by destroying their lives for making bad decisions about who to trust, right?

deleted 11y ago

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rjbwork 11y ago

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 11y ago
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 11y ago
  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.

qq66 11y ago

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.

naveen99 11y ago
If the host accepted money for food, they'd be opening themselves up to liability and be violating restaurant laws. Agree with you in spirit though.
rossdavidh 11y ago
As a parent, let me say that I think it's ok to pay kids for chores, as long as it's clear that not everything you ask them to do gets them $$. Just these specific things. Then, when my kid has dropped yanked on her tablet power cord one to many times and has to buy another for $8, she appreciates those $8 more. I agree that physical money teaches that lesson better, though. This app seems to be a solution in search of a problem.

hoodoof 11y ago

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.

orasis 11y ago

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

kromem 11y ago
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."

elif 11y ago

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.

exolymph 11y ago
This is a great idea. It wouldn't have supported every use-case, but it would have executed the minimum viable requirements to get traction (I'm guessing, anyway).
- StavrosK 11y ago
  I am completely clueless when it comes to finance regulations, but how does "sends cash in a registered mail envelope" not raise any red flags for people?
  - startling 11y ago
    Why should it? Mailing cash is totally fine. There are a couple of other red flags though.
Johnie 11y ago
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-pleads-guilty-laundering-more-250-million-through-his-digital https://www.justice.gov/opa/pr/founder-liberty-reserve-plead... * Ripple - http://www.americanbanker.com/news/bank-technology/fincen-fines-ripple-labs-over-aml-says-firm-enhancing-protocol-1074173-1.html http://www.americanbanker.com/news/bank-technology/fincen-fi... * 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.

eljimmy 11y ago

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.

jhwhite 11y ago

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 11y ago
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.

harel 11y ago

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.

twic 11y ago
There's also Osper: https://osper.com/ https://osper.com/ Which is MasterCard rather than Visa.
BukhariH 11y ago
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.
- harel 11y ago
  Fair enough. They used the word "partnered" so I went with that.
- getmetheswan 11y ago
  '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.

pookeh 11y ago

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 11y ago
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.
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sakopov 11y ago

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 11y ago
Much less of a sex appeal vs a successful B2C startup app. But yeah, typically lucrative business isn't sexy business.

HillaryBriss 11y ago

At least the lunch looked pretty good

sgtpepper 11y ago

So... ChoreMonster but with cash?

andrewfromx 11y ago
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-kids-to-do-their-share-now-free-parents-rejoice/ http://techcrunch.com/2014/04/03/choremonster-an-app-to-get-...

megablast 11y ago

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 11y ago
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.

themartorana 11y ago

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.

homero 11y ago

Reminds me of knox payments which seems abandoned

forgotpwtomain 11y ago

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 11y ago
I'm not sure the writer wanted empathy

markbnj 11y ago

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.

paloaltokid 11y ago

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. :)

mianos 11y ago
First sensible comment in a long long thread.
gerbilly 11y ago
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.

ohazi 11y ago

> 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

mahyarm 11y ago

Andddd shit like this is why bitcoin was invented. Fund via coinbase! Thanks for the post mortem.

shitgoose 11y ago

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.

graycat 11y ago

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.

pedalpete 11y ago

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.

swalsh 11y ago

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.

Zelmor 11y ago

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.

bikamonki 11y ago

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.

theinternetman 11y ago

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 11y ago
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 10y ago
  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.

ultimatejman 11y ago

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.

nhangen 11y ago

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 10y ago
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 10y ago
  Sounds to me like backseat entrepreneurship

rdlecler1 11y ago

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.

brett40324 11y ago

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?