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You legally need something like $10 Million in reserve capital to start a bank. Pretty much any business is profitable if you can afford to start with 10 milli

You legally need something like $10 Million in reserve capital to start a bank. Pretty much any business is profitable if you can afford to start with 10 million in savings plus have enough money to run the business.

tasuki 8y ago
> Pretty much any business is profitable if you can afford to start with 10 million in savings plus have enough money to run the business. This is non-obvious to me. Care to elaborate?
- vinceguidry 8y ago
  I think the idea is that there aren't any problems in business that cash in the bank can't solve. It's just a question of whether you have enough money to throw at the problem to make it go away. $10 million is enough to make any problem go away. Basically you just hire a consultant and they get it done. Finance is high wizardry, treating literally every single problem you have in dollar terms, but it built the modern world. Us software developers exist in what's basically the frontier of business. $10 million is just getting started for a software company. But it's enough to push through to profitability in every single other sector.
  - __blockcipher__ 8y ago
    Bullshit. Hire a bunch of consultants without any ability to judge which are worth the ticket, and you’ll spend a measly $10 mil in no time.
    - vinceguidry 8y ago
      Knowing which consultants to hire and when is presumably the domain of the finance guys. You can buy competence, it's just expensive. $10 million is enough to hire a full turnaround team. The key is you have to have it as cash in the bank. You can't finance a turnaround, the better move at that point from a financial perspective is to just fold up the business, but if you have it, you can use it as collateral for a more aggressive expansion. That way if you run into enough problems, the money guys can 'foreclose' and use the reserve capital to enact a turnaround plan, and eventually earn their money back. It's an extra form of security.
      - __blockcipher__ 8y ago
        lol, how do you hire the right finance guys? You didn’t address the central paradox.
        vinceguidry 8y ago
        The finance guys are running the company at that point, so presumably they already have that knowledge. And most companies do retain a finance guy in a senior management role as the CFO. So their perspective gets heard and in some cases actually listened to. It's just that running a company purely with safety in mind generates far less profits than aggressive investment in a business model. If a finance company is running a business, it's because the industry people that started the company managed to run it into the ground, finance people never seek to start businesses in any other space than the finance space. It's just not interesting to them. When they wind up running companies, they mostly just delegate all the decisions to the consultants they have a working relationship with. It's simple, you go to a lender who demands you keep $10MM in the bank as a contingency fund. You run the company into the ground, and the lender has to foreclose on the loan, taking control of the business. They then use the $10MM to turn the company around, eventually recouping their investment over the long run. You're bringing the $10MM in collateral, not the bank, so the bank doesn't have to use their own money for the turnaround. It's a hedge against risk, not some kind of magic bullet like you seem to think. No paradox needs be invoked, the finance company simply runs the company differently than you would, from a purely financial perspective.
  - tasuki 8y ago
    Even if I grant you that $10 million is reasonably close to being able to "get rid of any problem", that doesn't seem to imply profitability of the company. Perhaps solving the problems costs $4 million and the revenue is only $3 million.
    - vinceguidry 8y ago
      That's why the money has to be cash in the bank, fully liquid. You can't convince anybody that their money would be better spent on your business if the numbers are like you say, but if the capital is in reserve then nobody has to.
miohtama 8y ago
Lithuania has a special banking license for "fintech" with only 1.5M EUR regulatory capital requirement.
nedwin 8y ago
It's dropped to around $3m in Australia with some limitations. $10m I believe for the full license.

tasuki 8y ago

> Pretty much any business is profitable if you can afford to start with 10 million in savings plus have enough money to run the business. This is non-obvious to me. Care to elaborate?

vinceguidry 8y ago
I think the idea is that there aren't any problems in business that cash in the bank can't solve. It's just a question of whether you have enough money to throw at the problem to make it go away. $10 million is enough to make any problem go away. Basically you just hire a consultant and they get it done. Finance is high wizardry, treating literally every single problem you have in dollar terms, but it built the modern world. Us software developers exist in what's basically the frontier of business. $10 million is just getting started for a software company. But it's enough to push through to profitability in every single other sector.
- __blockcipher__ 8y ago
  Bullshit. Hire a bunch of consultants without any ability to judge which are worth the ticket, and you’ll spend a measly $10 mil in no time.
  - vinceguidry 8y ago
    Knowing which consultants to hire and when is presumably the domain of the finance guys. You can buy competence, it's just expensive. $10 million is enough to hire a full turnaround team. The key is you have to have it as cash in the bank. You can't finance a turnaround, the better move at that point from a financial perspective is to just fold up the business, but if you have it, you can use it as collateral for a more aggressive expansion. That way if you run into enough problems, the money guys can 'foreclose' and use the reserve capital to enact a turnaround plan, and eventually earn their money back. It's an extra form of security.
    - __blockcipher__ 8y ago
      lol, how do you hire the right finance guys? You didn’t address the central paradox.
      - vinceguidry 8y ago
        The finance guys are running the company at that point, so presumably they already have that knowledge. And most companies do retain a finance guy in a senior management role as the CFO. So their perspective gets heard and in some cases actually listened to. It's just that running a company purely with safety in mind generates far less profits than aggressive investment in a business model. If a finance company is running a business, it's because the industry people that started the company managed to run it into the ground, finance people never seek to start businesses in any other space than the finance space. It's just not interesting to them. When they wind up running companies, they mostly just delegate all the decisions to the consultants they have a working relationship with. It's simple, you go to a lender who demands you keep $10MM in the bank as a contingency fund. You run the company into the ground, and the lender has to foreclose on the loan, taking control of the business. They then use the $10MM to turn the company around, eventually recouping their investment over the long run. You're bringing the $10MM in collateral, not the bank, so the bank doesn't have to use their own money for the turnaround. It's a hedge against risk, not some kind of magic bullet like you seem to think. No paradox needs be invoked, the finance company simply runs the company differently than you would, from a purely financial perspective.
- tasuki 8y ago
  Even if I grant you that $10 million is reasonably close to being able to "get rid of any problem", that doesn't seem to imply profitability of the company. Perhaps solving the problems costs $4 million and the revenue is only $3 million.
  - vinceguidry 8y ago
    That's why the money has to be cash in the bank, fully liquid. You can't convince anybody that their money would be better spent on your business if the numbers are like you say, but if the capital is in reserve then nobody has to.

miohtama 8y ago

Lithuania has a special banking license for "fintech" with only 1.5M EUR regulatory capital requirement.

nedwin 8y ago

It's dropped to around $3m in Australia with some limitations. $10m I believe for the full license.