It used to be “location, location, location” would determine whether your business got off the ground.
Now, it might be “capital, capital, capital” is more important in the new cyber-world of business, although it might be just as hard to find.
When Gary Evans and the 19 other founders of the San Diego-based Bank of Internet USA started to pitch their idea of offering traditional banking and loan services entirely over the ‘Net, they came across the believers and the nonbelievers.
It was easy to talk about the business plan with those who believed in the Internet, but the skeptics were more difficult to conquer, Evans said, adding that most of their investors are believers and family and friends.
Preparing to open its doors this June in Del Mar, the bank’s organizers were able to raise more than $14 million in start-up capital with 151 investors. Most of the money of raised within 60 days, he said.
– Diverse Sources
Of Start-Up Capital
Studies have shown that family and friends, personal finances, and credit cards are the main source of capital for start-ups, according to Ken Thygerson, professor at CSU in San Bernardino and at Digital University, which provides online training to bankers.
While family and friends came through for Bank of Internet USA, Thygerson said that one never knows when an Internet bank could find capital.
A few years ago, venture capital was easier to find, but the highs and lows of the stock market have made it a little harder for start-ups to get funding from venture capitalists, he said.
Although it is still possible for investors to take an interest early on, these days it is more likely that a banking venture will find investors after regulatory approval, Thygerson said.
While there may be many players in the field of Internet banking, it is still anyone’s game at this point, he said.
– Success Is In The
Package Of Services
Success will be found by the venture that comes up with the right package of services that will attract a profitable customer base, Thygerson said.
For Evans, the foundation of Internet banking is based on the premise that it will save people time and help them make money. “Our job is to make it easier for people to bank,” he said.
Evans pointed out that unlike a typical start-up, Internet banking ventures must overcome barriers that include federal regulations and capital requirements in order to get off the ground.
Although Bank of Internet USA’s founders have much experience in traditional banking and technology, they are keeping in mind that things are a little different.
While traditional banks may have an easy time making forecasts, Evans said that doing forecasts for an Internet bank requires daily monitoring.
Also, regulators must be kept aware of what is happening at all times, he said.
