There’s something brewing in Silicon Valley: a growing crew of venture capitalists are beginning to talk about starting a bank.
Among those VCs with banking interests are Marc Andreessen of Horowitz Andreessen and Mo Koyfman at Spark Capital.
The whole notion percolated on Twitter yesterday. In a Twitter conversation about why venture capitalists might be thinking too small in their investments yesterday, self-described “FinTechnologist” Jack Gavigan asked:
Retail banking is broken, right? Massive opportunity. Why no VC-funded new high street bank?
Entrepreneur Marc Andreessen replied, “I am dying to fund a disruptive bank.” Asked what about banking he wanted to disrupt, Andreesen wrote, “I want the pure software bank w/no physical infrastructure, + a full API for financial apps on top.” He then indicated, somewhat cryptically, he might be interested in starting his own bank — or buying an existing one for its license, as Green Dot did.
Meanwhile, Gavigan went on to discuss whether a banking charter was needed to disrupt banking. Bradley Leimer, VP of digital strategy for Mechanics Bank, put forward the idea that disruption in the absence of a charter was possible, and even preferable to working from within a financial institution. Gavigan disagreed:
As long as you rely on a bank, you’re not disrupting banking, IMHO. Need the full stack.
The only “neobank” that fits this bill is GoBank, with its banking charter and vertical integration, but GoBank is not innovating in the ways Gavigan suggested, such as his comment that, “A bank should be akin to an ISP, to my mind — provides access to the financial networks … and enable new products, new services, API-driven banking and IFTTT-style functionality.” (IFTTT refers to “if this, then that,” a web service that helps create “recipes” to automate digital tasks.) By “access to financial networks,” Gavigan clarified, he meant, “Interbank transfers. Credit card issuance. ATM withdrawals. FDIC insurance.”
Not long after this, the conversation petered out as Gavigan described the bar he was sitting in and cajoled a friend to come join him — such is Twitter.
Venture capitalist Chris Dixon, another partner at Andreessen Horowitz, seconded Andreessen in indicating his interest in funding a new bank:
never been pitched it. We would likely fund the right person / plan doing that.
A VC-backed bank is an intriguing idea, and it seems there is interest in the VC community. Is anyone ready to take this on? Do existing startups such as as Open Bank Project fit the bill? Standard Treasury?
Learn more about what’s next in banking at Bank Innovation 2014 on March 3-4 in Seattle. Request an invitation here.