Just to put a bit of nuance in this article. I am French living in Germany, I created 2 UK limited companies without putting a single foot in UK. I am banking with Barclays Wealth (the side of the business dealing with foreigners and very rich people) and have everything with them. They are simply excellent, you never ever touch a call center in India, always UK people in UK. No more than 30 seconds to wait on the phone for an inquiry and extremely polite.
And yes, this includes merchant account, accepting payment by card, Internet banking with a real security (smartcard), etc.
The thing is: you need to be extremely professional in the way you present your business to them. Follow their procedures, be polite on the phone, explain clearly your case. They are a business like you, when you have a good customer in front of you, not by money but simply because polite, patient etc. you always end up walking happily the last mile for her. Be the the nice customer and profit.
Edit: By the way, I got everything without a single deposit, only references from my personal banker and my company secretary banker.
Sorry, maybe you haven't spotted it, I am using Barclays Wealth, that is, the small part of Barclays where you have a relationship manager you can talk on the phone (mobile) at nearly any time and meet in person when you need. This is not the "general" Barclays.
When you hit the insurance stuff like Barclays Aviva or the payment processing, it really depends, sometimes you are out for an Indian ride, sometimes not, most of the time it seems like it depends of the complexity of the issue.
Use your ears. When you are based in Western Europe and call a UK number rerouted to India you have a nice lag and dumping of the voice plus the VoIP noise. This is physics, you cannot escape it, it takes time for the signal to go there and come back.
With all due respect and without being snarky, your steps are wrong. Try these ones:
1. Register a business (Ltd, LLC, etc)
2. Open a Business Bank Account
3. Implement Paypal to get yourself up and running,
4. Prove that there's a market for your product, people will pay for it, people will continue to pay for it, you don't have lots of chargebacks, you're capable of managing sensible customer relations, and generally are as small a risk as possible for any merchant account. As a bonus, this also validates your business plan before you invest too much time in irrelevant admin.
5. Go and talk to your bank. And every other bank out there. Shop around, shop around, shop around.
I've used Paypal before and they've been nothing but hassle. Getting your money down from Paypal is often the hard part. The random freezes, and goodness knows what else.
I'm not advocating using them long term, I'm advocating using them to get yourself off the ground. There's no setup cost, and integration is fairly trivial.
It almost doesn't matter whether you can get your money down from Paypal. It matters whether you can persuade people to hand over their credit card. Not much point worrying about anything else until you can prove that, and paypal is a very cheap & easy way to manage that.
The reason we did not go for Paypal first was handling the transition from Paypal subscriptions to a different payment gateway would be a pain. We didn't want two sets of funds. Knowing possibly we would probably not get our hands on the Paypal funds for a good 5 months.
Using an "abstraction layer" like Recurly or Spreedly would solve this problem for you (although you would have to convince PayPal to accept payments without CVV numbers, which is an extra couple of hoops)
I don't have any hard data, only my own experience, but I think some customers prefer PayPal. I added it as a payment option to one site and they now get approximately 30% of their payments through PayPal.
This. A friend of mine used Chargify and Paypal to launch a subscription-based product. At ~£1000 a month revenue he started shopping around for a merchant account and banks were actively bidding against each other for his business.
Banks aren't daft. When they provide you with a merchant account, they're taking a significant risk. If you can't show any evidence that you're a real business, they'll want a fat deposit. It's not hard to prove to them that you're a proper business - the fact that you haven't bothered is cause for concern.
Ignoring the completely unnecessary headline, I still think that this highlights the naivety prevalent among geeks in business.
Despite how your bank may appears in their own adverts (and this applies to all banks in the UK, as far as I can tell), they’re still not run as service providers. They’re not friendly by default, nor do they take a neutral point of view on you as a customer. Your relationship with your bank is just that, a relationship. You need to build it and work on it, on at least a monthly basis. You need to know your bank manager by name, the football team he supports, and the names of his children (side note: if your bank says they don’t have bank managers, bullshit. Ask to speak to someone in their local business team. They still exist, under a different name).
You need to take him out for dinner, send him a card at Christmas, and above all make him believe in you as a business person and entrepreneur. I’m lucky to have a very trusting relationship, and mutual respect for the head of the business team at my local branch, and he’s opened countless doors for me, expedited paperwork, and, yes, setup merchant accounts for me.
If you want to make money, you’re not only a programmer, you’re a business person. And successful business people network.
I want to use a bank's services and build a business relationship with the bank, not make deep personal relationship with the employees (though those aren't mutually exclusive). The courtesies you mention should go both ways. Why don't UK banks try to attract more first-time businesspeople or at least not be a hindrance to them?
The banks need healthy relationships with entrepreneurs and their businesses as much as the entrepreneurs need their services. Their PR material tries to convince you of this but the reality seems to differ.
If this was a public official instead of a bank employee, it would be more obviously bribery that you're advocating.
Successful business people don't just 'network'. They also just do the damned job they're paid to do without also requiring you to buy them dinner before they fuck you.
And, for the record, it's exactly this sort of crap that makes me think the guy picked a headline I can't disagree with.
With all due respect this kind of behavior makes me heave.
Don't get me wrong. Trustworthy relationships are essential, after all people buy from people. But buying privilege with dinners and fake friendship is not a way to build a trusting relationship. Business needs to be conducted on merit not on who has the largest expense account. Yep, I'm an naive idealist, but my definition of success includes retaining my integrity.
By the way the way to flummox expense account driven salespeople is to always buy them lunch when they come to pitch to you. Messes with their reciprocity training.
To be honest, I do network. I have access to plenty of business contacts in and outside of my family. (Thus the reason I asked my father to help. As his businesses are run through Lloyds.)
However, Cardnet is a separate entity to Lloyds technically and that's how they saw it.
I've recently come back to the UK from living abroad so I have been rebuilding contacts.
But you are correct; networking is incredibly important.
Ignoring the fact that setting up a merchant account is not a good way to get a startup going...
We have just had an identical problem with Lloyds:
- It took ages to get the application sorted in the first place
- They demanded changes to the TOS
- Then we got "questions" about the business (selling our software online), which showed they had clearly not read one part of the description & business plan (the one they asked we write..)
- Then the underwriter apparently decided that they couldn't risk it as they "had a policy of not underwriting software retailers" :S So back to square one on the progress...
- Looking for a new underwriter took a month, and only happened because we spent a morning calling them constantly to ask if our business manager was out of his meeting yet or not...
- Then everything went silent for a week. So we phone Barclays, had the forms and everything arranged within 3 more weeks and away we went.
The day after we went live the merchant agreement from Lloyds arrived by mail...
Irish startup. Paypal don't even offer payments pro here even though their euro hq is in North Dublin.
For my MVP I did the following: I was reading HN, similar thread to this and one of the Stripe boys was giving his tuppence ha'penny - having read his contribution I emailed him for a beta invite (I have a US SSN and bank account). I was able to get payments running with active merchant in a very short time despite the fact I'm very inexperienced. No dealing with the disaster zone that is the Irish banking system, no paypal worries. For someone hacking together an MVP (me) it was a massive hurdle overcome with relative ease. Sadly I think Stripe require the ssn (it is/was possible to open a us bank account without), perhaps one of their reps could confirm this?
Agree with the UK poster it isn't easy doing startup stuff in this part of the old world, it certainly pays to have one foot in the States if you can manage it.
Register a business (Ltd, LLC, etc), Open a Business Bank Account, Open a Business Merchant Account, Sign Up For A Payment Gateway...
Why do you need any of that to get started? You can trade as a sole trader, and use PayPal to take payments in the interim. Not ideal... but it does the job.
For merchant accounts, there are plenty of third parties that will do the job as well. Again, it's not ideal... but at least you get started.
* You just simply don’t see the level of entrepreneurs in the UK as you do the US in my experience and I feel that is not helped with the bureaucracies.*
And with only a £3100 ($5000) deposit.
I highlight these quotes to illustrate the fact that there's still a problem: what if you don't have a $5,000 deposit? At that point, whether it's $50,000 or $5,000, it doesn't matter: you still have to use some ingenuity to succeed. The same ingenuity to doing things in a less than ideal manner at first - but that can be "fixed" soon enough if you start to succeed.
Another point is you don't need a business bank account to be a sole trader. The business bank account has fees attached to it, which is why a bank wants you to use it rather than the free alternative.
This makes it ideal if you want to 'bootstrap' some ideas to see if they are worthy of pursuing - without the pressure of investors, business plans etc. You don't even have to register with the tax people until a few months into a business.
Oh, I agree. I was lucky to have $5,000. Compared to the $80,000 being asked it seemed like a godsend. But I think the entry point should be free so that it promotes startups. :)
Using Paypal to collect payments is probably the quickest way to get a startup up and running. Even for recurring payments paypal works quite well. In fact for users who already have a paypal account, signup would be easier than entering credit card details into a form you host.
Also I think there's a better chance your users will keep their credit card details up to date as they'll be using their Paypal account for other things. e.g. ebay.
What a good approach to take is simply to approach other businesses with models similar to yours and ask them who they use and get an introduction to their contact at the merchant account provider. If you're working with someone at the provider who's already familiar with your business type then things will move much faster.
If the person you're dealing with has never worked with a company that's does SaaS subscriptions before then naturally you're going to have more problems.
Chargify even lists specific contacts at BarclayCard and HSBC for people looking to setup merchant accounts that work with them, and because Chargify direct all of their users to specific contacts it means these individuals are extremely clued up about the SaaS business model and the process will be a lot less painful.
UK startup here. We signed up a Barclays business account in about ~2 weeks and they were happy with a £100 deposit just so there was something in the account. Relatively straightforward. Paypal set up and seems to be working OK. Not sure why it all went wrong for you.
Having lived in the UK a few times and having to go through the process of bank accounts and stuff, and a lot of friends who did the same, the problem usually isn't the bank.
Its usually the case manager you get. My first account was with HSBC, I waltzed in filled the forms out. Walked out. My friend I travelled with came with me, got a different case manager ... took over 4 weeks and eventually moved to Ireland before his account was even opened.
The differing service you can get from one bank is amazing. Just take this example from a trip I took a few months ago.
I went to Thailand with 3 mates from the UK, all Llyods customers. One had a friend as his bank manager who OK'ed his for use in Thailand. He had no trouble at all.
Second guy OK'd his but he withdrew 20,000 baht in one transaction and his account was locked as he wasn't told there was a threshold. He had to ring help desk to unlock his account, it was fine after that.
Third guy didn't realise he had to OK the account, every time he used an ATM his account was locked. He would ring help desk every few days to unlock his account. It seemed he could only draw down 10,000 baht a week, if he tried a second transaction a few days later it would lock again.
No matter what he asked for they just unlocked his account and promised it would lock again. But we where there for a month, and he was always on the phone to the bank.
The problem they had was with a merchant account, not a business bank account, the two are different and a business account is as easy as setting up a personal account.
That's kind of a big claim based on your problems with "the process for receiving payments on a website". Although I don't disagree that the UK startup scene is fragmented and less of a force than it should be, I don't think the fault lies with not being able to accept a payment on your website.
Although I'll take your title as british humor and say the word "doomed" in a dark echoey room.
There are people working to build a startup culture over here (i.e. http://www.startupbritain.org/) and I think the solution lies a little bit before your step 1. So here are my 7 steps to prepend to your 7 steps:
1. If you've successfully gone through building a startup, reach out to other startups in the UK and offer advice. Don't wait for Seedcamp to ask you to mentor, make yourself known and help out. Hell, no one's tweeting with #UKStUp so introduce yourself
2. If you're trying to launch a startup in the UK, tell other startups that's what you're doing, so they can follow, and you them. Hell, no one's tweeting with #UKStUp so introduce yourself
3. Be vocal about your failures.
4. Be vocal about your successes.
5. Organise or attend meetups in your area.
6. Meet up with UK people at conf abroad.
6.5. ...and probably some other stuff...
7. Profit!
That's a bit dated now, the scene's moved on a lot in the last year. The best way to learn about events tends to be by following startup people on twitter.
But if you're not a twitter user there are a couple of people who do weekly emails about startup events in London:
I've had nothing but positive experiences from Barclays and HSBC (can't remember who handles card payments for my current company, but if not one of the above two then a third can be added to that list).
It's true that UK banking system is totally wrong (which is interesting, considering that they invented modern banking). There are multiple regulations that make bankers life hard, most prominent being the anti-money-laundering regulation. Generally a completely useless regulation that doesn't protect the financial system in any way (but that's a different story). This system can be hacked though. Normally it will take a foreigner a couple weeks (if not months) to set up a business bank account. But if you will set up a personal account with that bank first, and follow up with setting up the business account later - no problems and instant service. Lesson learned - you need to know your way around, and there's plenty of people that will help you (other startups). You have to consider that London is the financial capital of the world (or used to be), hence the number of fraud and cheating is enormous. They need some ways to structure it, otherwise it would all collapse.
Also, if opening a bank account is something that can kill the startup, please - what will you do when US competitors actually take notice of you?
While the OP's frustration is understandable, I would say that this is simple example on why the UK startup scene is non-optimal. Allow me indulge in some over-generalization. (And for the record, I /have/ started a tech business in both the UK and USA.)
* A culture of over regulation. It's not just the UK govt that does this - you'll find most large businesses like the bank mentioned putting up roadblocks.
* Concentration of talent in financial services. Investment banks pay alot of money for top talent. Heck, when I first moved there I was working for an investment bank and enjoy the cash and perks - I should have been doing my own startup but money in hand now is hard to turn down.
* Expensive everything. I would say that you need at least 2X more cash to start a company in the UK than compared to 2nd-tier-startup-markets like Atlanta, where I currently live. Sure, you can economize in creative ways, but that takes you away from your core mission in a startup: to build awesome products/services.
A lengthy process (about 3 months) to get signed up with Sage Pay only to be declined the merchant account (yet to give us a reason although they said they would tell us, that was 2 months ago).
We ended up settling on PayPal just to get started, not ideal for taking recurring payments, but quick, easy and better than nothing.
I already had a business account with Lloyds so next I needed to apply for a Merchant Account [...] After jumping through some hoops they came to me with an offer that I could use their service if I give a deposit. [...] they asked me to put a deposit of £50,000 ($81,000.)
I nearly choked right there; 50.000 pounds? What the hell? This is not right by any definition. No wonder the US steams ahead in the startup game.
What would really drive this post home though, would be the second half the author fast-forwards through. Understanding the technicalities and nitty-gritty details of setting up a startup as a European would be very interesting. Especially tax handling. Perhaps a Part II!
The UK is easy, honestly. If you want to form a LTD company, pay someone twenty pounds and it'll be ready within a few hours. Have a 20 minute meeting for you business account (I admit this might have changed - it was about five years ago and with Barclays), get everything set up within the following couple of weeks.
In the meantime, trade as a sole trader. Register with the taxman, phone up their very helpful advice line for what numbers to fill in where. Job done.
I didn't even have a meeting for my business account, everything was handled over the phone/online with 1 set of paperwork having to be sent out to me and back. The only thing they wanted to know was how much I expected to deposit a year and they insisted the first deposit be from a UK source (supposedly some anti-terror funds requirement).
This is an amazing article. The level of dysfunction and inappropriate external control demanded in setting up payment processing was far beyond what I would have imagined was possible setting up a business outside North Korea.
Did you ever consider going with WorldPay instead? That's what I did after seeing the ridiculous measures you need to go through to get a merchant account.
Worldpay is used quite extensively. Frankly I think the interface is a little clunky compared with others but it works. Also SagePay do the merchant account side for you also these days and I know a few people who have received one with NO trading history. Frankly I believe the UK market is quite positive toward startups and I think its down to the individual to look at what the options are and do something for themselves instead of (just being honest) whining about the problems they've had
Honestly, I was going to go the SagePay route. However, they wanted the Lloyds Cardnet stuff in place first.
I'm whining about my problems because I know countless others have had the same issue. I want to incite discussion on what problems people should expect to face and how they can go about it. So others can learn.
When was this? SagePay USED to only work with people who had existing merchant accounts, but no longer. We have just had one of ours accepted for a new ltd company with no trading history. Provoking discussion is great and most things can be improved, however I think the term "doomed" is a little bit over the top. That being said, if you want any advice, get in touch and I'll give you some pointers
I have been using http://www.swreg.org/ (now part of Digital River) to handle all the billing and credit card payments for my downloadable software for about 10 years. I honestly wonder what the conditions are under which it doesn't make sense to outsource all this trouble to one of the many service providers.
I think the title is wrong, but I would agree with the problems with Banks over here. They really REALLY need to get broken up and sorted out. It also doesn't help all the ridiculous red-tape that New Labour put in force at the behest of the US and anti-terrorism etc, none of which occurs in the US ironically enough. I know I lived in both countries.
1. Find a helpful, competent accountant who deals with small businesses (because that's what you'll have at first - a small business)
2. Tell the accountant the nature of your business
3. Follow the accountant's advice.
I'm almost certain the accountant would have given you advice on a simpler path to getting a business bank account.
It's well known to any UK resident that the bank system here is broken, made for and run by the large corporate companies. They are not used to dealing with startups, and I have a feeling that they don't want to either..
I do get his frustration with Barclays. They sent my wife a basket of flowers and a bottle of wine with a "sorry for your loss" card and closed my personal account.
Apparently something had broken somewhere leading to them assuming that I was deceased?!? I never did get a proper explanation.
It was transferred to an "internal account" which they keep for assets awaiting solicitors to approach them with respect to wills and inheritance. They stuck it all back in a new account without too much hassle after a couple of (very awkward and strange) phone calls and a visit to the branch to make sure I was indeed still alive and breathing.
And yes, this includes merchant account, accepting payment by card, Internet banking with a real security (smartcard), etc.
The thing is: you need to be extremely professional in the way you present your business to them. Follow their procedures, be polite on the phone, explain clearly your case. They are a business like you, when you have a good customer in front of you, not by money but simply because polite, patient etc. you always end up walking happily the last mile for her. Be the the nice customer and profit.
Edit: By the way, I got everything without a single deposit, only references from my personal banker and my company secretary banker.