The Birth of Neobanking And Building A Programmable Money Layer for The Internet with Shamir Karkal Co-Founder & CEO Sila

Shamir Karkal, Co-Founder & CEO  Sila  chats with  Sanjay Swamy, Managing Partner  Prime Venture Partners .

Listen to the podcast to learn about

02:30 - How an email led to birth of Neo banking

12:30 - Building Simple: “We did everything wrong before we did everything right”

23:15 - Simple’s not so simple acquisition journey

33:00 - Race of tech platforms and why India might emerge as a winner

42:20 - Similarities between money and email

47:00 - Shamir’s advice to entrepreneurs: Do it sooner

Read the complete transcript below

1:10 - Sanjay Swamy

Hi, everybody, Sanjay Swamy here. Welcome to the next episode of the Prime Venture Partners Podcast, where we bring you guests from all around the world from the startup ecosystem. I have today a very special friend and guest here Shamir Karkal. Shamir is from Bangalore who now lives in Oregon and is an entrepreneur; a serial entrepreneur in the FinTech space. We’ll talk about his background in a bit. Shamir, welcome to the show.

1:44 - Shamir Karkal

Thank you, Sanjay. And thank you for having me, it’s a pleasure to be chatting with you and to be on the show.

1:58 - Sanjay Swamy

Great. So very quickly we’ll dive into your first entrepreneurial stint. Many of us, especially in the FinTech space track this amazing industry called Neo banking, which is probably today, several 10s, if not hundreds of billions of dollars in value if you look at all the companies around the world. You were the co-founder of the first Neo bank, and as the CTO, I would like to say, when people may claim to be the father of something new, I would say, you are the mother of Neo banking. And everyone knows that the mother does all the hard work anyway. But let me start by asking you about that experience. And you have told me about the legendary email you got from your co-founder that started it off. Tell us about the origins of Neo banking.

2:45 - Shamir Karkal

There’s a lot of stuff that happened even before that email that we don’t always talk about. And even when I was at Simple, we will start with the story of that email. So in a nutshell, I used to be a software engineer, ended up in the US and went to business school. And then I was working at McKinsey in Europe. And I ended up just by chance more than anything else becoming a financial guy because that was the first project I got at McKinsey. Now my parents and even my grandparents were all bankers. But up until that point, I hadn’t done anything with finance. And then I had spent three years doing banking stuff at McKinsey. So my classmate from Business School, Josh Reich, who was and is a good friend.

He thought of me as his banker, in the sense, when he had questions about banking, he would reach out to me and ask me, even when I went to New York, I would chat with him. And we would discuss auction markets and market structure and especially in ’08-‘09, there was a lot to talk about.

And the way it started for Josh was, he had just gotten married and he bought a house and his financial life had gotten much more complicated than being a single guy. And he had a very simple question. Who makes more money? Who spends more money, actually, him or his wife?

Now, if he had just asked me that question, that might never have been a Simple because the answer was very obvious to anybody. But Josh is an engineer, he actually did an MBA and majored in accounting of all things. And so he was trying to massage his bank data and actually get an answer, a quantitative answer. And he couldn’t figure it out. So he went on Twitter and started, cursing because then this was early ‘09 so Twitter was very small. So some people then asked him why? And he said these are all the problems that I’m having. And one VC actually at Union Square told him, well, fix it!!

And he was like, it’s the good thing? How would I fix it?

05:15 - Sanjay Swamy

There’s no such thing as a problem. It’s an opportunity.

05:20 - Shamir Karkal

Exactly. So then he started asking me, why is banking so bad in the US? I’m like, when I first came to the US from India, I was shocked that banking in the US was worse than banking in India in ‘03. And I just explained to him all these things I’d learned at McKinsey, just from working at banks and everything, I just kept answering his questions. But he never asked me that question that started it. And, then he sent me an email. And in this email, he laid out this vision which was that banks basically do four things.

They are a place to hold money. They provide electronic payments and transfers so you can move that money. They have the ability to lend you money. So it’s not just the take your money, they can also lend money. And then they also can borrow money.

So, that’s just it. That’s all that a bank does for people. Why don’t we just build a bank that provides the infrastructure to perform these four basic functions? But instead of earning money by hiding information and confusing customers, let’s just make it all simple, very transparent. And let’s just provide the core products. And then on top of it, build a marketplace to find the best investments or the best ‘x’, or whatever else that a person needs, in their financial life beyond that core banking thing.

And he laid it out in that email, it’s on my medium, you guys can go read the whole thing. But it was just such a compelling thing for me. Why doesn’t it work like that? We should make it work like that, that makes so much more sense than the current way that it works. So I got interested in that, and he sent that email to me, and to another guy called Jerry Neumann.

And Jerry responded first to that email and he said, “Oi, regulation. But it’s a good idea.”

And I responded saying well, we can figure out regulation. But let me understand this idea more. And that’s exactly when I started talking with him.

Four months later, Jerry, who’s an investor in New York. He is like a super angel now. But he wrote us an angel check. And I left McKinsey. Moved to New York, and me and Josh co-founded Simple. And then we added another co-founder a few months later, but that’s where it all started from, that conversation that we were having, but then just that email, crystallizing all of it into a very compelling vision.

08:02 - Sanjay Swamy

And so you left McKinsey and moved from Europe back to the US to the west coast to start Simple.

08:10 - Shamir Karkal

I actually moved to New York. So I was at a rotation in Europe, I was supposed to go back to the US. I did but I left immediately. And December of ‘09 was my last day at McKinsey and January 1 of ’10, I was officially employee number two at Simple.

And we incorporated in November and did the whole thing. And in fact, it was quite interesting because I was actually on an H1B visa at that time. And even figuring out how to do all of that itself took two-three months, but we found a way and we made it happen.

08:50 - Sanjay Swamy

So, tell us about life at Simple when you started out, today everybody says you need to find a sponsor bank, you need to do this, or you need to get a license, some countries also have digital banking licenses, and so on. But when you guys started out, none of that existed? Or at least not in such a formal way. And the whole idea of building a complete brand, I was one of the very lucky early customers and users of Simple for the longest time actually.

But obviously, it was refreshing, it was different the way you communicated. I still remember the passphrase instead of a password, the safe to spend idea, a lot of those things, which still 12 years later don’t exist in most of the banking platforms, probably none. And which are very user friendly. But tell us about the early days and how you went about getting the partnerships going, getting the team together to believe in you guys. And some of those fun moments.

09:55 - Shamir Karkal

Yeah. So that was an interesting thing which hit us early, even though we were anticipating it. I had left the US in summer of ‘08 before the big crisis. And I came back to the US at the end of ‘09. And I was the banker in the group in the sense that I was the guy who understood more about banking than others. So I had to figure out how to put this whole system back-end together. And when Josh initially asked me, I just went and pulled up the McKinsey internal deck on how to start a bank. And I told him, it takes a few computers and about $10 million and a license from the Fed. And that’s how you do it. And every year between 2000 and 2008 there were 100 to 300 new banks chartered in the US. Every year, there was a thriving industry of starting up small community banks. And that’s what all people started. And we just go and start one of those and you just have to raise enough money to do it.

Between 2008 and today, 13 years later, I believe we are now up to 10. So at the start of the crisis and through the crisis, the regulators, mainly the FDIC, basically decided there will be no more new banks in this country. And so the whole community banking industry, the community banking, startup industry just ended. And they were remarkably consistent on this. They said no to two guys in a basement in Brooklyn trying to start Simple. They met a consortium of which had backing of $2 billion, they had retired Admiral, a three-star General, they had a former Secretary of the Treasury, a guy whose signature is on the currency. That was the team trying to start a bank, the FDIC said no to them as well. So it didn’t matter who you were, it was no to everybody.

And so we quickly figured this out. And we’re like, no matter how much money we raise, no matter what we do. We’re not getting a bank license, it is just impossible. Well, how do we start a bank without a bank license? And so I started doing research on this. And I was like we got to go find a partner bank. That seemed like the obvious choice. And then when we thought about it, we were like, that makes a lot of sense. We are not trying to change anything about the balance sheet of banking, we’re not really trying to change regulatory, reporting, ther is a lot of really old tech at banks, we’d like to change that. But even that isn’t necessarily a big problem. What we are changing is the product and user interface layer.  

And so there are some dependencies of the tech, which we got to figure out. But ultimately, and a Neo bank, just looks like the balance sheet wise, compliance wise, it just looks like a traditional bank, through the internet. That’s all, from a regulatory perspective. So why go to all that hurdle to solve something which already exists, if you can just rent it, rather than go and buy or build it. So we started looking for partner banks, starting in November of ‘09 actually. But of course, full-speed from January of ’10.

And it took us a long time. And in fact, that was the biggest problem throughout the history of Simple was finding reliable back-end-bank partners. That’s not such a big problem anymore, because now there’s 20 to 30 in the US who would do this as a business. But back then there weren’t any, what we eventually did was sign up with a bank, which was quite experienced in the prepaid space. And this ended up being one of the important learnings for us. If you guys don’t know anything about starting a bank, and if the bank or Neo bank, and the bank that you’re working with, doesn’t know anything about working with FinTech startups, this is not going to work well.

Somebody should have some experience in this at least. So the closest thing was banks that would do deals with the likes of green dot, rush card, and put these prepaid cards, which were really aimed at lower-income people in the US. It’s a very specific type of product. But it had that partnership structure, there was a bank partner, there was a processor, and there was some sort of marketing entity, which marketed it to a group of people.

We were like, wait. We can borrow that structure from the prepaid car industry, use some of the technology, and change the entire product and market it to a whole new set of people. It sounds very obvious when we say it like that. And it makes a lot of sense. It took us a long time. Right from that first email to actually launching Simple was almost exactly three years. First email was in July of ‘09, the launch was in July of ‘12. And the way I like to put it is that we did everything wrong before we did it right. But we just stuck with it. And eventually figured it out and built that platform and launched it.

15:30 - Sanjay Swamy

It’s terrific and I think that is always both the challenge but the opportunity for the category creator because you have an opportunity to perhaps make some mistakes and correct course, as opposed to when you’re chasing someone who’s already shown the way then. Mistakes will actually be very, very expensive and that’s generally why we also like to back category creators in the first place. So tell us about the early days post the launch, and what some of those experiences were, and what led all the way up through to the exit of the company.

16:10 - Shamir Karkal

So one of the interesting things was in that two, three year period, while we were still trying to find bank partners, processors and connecting all this up in ways that nobody had ever done, so I had to hack our way through it.

We started a sign-up list. And we started this in February of ‘10. So soon after we got working on it and that thing became viral. And it was the simplest thing. The first version of it was just like a black website saying, we’re going to make banking better. If you like that, then put your email id and we’ll contact you. There was nothing like how or what. No promise, except we’re going to make banking better. And Josh went and tweeted out the link to it. To his 50 followers on Twitter back then.  

That thing just started spreading and spreading. At first, we got 10s, then 100s, then 1000s, then tens of 1000s of signups. And what we did was every time somebody would sign up, we would take a form email. And we had a little piece of code that Josh wrote, which would either assign it to me or to Josh. And we take a form email, I would Google the email id because we didn’t ask for name only email. So I would look up, Sanjay, prime VP, or whatever. And be like, that’s Sanjay Swamy. And I would take the form email. And in the middle of it, I would put one line saying, ‘hey, Sanjay, how is the venture business in India’ and then send it off. Takes not even two minutes. But we will just do that in whatever time we had between meetings and everything else. That caught us such a tremendous response because people signed up for something random. And then I got a form email thanking me for signing up. But wait, it said something about me being venture capitalist, and how do they know that? Did some human actually like this?

And so we ended up having more than 10,000 email conversations with people and once people responded, we just asked them, what do you like about banking? What do you hate about banking? Some of it we printed and stuck on the walls, but we had people send us like seven-page long emails talking about all the different ways in their life that banks had screwed them over. And people put so much of their heart and soul into that feedback, because people truly, really deeply hated the banking system.

And by the time we launched that signup list was 200,000 people, and we never put any marketing money behind it. There is such a whole art now that people do to building a signup list. Ours was probably the original one in the FinTech space. And all we did was just like ask people questions and respond to them. Eventually, it got too big, we hired interns. And then even after a while, even they couldn’t keep up with it. So we just stopped trying to talk to everybody on the signup list. But it gave us so much feedback. It also meant that by the time we launched for the first nine months, all we did was try and catch. For the first 12 months, all we did was try to catch up with the signup list.

There are 200,000 people, and our bank partner on the back end, couldn’t onboard more than 5000 people a month initially. Their systems would just start breaking at that point. And so we had to gate it, there were so many crazy stories that came out of that. Because we went basically through the list in order. So if you signed up in February of 10, you got invited in July of 12, to sign up.

And we actually got the first half of the signup list, at least we got a 30% conversion rate. People waited two three-years and then signed up. When they got to the end, it was just insane. They were patiently waiting for these years for us to build this.

So the initial problem wasn’t even product-market fit in the traditional sense, and that we didn’t have to find customers, we had all the customers find us before we built the product. But what we realized was one thing is to sign up a customer. Another thing is to make them active. And so this we started seeing in two to three months after launch where people would sign up, put in some money and spend it down on their new Simple card and then just vanish.

And the number of customers kept increasing, the number of active customers didn’t increase nearly as fast and the active rate actually went down. And we then had to realize like the whole thing in this space is about getting active customers not just getting random signups. And so we built a whole process around that. And we put a team on it. And we just came up with a list of ideas.

And we’re like let’s try them. And it was like, just do one new idea every week. What is it? let’s think which is the best one, ship it, go on to the next one, come back a few weeks later, see what worked, what didn’t, whatever was working, keep it. The rest, kill it. Keep rinse repeating.

And so on our internal metric of activation that hit the lowest level of around 16%. in September of ‘12, by February of ‘13, it was up to 26%-28%. And by the end of ‘13, it was around 30. So we basically doubled the activation rate. And doubling that activation rate it just made like per user economics improved five-six times, because it’s way more valuable to have active users. And also active users were super active.

So that was the other part, once you got somebody to actually switch their primary account over, then you would see not 10 transactions a month, you’d see an average of 35 transactions a month. And we had customers doing 100 transactions per month. It’s some of the stuff we’d saw in the data was just crazy. So that took a while. And we had to learn that process. But ultimately, and now looking back on it, it only took six to maybe eight-nine months. And after that it was just about getting the engine working and the biggest problem always was just the tech to scale it because that problem I glossed over at the start, which was the underlying tech at the banks, it’s problematic, but you can make it work when you can make it work. But can you make it work at scale? And it’s like, hey! Now you want to onboard? Not 5000 customers a month, you know it works. You want to go from 5 to 10 to 20 to 30 to 40. Well, the bank can’t deal with that. And you’re like, I need to grow, I need to grow dammit, I have customers. And my marketing engine is also beginning to work now. But I need to scale the underlying platform. And that’s where the underlying tech becomes so important. And banks just aren’t great at that.

23:35 - Sanjay Swamy

So, Post the launch and I think you had several 10s of 1000s of users active on the system and so on. And suddenly one day I read that BBVA has acquired Simple. And it was interesting that a traditional European Bank would acquire the company. And then subsequently, we got to know each other. And you shared some of those stories about how the bank was such a forward thinking bank and you spent some time continuing with the bank before you moved on.

How did that come about? And why was at the time the right thing to do? And any thoughts around that in hindsight, given how the industry has shaped up?

24:24 - Shamir Karkal

So the part of the thing that I glossed over here was that in this period of time, we also raised two rounds of venture capital to pay for all of this. So we raised 2.9 million in series A and back in 2010, 2.9 million was series A. In August of ‘10, then we raised another 10 million series B, in August of ’11 or around late summer of ‘11. That really set us up, there was a fair amount of money. It helped us to launch, power through launch. But by 2013, we were beginning to run out of money. And the problem was we’re running out of money just as we got the engine working. And we’re like now the metrics are all beginning to go up and to the right steadily.

But we don’t have a track record of 12 months of them going up into the right. It’s only six months since we launched and the last two-three months have looked promising, it was only two-three months. So we set out to raise around in early ‘13, which would have been a series C for us. We started getting some good responses. And then we ended up getting a term sheet from a late stage Private Equity Fund, which was not what we were looking for at all. We were looking for 15 and they offered us 25. And it was really the smallest that they could do because they were huge. And we just went for it. We can always spend more money, at least that’s what we thought. And we got into due diligence with them. And then after three weeks, they just pulled the term sheet.

And that really created a problem for us because we had lost the full momentum that we had had all the other VC conversations had gotten cold. And now we had only two months of runway left. For a company, which was at that point, we were like 40,000 users more than 30,000. And we had 50 employees, more than 50. So it wasn’t a small operation anymore. And it was beginning to really take off. And we’re almost out of money here.

25:32 - Shamir Karkal

So we went to the board. Now the problem for the board was that all our investors were early stage. Like they weren’t able to write a late stage check of 15 or anything. And we couldn’t put a new round together in just six weeks. So the board, and to be fair, a couple of companies had also started asking about acquiring us, and we’d begin to get that. So the board was like, look, we’ll do it a bridge round. But you guys have to start talking because up until then we were not selling ever. You have to start looking at this acquisition interest. So that’s where the acquisition train started rolling. And a few months after that, we ended up with BBVA ventures team, we had known them for two-three years, they were actually as corporate venture arm, they couldn’t lead around. So they basically tell us when you do your next round, we’ll put in some money. So they were close to us already.

And when they heard that we were looking at acquisition interest, they relayed that to Madrid. And that’s when Francisco Gonzalez, who was the chairman and CEO at that time, was immediately like, we should go buy them. And he had heard of us, because we had always gotten great press. And he was super forward thinking. He was an engineer himself, even though not back then he was already like around 70-69, he was pretty old. But he had been an engineer on IBM mainframes starting from 70s. And he had built and sold a brokerage business in Spain, and then came into banking. So he was the tech guy in banking from a generation earlier. And he had this thesis that banking would be completely transformed by technology. He saw us as the vanguard of that movement and he was like, go buy them. And that’s when we had a process, we had some folks who were interested. But then BBVA just got in and was like, No, we’re going to acquire them. And that really drove the price up and it drove the price past 100.

At the same time, now that we had a few more months, we got VC’s interest as well, we got a term sheet from a VC, which was okay, it would have been a slight down round, but it would still have been enough money, we could have recapped, and we could have been.

And so there was this period of time where we were working with BBVA, it was not an exclusive or anything, and doing due diligence with them, which took a long time because the bank and our term sheets from different VCs just kept getting better and better and better. And, finally, it came down to January of ‘14 and Josh and I had to make a decision. Well, finally, BBVA is there, they have got all their due diligence done, everybody in this giant bank has signed off on this deal. And they’re willing to pay a pretty nice price.

At the same time, we now have a really attractive VC term sheet on the table, $25 million. The best funds on the planet. Good valuation, if I’d gotten that six months before, I would have signed it, thrown a party and never even thought about selling. But now it was different. And there’s the cash on the table. And the economics are all figured out, we had figured out how and the board had supported us in this how to take what ended up being almost $15 million and distributed to 100 employees. And so I think there’s 40 employees who made more than $300,000 on that sale. So they didn’t know it. This was all just me, Josh, and like five people on the management team.

But on the same time we were like, if you sign up for the VC term sheet, this is going to be pushed off for at least another three or four years. And so there were still lots and lots of problems in the technology platform. We were doing a major technology transition. So ultimately, we decided that we were too far down the sales path to jump off and go back to fundraising and that’s when we decided to go and sell.

I still remember where I was. I still look back on it. And I look at all that’s happened in the industry now. And I’m like, should I have? Should I have bitten the bullet and just rode it for another four or five years? Who knows man? Who knows?

31:20 - Sanjay Swamy

Yeah, well, hindsight is always 20-21 what we’d like to say.

31:25 - Shamir Karkal

But 2020 is in hindsight, Right?

31:30 - Sanjay Swamy

Yes, absolutely. But I think also it’s always very easy, because in life, we can only take one fork.

And you never know what would have happened and we assume everything else would have happened exactly the same way. And just the one decision would have altered your own thing. I had a similar experience. I left mcheck. It’s just probably a couple of years too early, before the whole mobile payment space sort of took off in India, wallet regulations came in, and so on. But I think these moments give us opportunities to do several new things in life and give us a lot more exposure. And clearly you have done a lot of exciting stuff, both including volunteering with iSpirit and looking at what’s happening here in India as well. So let’s switch gears a little bit to India and what you’re seeing happening here in India, which, frankly, I think is quite different from the rest of the world. Would love to hear the thoughts of somebody who’s a native of Bangalore grew up here, went to school here, did your undergrad and then with the BBVA acquisitions sort of had a global view of things with the European view, the North American view, and then looking at the startup ecosystem, as a very successful angel investor, and so on. So tell us what you’re seeing from the outside on the India front and your thoughts around that.

33:03- Shamir Karkal

So I have this thesis that history does not repeat, but it does rhyme. And I think where we are right now is that we are actually at the start in the probably, the next one or 10, 20, 30 years of a new Cold War. The world is there was this era of globalisation that started from the fall of the Soviet Union, where the last Cold War ended. And it was the US was the single superpower, the internet was everywhere. There was globalisation growth. India has transformed, China has transformed, and so has many other parts of the world.

I think that was already beginning to break down a little bit with the ’08 financial crisis. Definitely with Trump coming to power in the US but also now with this whole COVID mess. So when I first heard this thesis from Jerry Yang, when I went to an event with him a year and a half ago, even before COVID. And the thesis is basically this whole anti China thing that’s happening in the US now, that’s not going to go away just because Trump goes away. And it’s going to evolve or maybe devolve into a Cold War. It’s not going to look exactly like the previous cold war that was different. It was all about like nuclear and space races. This one is probably going to end up being the race of the platforms. The US has a bunch of massive tech platforms. They’re ‘The GAFA’, they’re called Google, Apple, Facebook, Amazon.

But so does China. China has Alibaba, Tencent and all these giant companies. And we’re probably going to see a more balkanization of the internet and a lot more government supported competition, like you would see in the Cold War when the US would try to push its companies and the Soviets would try to push whatever their capabilities were as well. But of course, it’s communist. And just like the last Cold War, this cold war is not going to be fought hopefully with guns and bullets, thank God. But also it’s going to be fought mostly in Latin America, Africa and Asia. So there are two separate ways of thinking. One is like the US entrepreneurial led tech startup, but which is also quite monopolised when you look at the very large companies. And then in China, you have the state supported system.

I think just again, like the last Cold War, when Jerry Yang was telling me this, that made a lot of sense. But I remember in the last Cold War, India tried to do this thing called the Non-aligned Movement and say that there’s a third way. You don’t have to be on the Soviet’s side or the US’s side. You can be your own side and we can pick all the people who don’t want to be on one side and make a group of them.

And it had some impact at least when you look at the platforms coming to the similar thing, what India has built with the India stack at the base of it is Aadhaar. But with UPI and all the other pieces around it is really a third way. It’s not like the US, which has very creaky technology, when you look at the underpinnings of finance. And that has enabled monopolies whether it’s Apple, Facebook or even the banks themselves are an oligopoly in the US.

Visa and MasterCard is a duopoly right there. What India has basically said is we can create social goods as infrastructure as a social good and have that built and deployed by the government with the government support. And that infrastructure will actually enable this explosion of value creation and innovation on top of that infrastructure. But you don’t want the underlying infrastructure itself to be controlled either by visa or by Alibaba. You want that access to be democratic and not driven by all the games. You can see so much of it in all the places. Google, Apple; all of them have their own things.

And I think that model is truly unique in the globe when you look at it, it’s not how the US operates. It is not how China operates. It’s not how anybody else operates. And yet, it is actually super exciting. And what’s happening in India over the last four or five years is just insane. And there’s not a lot of people in the West who’d still realise that. I feel at the highest levels, there is awareness. But India has that opportunity to basically say, “there’s a third way”. The third way is actually way better because it allows the creation of a lot more value for the end consumers, which is us.

And if we can do that right, I think we’re doing it right in India. And we can then actually act as an example for large parts of the world. Europe and lots of places in Africa are not super happy about this. They’re like, if I have to choose between a fairly right wing US and authoritarian Chinese. If I have to choose between Visa and Alibaba, I’m not sure, is there a third choice? Can I have better choices? And so there’s a lot of people who are looking at what that could be. And I think they’re very interested in what India has built. And I’m hopeful that it becomes not just an Indian thing, even in India. India has 1.3 billion people and this is big enough. If we can just solve all of India’s problems, that’s still amazing. But we have the opportunity to export it and act as an example for the world over the next decade.

39:39 - Sanjay Swamy

Awesome. So switching gears to your new venture here? Silamoney. Tell us a little bit about it and what you see over the next few years? What excites you?

39:52 - Shamir Karkal

So it came out of my experiences at Simple. I was always the guy whose job was to make the backend work. I wasn’t the UI guy. I wasn’t the one who came up with the beautiful drag and drop feature for goals or any of that stuff. I was the guy who found the bank partner, find the processor, figure out how to connect them and build that internal API layer on top of which everything else gets baked. It was hard and it was complex, it was always in some different state of being broken and being fixed. And that really led to this insight that if you’re a developer or a builder or a programmer, whatever you want to call it, and you wake up anywhere on the planet today or even five years ago and you want to programme with Email or SMS or Voice over IP or any messaging system. There are API’s, SDKs, a whole ecosystem of providers, open access protocols. It’s just a question of what you want to build and write the code and build it. Nobody’s stopping you.

The hard thing to do is to compete with Gmail because Gmail is a pretty good product. But reality is most people who are programming with email, they’re not trying to build the next superhuman or build another Gmail. They’re just embedding some email flow into their app and into their businesses, gaming app. There’s 1000s of use cases. It’s quick and easy to do, the moment you come to money.

And remember, money is just another type of messaging protocol at its core. There are no APIs or SDKs, there is no open access protocols, there is no ecosystem of providers, whether you’re in San Francisco or Shanghai matters a lot. But if you ever actually managed to build an app, in money, you will find that competing with Bank of America is much easier than competing with Gmail. But again, most people who want to programme with money are not trying to build a Neo bank.There’s a market for that. There are now 40, 50, 100 Neo banks in the US, there’s Neo banks in every part of the world. But that is not the vast majority of the market, the vast majority of the market are people who are building apps of all the different types. And the money is as important and as fundamental as email.

And so they just want to embed a payments capability, which usually involves taking money from here, holding it, transforming it in some way, and then sending it somewhere. Every large, late stage tech company has a mid size FinTech within it.

Before this whole crisis, now I don’t know, they’ve been public, Airbnb had 300 people in its payments team. They had 70 product managers in payments. You don’t think of Airbnb as a payments company at all. If you wake up in Tanzania tomorrow and decide to book a vacation in Greece. After two months, you decide to cancel it and rebook in Vietnam. Airbnb has to make all that money flow work. And there is no programmable money layer for the internet.

So they had to build it. And they had to build integrations with everybody from Stripe to Flutterwave to 100 different providers across 180-200 countries. Same thing with Google. Same thing with Apple. Same thing with Facebook. PayPal was originally one and the same thing with them.

So that’s what I want to do with Sila. I want to build a one API layer which connects into every payments network out there, has all the compliance capabilities that you need embedded because it’s very important. Because the whole thing about difference between money and email is money is heavily regulated, and email is almost unregulated. So you have to manage that across 190 countries and connect into the local payment systems. Some of the international payment systems provide that programmable layer. But once you do, then you unlock this massive wave of innovation where you’re building a payments app in the US. Pre Sila was probably a minimum of 12 months. Now we regularly have customers who sign up and are live in six weeks. And our record is 20 days.

And this is with full compliance, due diligence, security reviews, and all the other things that a bank would do. In fact, we work with bank partners, so we embed those capabilities. It’s just that we don’t operate like a bank, we operate like a tech company. And that makes a massive difference. That’s what I want to do. I want to help every one of those developers right now in the US but eventually all over the world to just programme with money and do it quickly and easily.

45:07 - Sanjay Swamy

Sounds really exciting and fascinating Shamir. All the best. And I’m sure that next few years are bound to be quite exciting. I’ll close with one question which we asked pretty much all our podcast guests. You’ve been through this journey over the last 10-12 years. What would the Shamir of 2021 advise the Shamir of 2008 when you were getting started on this entrepreneurial journey?

45:36 - Shamir Karkal

Do it sooner.

And even back in ‘98 when I was in college and the first tech boom; the dotcom boom was happening. I was still a teenager. I was coding away with friends and we were building websites and people were paying us to do some of this stuff because why not make a few 1000 bucks in college is always good.

And I had ideas for things to start. And one of my friends even tried to start it. But I was always the conservative guy. I was going to finish my bachelor’s, go do a Master’s, get a good decent paying job and then go to the US and do an MBA. And honestly, if Josh had not sent me that email, I probably would have stayed at McKinsey for years. But I would probably have done the standard route and gone to some corporate finance department and just started working my way up the ladder at some large company or a bank even.

46:35 - Sanjay Swamy

I was worried you were going to say venture capital.

46:40 - Shamir Karkal

I was always interested in venture capital too, but I couldn’t figure out how to break in. And honestly, I didn’t try hard enough. It wasn’t like I went at it with the passion that I need to get into venture capital. And I was interested in entrepreneurship too when I was in business school. But again, I didn’t go at it hard enough. I just was like, this is cool. Talk to people, explore it a little bit, got my internship offer from investment bank, did that, came back, but in consulting offer when I did that. While I was interested in other things, I followed much more of this standard route.

And now looking back on it, I should have chased some of my passions much more aggressively, and probably taken on a few more risks. It’s funny that I am now starting up a company and I’m over 40 now. And it’s not that old. But I have two kids, and managing everything is really hard. But when I was working 100 hour weeks at McKinsey and enjoying, I learned so much. McKinsey is a great place. And yet I wonder if I’d left a little bit sooner and gotten into startups more early and put more of that passion and time and energy into that. I would have probably learned just as much. I’m not sure that I’ve been any more successful or less successful is always this question of ‘The Road Not Taken’.

But I do think that I was a lot more hesitant and had a lot less confidence in myself to figure out uncertainty than I do now. Now, I’m like I have no idea how this is going to work. We’ll figure it out. Let’s go do it. Back then we have to make a plan. We have to have the five year plan and this is what we’re going to do and all of those plans went by the board.

48:40 - Sanjay Swamy

Terrific. Awesome, Shamir. I think that’s great advice for everyone and there’s no time like yesterday to get started and chase your dreams. I think that’s the key message. Terrific having you on the show. I know we could go on and on chatting about this industry and your experiences. But we’re running out of time. So wanted to thank you and look forward to staying in touch. All the best at Silamoney for the coming year.

49:06 - Shamir Karkal

Thank you, Sanjay. Thank you for having me. This was fun.

49:11 - Sanjay Swamy

Awesome. Great.

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