Illustrative Hypothetical Case: Empowering Veteran Entrepreneurs in Fintech

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Mission-Driven Growth: How a Veteran-Led Neobank Scaled with Licensing, Certifications, Government Funding, and Training Support

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Introduction

A group of U.S. veterans launched a mission-driven neobank with 20 employees and $3 million in seed funding to bring financial inclusion to underserved communities, particularly veterans. Combining service-driven values with innovative technology, the neobank sought to provide real-time payments, cryptocurrency transactions, and access to affordable insurance, mortgages, and car financing tailored to veterans' needs.

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In addition to targeting individual consumers, the company planned to pitch its platform to corporations, enabling them to offer the neobank’s services as an employee benefit. This approach not only supported the company’s mission but also aligned with corporate social responsibility goals, leveraging set-aside opportunities through its veteran-owned certification.

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To achieve these ambitious goals, the company required licenses in 15 states for money transmission as well as brokering insurance, mortgage, and car financing services. Regulatory requirements and banking partner expectations also necessitated robust compliance systems. However, the company lacked the internal expertise to manage these efforts, sought to avoid high fixed costs, and was deeply concerned about losing valuable time as it burned through its capital during the lengthy licensing and compliance process.

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In addition, the company planned to differentiate its offering from competitors through significant R&D investments while expanding rapidly into the consumer and corporate benefits markets. The leadership team was unaware of opportunities like veteran certifications and government funding programs that could boost their standing, credibility, and financial capacity.

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Challenges

The neobank faced several hurdles:

1. Complex Licensing and Compliance Needs:

   • Securing and maintaining licenses for money transmission, insurance brokering, mortgages, and car loans across 15 states.

   • Establishing a robust ongoing compliance system without incurring high fixed costs.

   • Meeting stringent expectations from bank and payment processors.

2. Lack of Awareness of Strategic Certifications:

   • Unaware of the Veteran-Owned Business Certification, which could provide preferred standing for corporate contracts and add credibility with banking partners and future investors.

3. Funding Constraints for Expansion and R&D:

   • Needed additional funding to invest in R&D to differentiate its offerings and manage licensing, compliance, legal, and development costs.

   • While it needed to raise additional capital to cover these costs, leadership was determined to avoid diluting ownership, especially after their initial seed funding round.

4. Limited Entrepreneurial Training:

   • Leadership and employees, while skilled in their areas, lacked formal training in entrepreneurship and commercial operations.

 

Highwater Bound’s Approach and Results

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