Thought Leaders in Financial Technology: Grain Cofounder and COO Carl Memnon (Part 2)

Sramana Mitra: What is your competition in this?

Carl Memnon: The way we see it and by what’s reflected in our customer base, our primary competitors are the traditional credit cards. Those are our competitors. That’s because the product functions exactly like a credit card in terms of reporting and a revolving line. But there’s no product that’s exactly like Grain.

The reason why I say that is, we don’t issue a physical card. That plays a part in the economics and why we’re able to provide revolving lines that are responsible and do not need to over-extend and charge high APRs. You would download the application. Once you get in there, you will connect your primary checking account. In the background, our algorithm will do its thing and determine a responsible line of credit.

When you want to use that credit, you go into the application. Say you’ve a thousand-dollar credit line and want to withdraw $200, that capital is instantaneously available in that checking account. You access the credit on the existing debit card. We’re meeting users where they are. You’re spending credit on your debit card. It feels more like cash. Part of that problem around overspending is the plastic. On the debit card, it encourages responsible spending that we want to make part of our program.

Sramana Mitra: The three of you came up with this idea. How did you go about it? Did you start the company? Did you start getting a minimum viable product out there? At what point in your evolution did you apply for Y Combinator?

Carl Memnon: We incorporated the company in 2017 in Delaware. Between 2017 and 2018, we started working on developing the MVP. We were able to create that viable product in the market as we were part of the Arizona Fintech Sandbox. We were the second company admitted. That allowed us the ability to take this product that we built and, in a very controlled environment, see how it worked.

Sramana Mitra: You built something before getting into the Arizona Fintech Sandbox?

Carl Memnon: Yes, we built an MVP that had no customers. It was a beta. We had the functionality. You could withdraw and send from that credit line. We launched that in Arizona, still in beta and invitation only. We were able to get a critical mass of users that allowed us to get a better understanding of the product.

We also partnered with financial institutions that provided us with anonymized data to help us further inform our model. We graduated from that program in October of 2018. Between that time and the end of 2019, we were further developing the algorithm and raising capital.

Sramana Mitra: Did the Arizona Fintech Sandbox give you funding?

Carl Memnon: No. I cannot emphasize enough how invaluable it was to our journey. If you want to launch a financial product, there are a ton of important but challenging barriers that are capital-intensive which is an effective way of stifling innovation.

Sramana Mitra: Do you have an example?

Carl Memnon: If you want to be a lender, you need to have a lending license. In order to get a lending license, you need to go through that regulatory process. You need to build a whole lot of infrastructure and have compliance in place. You need funding to do so, but it’s a chicken-and-egg situation because you need to build a certain level of product before you can get that funding. Arizona allowed us to not have all of that infrastructure and test it out, prove the concept, and then go get the funding to further develop.

This segment is part 2 in the series : Thought Leaders in Financial Technology: Grain Cofounder and COO Carl Memnon
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