Rho Rho cofounders Everett Cook and Alex Wheldon
- Rho, a new digital bank aimed at entrepreneurs and startups, is launching this month. It has partnered with Evolve Bank & Trust, which provides core banking services and FDIC membership.
- The digital bank's API has the ability to integrate other software, like Slack and QuickBooks.
- Rho will compete with the likes of mobile startup bank Novo, digital bank Mercury, and incumbent Silicon Valley bank for the entrepreneur segment.
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Rho, a digital bank geared at entrepreneurs and startups, is launching this month. We spoke with cofounders Everett Cook and Alex Wheldon about what it takes to build a banking fintech.
Cook and Wheldon said the idea for Rho came from their experiences opening business bank accounts with large, incumbent banks.
"Very few people are happy with their bank accounts, it's something that people tolerate and put up with as it's a necessary precursor to doing business," Cook told Business Insider.
Rho's lead seed investor is Alexa Von Tobel, founder and former CEO of LearnVest, and founder of new venture capital firm Inspired Capital.
Rho will compete with Andreessen Horowitz-backed Mercury, a digital bank for startups that launched in April, and incumbent Silicon Valley Bank, which has been providing business banking to startups and larger companies for 35 years. According to the SVB website, 50% of all venture capital-backed tech and life science companies in the US bank with them.
Still, Cook and Wheldon see a gap in the market for startup banking.
"The consumer segment is much bigger. If you're a big bank, you make most of your money on consumers and large corporates, and everything in the middle is kind of an afterthought," said Cook.
New companies are looking to build platforms from scratch, whereas large institutional banks often have to navigate legacy technology and infrastructure roadblocks. But the startups still often leave the actual, heavily-regulated underlying services to existing banks.
For example, Rho has partnered with Evolve Bank & Trust, which provides the core banking services and FDIC membership.
"Naturally, our focus is to help startups because generally their needs are more technologically advanced, that they warrant the type of tooling and capabilities we're trying to improve," said Wheldon.
Move fast, don't break things
Wheldon has started several companies, including Vegas Wireless Entertainment, a mobile gambling software company. Cook has a decade of experience working at various hedge funds, as both an analyst and a portfolio manager.
While Cook and Wheldon aren't the first cofounders to pair finance and tech experience, they believe it's critical to success when working with a partner bank.
"To be able to engage with those institutions you have to be able to speak their language, and have them understand that you take regulation, compliance, all that stuff extremely seriously," said Cook. "The ethos of move fast, break things is not compatible with fintech."
Wheldon described how building a core banking product was different from his past projects, given the control and security required.
"There's a thing that works and there's a thing that doesn't - it's kind of that binary," he said.
Rho will offer digital account opening, an FDIC-insured bank account, and a programmable cash-back corporate card. It will have 1% interest on the Rho checking account with no minimum balance requirements.
There will also be a third-party cash management option, where clients can transfer a minimum of $250,000 to earn 1.6% through a diversified money market allocation.
In addition to the banking services, Rho's API has the ability to integrate other software necessary to running a business, including Slack and QuickBooks.
Many fintechs, with their open APIs, partner with each other to offer their customers more services.
Novo, a small business-focused digital bank that launched in March, recently announced a partnership with UK-based fintech TransferWise. This deal gives Novo's business customers the ability to use the TransferWise API to send cross-border payments from their Novo accounts.