Ask HN: How can my startup break a monopoly? | Hacker News Reader

Ask HN: How can my startup break a monopoly?

3 pointsPedro_Ribeiro3 comments

Hi. I'm a co-founder of a startup focused on anti-money laundering in crypto.

There is a big company in the space called Chainalysis. 70% of the governments that care about these things use them. The other 30% are divided between Elliptic and TRM Labs.

The issue is: when a company is buying AML software, the only real law besides doing KYC is that you must "known-your-transactions".

The only companies that the central banks of each country trust for doing KYT are the three I mentioned earlier because they're the ones working with the banks.

We can't get a central bank to give us the OK because there are no written rules, it's just: "you have to be a trusted source". FYI - the people they rely on to judge the trusted sources are the investors of these three big companies. It's a full-on lobbying effort to keep out any competition.

We can't get a big company to trust us because the central bank of the country they're in hasn't given us the OK.

So where do we even begin?

We have, in my opinion, a very good product that can outperform the competition in a lot of cases, and we've tested it. We've done a few B2C sales and have traction but it doesn't move the needle.

Any advice?

It sounds like your target customers do not have a problem to solve: they are meeting their compliance requirements with existing software.

It sounds like central banks don't have a problem because nobody is embarrassing them into action. You could try and make a problem for them, though they will obviously not like that.

You should figure out what the actual problem you are solving for someone is though. Being "better" is not it.

Thanks, that was very enlightening!

I had already had the hunch months ago that the problem companies in the same space are solving is of a "minimum requirements cover your ass" thing rather than "how good is the platform".

I don't think I have it in me to break a monopoly as big as this one. To be honest I'm much more interested in building something than talking to old people at central bank entities.

One thing that has come up when talking to smaller competitors in the space is that some of them already have a few clients ($10M+ ARR) but are struggling with the tech and dataset (which is what my startup has in spades). We've started having a few acquisition talks lately and it looks like merging with a bigger company might be the path forward.

Thoughts on this?

I think this comes down to whether your better technology is meaningful to customers and how hard your better technology is to replicate, and whether you are any good at sales.

In general, I think if you have a better product (on a dimension that is meaningful to customers), then you should be able to win sales, particularly if the industry is growing and all your potential customers have not yet purchased a solution.

And if you are winning sales, you should not need to sell the company.

I would be very careful in acquisition talks that you're not just giving the tech away to your competitors for free and you're not getting bogged down and distracted for a thing that will not materialize. You have little leverage if you have no sales, because you have no credible alternative, and even less if they've learnt enough from you to replicate your tech.

If your potential acquirers are struggling to meet customer needs right now, and you cannot just poach their customers, and they are willing to give a good price without you having to disclose much secret sauce, it could be worth it, but I would try and poach their customers first. If their customers are looking to start using you, that should significantly increase your leverage above and beyond their internal struggles.

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