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Y-Combinator

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Green Dot today launches the smartphone-based GoBank, which will have no overdraft or penalty fees, no minimum balance and a “pay what you feel is right” monthly membership fee.

iphone_payLet’s take a step back to set this up. Lots of startup types go about their lives in search of something they can fix. “Banking!” they think. “Banking sucks! I hate all the fees and unfriendliness.”

But then they realize that banking is really hard. To do it right, you have to actually officially be a bank, which takes years, even if you can find an existing bank to buy. So startups like WePay and BankSimple (now Simple, if that tells you anything) have historically partnered with banks and offered user interfaces layered on top.

GoBank promises that it can fully bridge the two worlds. That’s because prepaid card provider Green Dot actually bought an FDIC-insured bank in Utah back in 2011, after two years of regulatory hurdles.

Then, in March, Green Dot bought Loopt, an early mobile location app maker that never had a ton of usage. But Loopt had a team of mobile developers and a strong leader in Sam Altman, one of the earliest participants in Y Combinator and a significant influence on the famous startup program as a part-time partner.

Altman said in an interview yesterday that he’s seen many a startup apply to YC over the years, trying to be a bank. But none of them were equipped to do it. “This is a product I’ve always wanted to build,” he said, “and it was just starting up when we were talking to Green Dot.”

Altman said it should take approximately four minutes to set up a GoBank account, and it can be done from a mobile phone. Starting today, GoBank plans to let 10,000 U.S. users in for a beta test, and expand from there.

GoBank charges for just four things: Putting a personal photo on your debit card ($9), going to an out-of-network ATM ($2.50), spending money in another country (3 percent), and paying your membership fee (whatever you want, a la Radiohead or Humble Bundle).

SamAltmanGoBankBut it promises that it has a huge network of fee-free ATMs — 40,000, more than twice as many as Chase and Bank of America.

The iPhone and Android apps also include budget tools (including a silly “fortune teller” feature that makes judgment calls on new purchases), an option to see your balance without logging in, bill payments and ways to send money to people outside the network through PayPal. Savings accounts and mobile alerts are also included.

The idea of allowing people to pay whatever they want for banking is an odd one. It might make sense in the context of thinking about the human appreciation you have for an artist like Radiohead, but this is a bank we’re talking about. Users can pay anywhere from $0 to $9 per month.

Altman said he likes the challenge. “We’re accountable to deliver a service that users think is worth something.”

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Asa Mathat / AllThingsD.com

Like any young start-up, the early days of Facebook were thin and scrappy. Its very first server back in 2004 cost $85 to rent. They didn’t spend more than they had in the bank. They were small, tight and still had everything to prove.

To do that, CEO Mark Zuckerberg said, the company needed to test its mettle against its existing competitors. And back then, those weren’t MySpace or Friendster, but the existing social networks inside U.S. universities.

“We first went to schools that were hardest to succeed at,” Zuckerberg said on Saturday morning, kicking off the Y Combinator Startup School event in Palo Alto, California. “If we had a product that was better than others, it would be worth investing in.”

Zuckerberg spoke to a packed house in the Stanford Memorial Hall auditorium, with an audience mostly composed of twentysomethings, the veritable next wave of young Silicon Valley entrepreneurs. The conference is geared toward the young and idealistic, those who may build the Facebooks or Twitters of tomorrow. Hence, Zuckerberg focused on the challenges of turning a rough-and-tumble outfit into the 1-billion-user-strong social giant it is today.

So if you’ll hearken back to 2004, Facebook’s first days were limited to college students alone, those who had verified university email addresses. It was a play for an early conception of true online identity; unlike other existing networks, you were supposed to be yourself on Facebook.

After first growing Facebook inside of Harvard’s network, then, the plan was essentially to go hard or go home — to launch the network at universities like Columbia, Stanford and Yale. These were the schools, Zuckerberg said, that had the most integrated social networks campus-wide. If Facebook caught on here, it’d be safer to assume that scaling to less-integrated schools would be a downhill battle.

That’s exactly what happened. Facebook spread from school to school, moving slowly to cope with the early scaling issues that popular services often face (Twitter and the Fail Whale, anyone?).

Much of the other advice Zuckerberg offered to the young crowd was the usual platitudes — listen to your users, stay simple, be reliable.

But his most important point was clear: Punch above your weight class. If your product is better than anything out there, the users will let you know it.

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