Startup Spotlight #149: Neon

Neon is the Buy Now Pay Later for essential recurring bill payments, such as Utilities, Rent, and Insurance.

Aug 11, 2021

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I got the chance to speak with Megha Agarwal and Aveedibya Dey, co-founders of Neon, about what they are working on at their startup, and any advice they have for emerging entrepreneurs.

Neon is the Buy Now Pay Later for essential recurring bill payments, such as Utilities, Rent, and Insurance. We’re building a set-it and forget-it experience for recurring bill payments by providing an interest-free credit line and Pay in 4, bill consolidation, and automatic payments.

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Startup Spotlight: Neon

Problem: Cost of credit has gone down significantly for non-essentials with companies like Klarna and Affirm offering Buy Now Pay Later options for e-commerce purchases. However, the majority of Americans struggle to get credit at terms that feel fair, much less at 0% APR, for essential bill payments such as rent and utilities.

Market: As a centralized hub for modern, multi-purpose consumer lending needs, Neon can serve a variety of customers. Our TAM is $50B annually composed of low, middle-income, and wealthy Americans looking for alternatives to traditional credit cards.

Solution: Neon provides interest-free credit for essential recurring bill payments, such as rent, utilities, and insurance. Our fundamental approach to determining creditworthiness is based on factors beyond what traditional credit scoring (Vantage score, FICO score, etc.) was designed to do, and so, we can determine creditworthiness for essential bills by incorporating factors such as bill payment history, spending habits, and cash flow patterns, which in turn helps us provide credit at 0% interest to eligible consumers.

Team: Megha and Avee, the co-founders of Neon bring a ton of experience from previously working in some of the largest financial services providers in the US — such as Capital One, Avant Credit, Discover Financial, and Fiserv.

Recent Success:

Agarwal and Dey: We’ve accomplished a lot of meaningful milestones on a very tight budget. I say meaningful because oftentimes founders who decide to build venture-backed businesses, mistake the success of their startup for the size of the round they raise.

We are a husband-wife team that bootstrapped our startup, till we were accepted into 500 Startups. This left us with not much room to hire or outsource any jobs. We did everything ourselves — speaking with customers, coding, marketing, biz dev, accounting, and of course, fundraising! We pushed outside of our comfort zones and continuously expanded our skill sets. We learned to prioritize what was important, we figured out the most efficient and quickest ways of accomplishing goals – sometimes that meant automating processes, other times it meant going manual. The bottom line is that we realized it was possible to build, test, iterate and learn on a very small budget.

It is often under-appreciated what a tighter budget can do for you but looking back I think it was the best thing that happened to us. For example, while we didn’t have too much to spend on marketing, we received $2.4M in credit applications in under a week, while we were testing out just one marketing channel – something we didn’t think was possible before. I would highly encourage other founders who are having a hard time fundraising to not rush into it. You can do more than you think on a small budget if you spend wisely. All you need to do is keep going!

Recent Struggle:

Agarwal and Dey: Spending our time and energy on things that matter the most. This in turn means saying no — nicely, politely, yet firmly. No one has it easy while building startups. You have lots of fires to put out every day. Which ones you put out though, will determine whether your startup lives to see another day, or dies. Saying no to the wrong partners, letting go of the wrong customers, passing on investors that don’t feel like a good fit is a big part of your job as a founder. It’s hard to trust your gut instinct but you have to go for it.

We have learned to spend time on things that have the most value at the moment, while being respectful of the time of those to who we say no to. We have learned to read the signals and to not fret about the things that wouldn’t work out, but to instead focus on what could go right. It’s hard! Building startups is a long, and emotional journey. You can’t just pretend to not be affected by things that didn’t materialize. But realizing that your job as a founder is building the company and doing what’s best for growth would hopefully equip you with the right perspective to move ahead.

Founder Advice:

Agarwal and Dey: If you’re building something that solves a real pain point, that people really want — chances are others know of the pain too. Some of these people will eventually end up being your customers, some others will end up being your competitors. And while most wise people will tell you that “ideas don’t matter, execution does”, I want to caution founders against taking this idea to the extreme. Just because you believe in being transparent about your product might not mean that others will too. Over time, you will have competitors or potential competitors signing up for your product, checking it out, chatting with you as a customer to dig out information, building a similar product, pivoting an existing product to match your product offering, and a lot more! And so, my advice to founders, especially the ones that believe in being transparent, is that you think strategically about competition.

First, institute ways to provide all information to your customers, but not necessarily to your competitors. If your competitors are building in stealth, you don’t have to volunteer information out to them. Learn to believe that playing on level ground, defending yourself, doesn’t make you weak. It makes you aware and present. Share information when you’re ready but don’t let your guard down too early.

Secondly, and more importantly, think strategically about your long-term moat. Most industries are not monopolies, even “winner-takes-all markets” like Airbnb eventually face competition from Vrbo and the likes and end up as oligopolies. Customers will and should switch when they find better product offerings. So be ready for your competitors to build a better version of your product (i.e. your product + a few more features). Think about what you’d do to retain your customers, grow faster, hire the best talent — when there are other bigger or more well-funded competitors in the market. Build those defensibilities in your startup today. Play the long game. Plan to be the biggest player in the market, don’t worry about others copying you.

Three Cool Founders You Should Know About:

Agarwal and Dey: Here are three founders you should check out next!

Nicholas Mahaney and Adam Hardej, co-founders of OnePager: OnePager is a tool for founders to consolidate and share their startup’s information.
Meenakshi Chitra Lakshmanan, co-founder of Manifest: Manifest is building the first-ever digital transfer solution for retirement accounts.
Lu Li, founder of Glowism: Glowism is a digital health platform for affordable, trustworthy and personalized skincare guidance.

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