Money For Nothing

In a previous life we were trying to adapt new innovative technologies from startups to the needs of Sberbank — a “technology research” activity that involved actually installing and integrating solutions and trying them out, not just reading the company sales pitch/marketing brochure. And I was presenting in front of a large audience of Russian entrepreneurs and wannabe entrepreneurs, explaining how they have to put the customer real needs first, and try to understand how to penetrate the wall of “not invented here” and “we are busy with a real business here, go away with your innovation stuff”. At the end, Q&A part, much longer than the actual presentation. And to my surprise, very few in the audience were interested in my advice (oh, the hubris of the “guru”…) and most of them wanted to know “how do I get money from Sberbank to build/grow my company ?”

I launched into a long explanation, that I can summarise as “it depends…”. We see many opinions, written or not, and my audience that evening was not different, that state that banks have the moral duty to support “their” business. I tried to explain that it’s all in stages of development. If you have just an idea (and I am sure it is the best idea ever) good luck getting a bank to loan you money — best bet is either “friends/family/foolssmart investors” or a seed fund/incubator, or a lot of strangers through a crowdfunding platform (see my friends at Luevo implementing it for the world of fashion design). In other words, forget about banks and stop heckling me when I am on stage 😉

If you have a business that has taken off the ground, either grow organically through more revenue and careful spending, or go to VC funds if you think you have built a business that will take off like a rocket if you just get a capital injection. Still not a bank, even though some banks have started allocating money to VC funds — see our own SBT Venture Capital.

Of course, your business may be doing well, not growing that much, still a good business, and the bank will not loan you money. Banks just don’t know how to assess small and medium enterprises, hence the opportunity for the likes of OnDeck and AMP.

Once your business is big enough and does not need money, banks will knock on your door to offer lines of credit — take it if you know what you want to do with it, cash-flow management for example.

The simple conclusion for tech and fin tech entrepreneur : stop looking at banks for your financing needs, not gonna happen.