Banks and incubators: complementary to the service of startups

By Dorothée Julliand, Director of WAI by BNP Paribas and Matthieu Somekh, Director of ZEBOX, startup incubator & accelerator founded by Rodolphe Saadé, CEO of CMA CGM

The complementarity between banks and incubators is a plus for start-ups and makes it possible to prepare the relaunch.

In the current unprecedented crisis, banks are proving to be a powerful lever to mitigate the impact and prepare for the recovery. In fact, the economic crisis linked to the Covid-19 epidemic has reminded us of the essential role that banks play for startups. Banks were the pillar of the State Guaranteed Loan (PGE) launched by the government and coordinated by Bpifrance. An overwhelming number of businesses, including startups, have turned to them to obtain this loan, with 115 billion euros having been distributed to more than 550,000 companies of all sizes.[1] In this financial transaction, guaranteed in large part by the French Government, it is the bank that performs the analysis, lends the funds and, ultimately, takes on some of the risk.  Without the bank, there would be no PGE, making it far more difficult for startups to fulfill their destiny. This critical role of banks is nothing new. Beyond just opening accounts and agreeing lines of credit, banks play a major role in the entrepreneurial ecosystem and constitute an essential link in the entire value chain.

Incubators help startups to move from the idea stage to maturation and materialization of their project. Very early on, they provide a link between the startups they support and the key players to help them develop, experiment, and present their project to the market. They allow startups to get through the initial stages of their development by supporting them on a daily basis, in marketing, commercial, HR and legal matters. By physically hosting startups, the incubator also provides them with the environment, services and tools essential to their growth, as well as networking with large groups, investors, research laboratories and other complementary startups.

Multi-level synergies

While the incubator intervenes in the upstream phase, the bank is more present the next phase, when the startup has a solution in an advanced state of development. Its need for contact with major accounts changes to market that solution, which is now robust and in the industrialization phase. The role of the bank will be to “connect for launch”. A natural trusted third party, the bank is in fact able to mobilize its network of client businesses, mid-sized companies and large conglomerates in search of innovative solutions, to organize meetings and give startups the chance to present their products.

It’s a win-win-win approach: the startup, previously selected by the bank, thus has access to interesting commercial leads, the large group meets quality startups, and the bank thus strengthens its relationship with both parties, through taking a different avenue from its usual banking activities. The complementarity between incubators and banks is therefore very strong, and their networks are interdependent.

In some cases, banks – being themselves large companies in a sector undergoing transformation that is in search of innovation – turn out to be potential clients and partners of startups. This is particularly true in the field of Fintech, e-commerce, or even in trade finance where supply chain and logistics are paramount. For several years, banks have dedicated teams to innovation and have increased interactions with startups. Startups, by nature, develop new services and are looking for partners to allow them to consolidate their expertise in “payment,” while also allowing them to present an innovative, reliable and robust offer to very demanding customers who need to be “reassured” when there is a financial dimension.

The support offered by the incubator to startups includes help for them to structure their non-dilutive financing plan (aid and subsidies, unsecured loans, etc.). Startups also need to find dilutive funding fairly quickly – sometimes in love money at first, although this often occurs when they join the incubator and then from business angels and venture capital funds. Most entrepreneur-focussed banks are involved as LPs (limited partners), in a number of seed or venture capital funds, or have their own investment capacities with dedicated venture capital teams. This makes them an ideal additional support for startups, in close partnership with the incubator.

Committed stakeholders, integral parts of a global ecosystem

As we can see, banks are stakeholders committed to the entrepreneur and the startup, going far beyond their role as mere bankers. In collaboration with incubators, they have the ability to create connections with other stakeholders in the innovation ecosystem, as well as between startups and large groups, in a dynamic of experimentation and collaborative development. They also have – thanks to the rich and varied ecosystem of which they are part – the ability to support entrepreneurs during seed operations, series A, B or C or even Growth Equity. By continuing to work together, banks and incubators will support startups to foster economic recovery and pursue the entrepreneurial dynamic necessary for growth and innovation.

[1] Source: Le Journal de l’Economie – 20 August 2020

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