Startups. They’re all the rage lately, aren’t they? Incubators and accelerators are springing up all over the country, and the startups and growth companies they foster make up an exploding part of our economy. In fact, according to research by the Kauffman Foundation, startups account for up to 50 percent of the new jobs being created in this country. And the National Venture Capital Association states that $69.1 billion was invested in more than 7,750 startups across the US in 2016. That’s righteous bucks!

While admittedly I’m a little biased on this topic–my book, The Hockey Stick Principles, is all about how startups can achieve exponential revenue growth–I would like to make a somewhat radical suggestion to the banking industry: More bankers should be calling on companies with new ideas that are seeking fast growth…small businesses that have revenue north of $1 million and that are trying to get to $10 million.

A new take on fast growth companies

I know, I know. Traditionally, banks have shied away from the likes of tech startups and fast-growth, new idea-type companies; they were considered to be too high-risk by most banks’ standards. Bankers have also been discounted from growth companies because:

• They don’t typically own their buildings, and they rarely own other tangible assets.
• They aren’t well-known because they are new-ish and don’t have some rich person managing them.

But I contend that bankers have it all wrong. They are overlooking the many advantages of banking a growth company.

DDA deposits: Startups and growth companies receive funding, either from a loan or some type of investor, and ramp up revenue quickly, making them good candidates to maintain large DDA balances.

Fee income: Growth company founders often embrace cutting-edge technologies, like the newest and coolest bank products, which can result in recurring monthly fees.

Branding advantages: Startups are the cool kids! They’re hip, innovative, connected, and admired in their communities. Getting linked up with this group shows that your bank is forward-thinking and “in the game.”

Concentration of prospects: New companies tend to congregate together, often in a co-working space or an incubator, so making multiple calls in one outing is easy.

Select founders will become very profitable customers: I wonder who the first banker was to call on Mark Zuckerburg back in 2004? If you pursue this strategy of calling on growth companies today, you’ll likely land high net-worth clients tomorrow.

Employee banking opportunities: Startup employees are often highly compensated, making them perfect for employee banking opportunities.

A targeted calling strategy: Focusing on a segment like new growth companies increases your chances of gaining traction and opens the door to an increasing number of relationships through referrals.  

Lack of competition: As I mentioned above, few bankers are pursuing startups as a niche…so it’s yours for the taking!

Start looking at startups

In two weeks, I’ll tell you HOW to call on startups. But for now, I’m just planting the seed…

It’s time to rethink your thinking on growth companies. No, you don’t always have to call on the newbies, but you may just be missing the boat if you don't put startups and other fast growth businesses on your prospecting radar!

Author: Bobby Martin, Cofounder & Active Chairman