To anyone who follows the news, the difference between MSMEs and Startups is very obvious. It isn't just about size. Startups move with a rapidity that is rarely seen in other business classes. Think about it, a startup idea, probably with a solopreneur or a small group of founders at the helm, grows into a $1 billion valuation business, and it doesn't take generations to get there. In fact, right now, the average time taken by an Indian startup to become a Unicorn is just 5 years.
Five years to create core teams, and marketing and sales structures, to create, test and refine a product or offering, to navigate all the legal and regulatory compliances, to pull together the IT and infrastructure needed for a rapidly growing organization, to connect with Angel Investors, Venture Capitalists and Institutional Investors, to craft a bespoke brand presence, to cultivate customer loyalty, to generate buzz, to attract the best and brightest minds, to switch mental gears from a bootstrapped business, to one that is listed on a national exchange.
With these varying needs, Startups need products and solutions that scale with them. This includes banking.
Early Stage Startups are juggling several business needs with, usually, a small and overworked core team that’s multitasking between various tasks and building the Startup from the base. Managing their banking needs becomes a task in itself, because till now, no tailored solutions have existed.
Startups' banking needs are different in the early years in that they operate with very limited capital and are often bootstrapped. At the same time, they need to make investments and purchases that help them grow rapidly. Banking that involves maintaining minimum balance, or charges for basic IMPS/NEFT transactions just becomes another thing that an entrepreneur needs to be concerned about.
Startups also need a lot of additional support. Given the scale at which banks operate, they can offer products, solutions and beyond banking support that can be accessed by large group of startups at once. Let's look at key needs for Startups, split into three main areas:
Core banking needs: These include services like Digital A/c opening & virtual account creation, app/web portal, PG solutions for Startups, working capital, salary accounts, forex solutions, business credit card, and treasury management. When catering to Startups however, we have to take into account their specific needs. A company credit card offering for a Startup needs to be very different from the offering aimed at Enterprise customers.
Business needs: These involve core business processes that the entrepreneur will need to hire experts for, or outsource. For instance: GST enabled customized invoicing, HRMS & payroll, expense management (linked to Business cards), business dashboard & direct reporting, seamless tax payments, custom duties, etc. Banks can add tremendous value by partnering with vendors that provide cloud based SaaS solutions aimed at functions like invoicing, HRMS, payroll, expense management, and others. By establishing the right tie-ups, banks can make these products accessible to small entrepreneurs
Founders needs: These are needs that a strong banking partner can enable, by leveraging their own network. All Startups could do with qualified mentoring, networking opportunities, access to VCs and investor networks. Additionally, Startups need assistance with company registration, licensing, etc which can be incredibly complicated without the right subject knowledge. Services like legal, facility management, digital marketing, etc can greatly augment an entrepreneur's ability to focus on growing their business, secure in the knowledge that they have an experienced partner who is taking care of these other areas.
It's easy to get caught up in a conversation about what constitutes banking and what doesn't. However, when we look at the core, absolute core function of a bank, it is to enable its customers to do more. When it comes to businesses, banking must take on the role of a partner in growth, and in so doing, share the resources and skills it already has access to.
This is where IDFC FIRST Bank is making a difference with a dedicated Startup Banking offering: FIRST Wings. What sets this offering apart is that it is curated based on the life stages of startups instead of a one-size-fits-all approach.
Startup Banking Done Right
For Early Stage Startups, the key is to look for low cost banking. Most Startups begin with bootstrapped funds, or with investments from friends and family. First Wings offers Startups a Startup Current Account that comes with no minimum balance requirement for the first 3 years, and no charges on IMPS/NEFT/RTGS transactions. A credit card with step up credit allows founders to separate business and personal expenses. This, combined with a small OD facility, rounds out everything an entrepreneur needs to start their credit journey.
The Beyond Banking Startup Kit equips founders with a one-stop solution for all their business needs. IDFC FIRST Bank's 50+ beyond banking partnerships cover the whole spectrum of business functions: ERP & Accounting to Field Sales Management to Taxation to HR and Payroll. Moreover, there are insightful offers like Cloud credits that allow entrepreneurs to try SaaS solutions risk free, and avail discounts for co-working spaces.
Another key need of Early Stage Startups is right mentoring. IDFC First Bank's Founder Success Program pulls insights from the best mentorship programs, incubator cells and bootcamps and has created a Founder Success Program to support India's next wave of Soonicorns and Unicorns. Founders can receive handholding from experts, get access to a dedicated team of professionals, get connected with the right investors, and be recognised through media coverage via IDFC FIRST Bank's media partners.
When these Startups transition to Growth Stage Startups, they can accelerate their growth journey with tailor made working capital solutions; use API Banking to create custom API bundles for business specific use cases, along with a sandbox environment to test all solutions; a Corporate credit card with sophisticated expense management tools. IDFC First Bank also enables frequent access to growth stage investors and offers a marketplace that allows entrepreneurs to showcase their products to IDFC First Bank's customers.
Why This Is Good For Banks
India is on the path to becoming the third largest economy in 2030, and nurtures the third largest startup ecosystem. In 2022 itself, we added 19 new unicorns and have around 80000+ recognised Startups, 4537 Funded Startups, and 100 Soonicorns with a total valuation of over $180 billion.
Today's Startups are tomorrow's Soonicorns and next year's Unicorns. For banks, this is a significant opportunity, and banks need to address Startups' needs and offer curated banking solutions. IDFC FIRST Bank, with the FIRST Wings Startup Banking program, offers bespoke Banking and Beyond Banking solutions that will work as catalysts for growth.
Moneycontrol journalists were not involved in the creation of this article.
