Banking the Unbanked Innovators

Abstract

Innovators are necessary for the engine of economic growth. Why do banks still find innovators, from startups to high growth companies, unattractive as potential customers for banking and lending products? Banks typically make business loans to established companies with positive cash flow and physical assets. Banks are eager to make loans in real estate transactions. Throughout modern time, banks persistently avoid banking innovators. Nationwide, only five outlier banks are defying conventional banking practices, and the leader among them is Silicon Valley Bank. Against all the odds, Silicon Valley Bank began as a local, community bank for innovators in 1982, and has continued its success in banking innovators and became the 37th largest bank in the nation. Using Silicon Valley Bank as a case study, this Article provides a much- needed model of banking innovators. Embracing innovators' intellectual property assets, cultivating networks of experts to assist innovators, and behaving like entrepreneurs, not bankers, are key factors to the model of banking innovators. The model traverses secured transactions, intellectual property, contracts, and banking laws and regulations to create an ecosystem incubating and advancing innovators.