Banking on Startup Success: DOs, DON’Ts and Strategies for Financing Your Startup

  • Date Published
  • Categories Blog, Interview
  • Reading Time 14-Minute Read

A strong banking relationship can be vital to a startup’s success. Silicon Valley Bank’s Rob Freelen breaks down the basics and the big picture when financing your startup.

To increase your startup’s chances at success, you need to plan strategically, execute carefully, and cultivate strong relationships that help you along your path. In particular, a strong banking relationship can be a crucial component in your startup’s success story.

Why? Every startup needs to source capital, and every successful human needs to be smart about managing his or her money. And while investors are often a key component in sourcing startup capital, your banking relationship can be essential. Your bank can help you set up the right accounts, financial instruments, loans, and future plans to help you source the capital you need – not only for your business, but for your life. A good bank helps you make the big-picture financial choices to best support your long-term interests personally and professionally.

To demystify the process of securing the right banking relationship for you and your startup, Distillery sat down for a Q&A with Rob Freelen, Los Angeles Market Manager and Managing Director of Silicon Valley Bank (SVB). Founded 35 years ago, SVB today banks 50% of all venture-capital-backed tech and life science companies in the US and 50% of the US VC-backed companies that completed an initial public offering (IPO) in 2017.

Freelen focuses specifically on working with technology clients in the LA area. We couldn’t think of a better person to help us sort out the DOs and DON’Ts for setting up strong finances – and a strong banking relationship – for your startup. Freelen also shares related thoughts and observations about the present and future state of the LA startup ecosystem.

What’s the single most important piece of advice you can give to a startup hoping to secure financing?

Says Freelen, “My #1 piece of advice is that, as you are soliciting advice from people, seek out those advisors and partners (banks, attorneys, etc.) whose primary and sole business is working with startups. For those people, if they make a mistake, their entire business suffers and goes away. In order to transform an idea into an enterprise, you and your partners must be 100% committed to success.”


In financing your startup, carefully consider your options

As you’re establishing your business, you want to maintain as much control – and freedom – as possible in your choices. Using your own money, of course, means more ownership and fewer constraints for you. But most startups don’t have that luxury. In addition, when it’s time to scale, they may miss out on gaining critical insights and access to VC, bank, and corporate venture expertise and resources.

Freelen advises that, when evaluating whether to accept outside investments in your business, you should ask yourself, “What value is the investor bringing? Just capital, or is this someone who wants to be involved at a deep personal level, and more importantly, do they have experience with companies like mine? ‘Experienced money’ comes with great insight that often far exceeds the value of the monetary investment.”

Tap into expertise that you are missing

Freelen explains, “When I talk to people who have yet to quit their day jobs and simply have an idea, I always remind them to plan their startup launch with the expectation that they either already are, or need to become, a world expert in the business they plan to launch.” Bottom line, he says, “The companies that grow very, very quickly are the ones that are familiar with startup challenges and have tremendous expertise on the industry side.”

For an illustrative example, Freelen shares the story of one of his clients, The Bouqs Company. Its Founder and CEO John Tabis had an idea for an online flower delivery business that would be a worthy competitor in a crowded field. As a former Bain consultant, Disney strategy executive, and LA startup entrepreneur, Tabis brought tremendous management and execution acumen. But he didn’t know the flower industry. However, his friend – and later co-founder – Juan Pablo Montúfar did. Far more than just a college buddy, Montúfar was a microbiology research scientist and flower-industry expert who’d grown up on a multigenerational flower farm in Ecuador. Together, Tabis and Montúfar bring complementary management and industry expertise that gives their company a significantly higher chance of success.


Underestimate the time it will take for your business to succeed.

“It always takes longer and costs more than startups expect,” says Freelen. With than in mind, almost every banker or advisor who looks at your business plan will add a margin for error. Explains Freelen, “That’s the first rule of startups.”

Wait too long to establish a banking relationship

If you’re bootstrapping your new startup, have yet to establish a banking relationship, and walk in asking for a loan, most banks will either decline your application or let you know that your loan requires a personal guarantee from an individual with means to repay the loan personally. However, if you have an existing borrowing relationship and a solid record, the bank is far more likely to give you that loan.

In addition, banks gain confidence when they’ve played a hands-on role in helping you set up your business. Freelen explains, “Our fundamental business premise is that we want – and expect – to bank companies at their very earliest stage. We want to meet founders before they incorporate.” SVB’s ideal startup client, he says, is “a seasoned team, and we’re meeting them prior to incorporation so that we can help them get all their infrastructure set up right the first time – things like payroll, HR, and financing.”

Get advice from people without any knowledge of the startup ecosystem

As entrepreneurs refine their ideas and hone their pitches, they should seek out third-party advice to help them improve their business and finances. How much will a business improve if they’re getting advice from people who don’t understand the dynamics at play, value proposition, and return on investment that bankers and investors require from startups? “It’s the mistake most people make – getting advice from people who are not in the startup ecosystem,” says Freelen. He continues, “I always tell people to be really, really focused on who you’re getting advice from. Find someone who understands startups.”

Can you help me understand the basics of capital needs relative to my company’s growth?

As Freelen explains, for most startups, capital needs tend to follow a path based on company stage. That stage is defined by the company’s size, product development status, and revenue generation. He continues, “I love it when entrepreneurs understand where they are on that path, and are very thoughtful about fundraising relative to where they are.” By way of illustration:

During the very early stages, there’s often a friends-and-family round of fundraising to the tune of $50k to $500k. However, founders tend to give away the largest percentages of their companies per dollars invested at this stage. (For example, at this stage, a $100k investment in a company valued at $1M buys you 10% of the company.)

As a startup moves into the next stages of growth – approaching a valuation of $1M to $3M – it requires more capital. Perhaps Series A yields $5M to $10M and Series B yields $10M to $30M. Eventually, if the startup thrives, Series C might yield a whopping $100M. In general, Series B and C may mark the highest point of the fundraising path.

In the Series D, E, and F rounds, however, companies typically need to raise less capital. By definition, they’ve evolved into healthy companies and are likely generating revenue. For example, a company may have the ability to take a higher-risk mezzanine debt round that enables them to raise small amounts of capital while reducing the need to relinquish equity in the company.

If the company elects to go public, it may be able to raise capital relative to the valuation of its IPO. At this stage, it may break even on cash flow and choose to return equity and distributions back to investors.

When I first meet with a bank, what information should I bring?

On your first meeting, says Freelen, the needs are fairly minimal. “Come with two things: information around who has put money into your company, and the tax ID number for your business.” With those two things, a bank can set up a basic business account and get you on your way to depositing your first check. As Freelen explains, the investor information is a necessary part of any bank’s due diligence process. He says, “We have to do our duty to know our clients, and to vet them for financial soundness to assess the risk to SVB and the US banking system.”

You’ll also want to come ready to answer some initial questions. What kind of business do you want to set up, and why? Which financial services will be most helpful to you? Which services will you qualify for during your first six months (e.g., a deposit account, credit card for travel and expenses, bill pay)?

What kind of banking relationship can I expect?

“Banking relationships take lots of different forms,” says Freelen. Yours will be determined by your startup’s financial situation, your investors, the changing needs of your business, and your personal finances. As with any healthy relationship, Freelen says you should expect it to evolve.

Freelen describes a typical illustrative example: “A founding team comes to us, sets up an account, spends a little money, does A/B testing on their product, and raises capital.” While their needs are simple at first, they engage with the bank more meaningfully over time. “Maybe they go into a debt facility with us, doing foreign exchange (FX), or establishing a letter of credit underlying the lease with their landlord. Maybe we help them with strategic payments integration with one of SVB’s API products. Maybe – in year five, six, seven, or eight – we help the founders buy a home through SVB’s private bank services. Or set up an accounts receivable (AR) line of credit to help them scale their business more effectively. Then, in years seven, eight, nine, or ten – once they’ve had tremendous success – through one of our partners (e.g., Founders Circle Capital), we may help them access some liquidity in the secondary market, selling some of their shares so they can secure their long-term financial future.” (To read stories of SVB clients, check out SVB’s website. They’ve put together a compelling video series that features the stories of several LA-area clients.

What characteristics should I look for in my bank?

Freelen advises startups to partner with a bank that has:

  • Experience serving entrepreneurs, early-stage, and VC-backed startups.

If a bank doesn’t have a good understanding of startups’ needs and goals, how can they provide proactive advice and ideas focused on helping you think several steps ahead? In addition, you want to make certain the bank can apprise you of developing market trends in the startup and VC community. Freelen says that SVB takes great pride in sharing the knowledge, insights, and perspective gained from the bank’s 35 years of experience in the innovation ecosystem. Today, SVB banks 50% of all venture-capital-backed tech and life science companies in the US. He attributes the success in large part to cultivating long-term relationships that may extend through several different financial services. He says, “We want to work with an individual in their first startup, their last, and everything in between. Often we work with serial entrepreneurs who serve as an inspiration for the entire industry.”

Alignment with your industry

If a bank has a demonstrated commitment to your industry, you have a better chance they’re interested in being more than a fair-weather friend.

As the most experienced financial institution focused on technology and life science innovation, SVB takes their industry commitment a step further. Says Freelen, “Technology companies are the entirety of our business. If a downturn comes, we’re still committed to this space. We’re not going to abandon it. We are 100% committed, just like you’re going to have to be to your enterprise in order to make it successful.”

Some analysts say the LA early-stage scene is much more active than more established growth-stage ecosystems. What have you seen?

Explains Freelen, “In terms of its growth since inception in the past five years, LA’s tech ecosystem has grown dramatically. The acceleration in new company formation has been nothing short of extraordinary. Inherently, the early-stage scene is much more established than the growth-stage scene.” Accordingly, the data shows that while LA is not seeing a lot of IPOs, it is seeing the closing of a great many Series A rounds. Freelen continues, “Companies are in stealth mode. For example, there were over 100 companies in just 2015 and 2016 – that we know about – that raised significant capital. In that same period, there was one IPO.” SVB expects that to change over the next two years. He says, “There are four to seven companies that could very legitimately go public, and that’s just in LA.” 

Other measures testify to the significant growth in the LA startup scene. For example, according to LA Mayor Eric Garcetti’s office, funding for startups in Los Angeles increased five-fold between 2011 and 2017, helping to create America’s fastest-growing startup ecosystem.

As Freelen explains, “Los Angeles has some of the most significant elements needed for becoming the next big startup city.” He points to LA’s ability to handle a wealth of company formation and its proximity to the Bay Area startup community.

Freelen also calls out the “tremendous amount of engineering talent resident in Southern California.” Garcetti’s office reports that the LA region graduates nearly 11,000 master’s level engineering students every year, has more engineers than any other US metropolitan area, and annually enrolls the highest number of graduate students in computer science programs.

SVB and its leaders are committed to doing their part to help the LA startup ecosystem grow and thrive. Freelen’s own presence in LA is a direct result of that commitment. At the end of 2014, SVB’s leadership asked Freelen to move to LA to “supersize” the LA technology team in an effort to mature and expand SVB’s capabilities to serve the region. Since 2015, Freelen has doubled the size of the team and more than doubled its market share.

In addition, SVB is an active player in region-wide development efforts. SVB CEO Greg Becker is a member of the Alliance for Southern California Innovation, an organization of universities and business leaders focused on nurturing and accelerating the growth of SoCal as a technology epicenter. The alliance works on creating the infrastructure and resources to help SoCal entrepreneurs get their businesses off the ground faster.

How can LA’s startup ecosystem evolve and grow?

Freelen says, “LA needs more exits. You have to give those people the freedom to start their own projects. It’s like the dispersion of the seeds of the dandelion.” He points to the Bay Area, in which networks of creative, visionary professionals have created business after business. He explains the phenomena as follows: “Great companies attracted great people. When those companies are acquired or go public, it gives them the financial capital and freedom to go off and start their own enterprises, and find more great people to work with.” 

Freelen references Jamie Siminoff, the founder of a video security company that was acquired in April by Amazon for $1B. “Incredibly successful companies give people the experience, credibility, and capital to start their own companies. It’s like a supernova,” says Freelen. With IPOs, companies and their networks “blow apart and create an even bigger ecosystem.”

If you have any additional questions for Freelen about securing the right banking relationship for your startup, you can email him at

Want to learn more about Distillery’s big-picture focus on helping our startup and enterprise clients succeed? Let us know! And check out some of our other interview-based blogs focused on securing office space, selling your startup, accelerator programs, marketing for app launch, and explainer videos for apps.