How high risk startups became a part of Danske Banks business model

MobilePay, TheHub and recently +Impact. All projects that underline Danske Banks recent development. Startups are no longer pursued in what could appear as a lacklustre CSR project. The pursuit has turned into a real organization strategy. A new unit, Danske Bank Growth, has transformed the banking giant into a startup-friendly financial institution and has seen the company assume a partner role in the Nordic region. A move inspired by the Silicon Valley Bank.

“Today, we are a specialised team across the Nordics who understand why you, as a startup, are burning money, why speed matters and that you have an annual report that can be very unprecise and useless compared to your current situation and development. We are building our international setup and help startups grow to become true scale-ups through our partnerships and network as well as expertise,” says Kent Due-Frederiksen, Global Head of Danske Bank Growth.

That’s why Danske Bank perceives themselves as a strategic partner to startups instead. The bank offers guidance when it comes to setting the team of lawyers and accountants, shares its corporate network of wealthy customers and corporate businesses; overall helps startups navigating the ecosystem as well as capital market and does this on a global scale.

“Most startups want a bank that understands them – which we have not always been good at.”

Two and a half years ago Danske Bank set out to support the Nordic startup ecosystem and make an impact on society at the same time. Instead of sponsoring random causes, the bank decided to figure out what the ecosystem needed. This paved the road for a partnership with Rainmaking to find that need.

“Firstly, most startups want a bank that understands them, their business models, their language and for example doesn’t require a 10-page business plan. They want an easy banking experience. Secondly, they value if the bank opens up their large network to them. Interestingly funding is not the main part that is expected as no experienced entrepreneur would consider a bank loan which entails a personal guarantee to finance a risky business at its initial stage. As it is not necessarily the lack of money in the market that is the problem but rather the overview of whom is relevant to them at the given time. Also, here we can help them in guiding through the funding market and connecting them to the right people but also open up our network, which could be wealthy customers who want to invest in a startup, or to other corporate businesses who might be interested in the product or service of a startup,” says Pascal Franke, Founder and former Head of Danske Bank Growth.

As it turned out, these wishes mirrored the business model of Silicon Valley Bank. Now Danske Bank is partnering up with Silicon Valley Bank to help Nordic startups as they look to scale in the UK and US. Meanwhile, Danske Bank has built up a vast network within the Nordic region and outside.

A field trip into the ecosystem

The startups’ requirements were different from those of the regular client. Therefore, Danske Bank sat down with various industry stakeholders to figure out where the bank’s business model would make sense for startups. In the same manner, as Silicon Valley Bank had done.

“We started out by getting out of office cubicles, attended a lot of different events, worked in different co-working spaces, such as Rainmaking, and had coffee meetings with interesting people from the ecosystem to become knowledgeable. Here, we found a very open ecosystem. With the greater knowledge and understanding, we can add value, and often in new ways that do not include bank products and things you have been used to from a bank,” Kent Due-Frederiksen says.

The familiarity, in turn, created a much greater network for the financial institution, which later resulted in the actual outcomes such as partnerships with investors, co-working spaces,etc., pitching events, as well as an understanding of new technologies and business models etc.

“Concerning the pitching events, for example, we invited some of our most wealthy private banking customers with an interest to invest in startups for a week to Silicon Valley for an inspirational and educational journey. Back home we hosted matchmaking sessions together with our partners like Rainmaking, Singularity University where startups came to pitch for them,” says Franke.

Danske Banks new role benefits both ecosystem and themselves

2018 has been heralded as the year of partnerships in fintech. However, we are yet to see the actual formation of that prophecy. That being said Danske Bank is closing in on a business model that allows startups and bank to benefit from joint ventures.

“We have handpicked the team of growth advisors. They build their networks and are chosen based on passion and motivation towards startups and the ecosystem. By this we have found a way to engage with the ecosystem in a way that benefits both ecosystem and the bank’s core business,” Kent Due-Frederiksen says.

“We have managed to create a win-win situation. Besides truly supporting startups and the ecosystem we are also benefitting from it in various ways which is important to make it a long-lasting and engaging effort that is part of the bank’s strategy, We are getting access to great talent and innovation. The innovation access allows us to understand what is happening outside the bank – also outside the fintech vertical. We expose ourselves to new business models and applications of technology, are able to test new ways of working and are building a strong innovation network. Lastly, there is the commercial part, and we have shown that it is profitable if we pursue this endeavour in the right manner. It is not only a CSR-effort on our behalf, but we also keep a keen eye on the top line at the same time,” Franke concludes.