The view from the trenches

I've talked a bit on this site about the ways the traditional venture capital model does and doesn't fit with cleantech. 

It's been said that 93 percent of startup financing comes from individuals and not venture capitalists.  Does that mean that 93% of startups are bad ideas?  No, it just points out venture capital is only a very narrow approach to successful entrepreneurial investing.

Many strong businesses are being formed right now that traditional venture capital won't go after, because it's not a proprietary technology play or otherwise a fit for the type of profile VCs look for.  In the teeth of these economic times, these entrepreneurs are forging ahead and getting things off the ground.  And from the perspective of jobs growth and building a robust "clean economy", these businesses will make even more of an aggregate impact than the solar, et al, startups talked about by big-name investors or profiled in the New York Times.

I thought it might be good to give a voice to the experiences some of these entrepreneurs are having out there, on the ground.  So, as a start, I've invited Steve Sherman, COO at GreenChoice Bank, to share a bit about what he's seeing out there:

We’re opening a brand new bank (within the banking world, it’s called a “de novo” bank) that we believe will finally give people a reason to feel good about their financial institution.  Based in Chicago, GreenChoice Bank will be one of the first “green” community banks in the whole country.  At our core, we’ll be a traditional community bank, with all of the products and services, and high level of customer service, that one would expect from a local bank.  But we also have a mission of sustainability that informs every aspect of the bank’s organization—from our initial location in the LEED-Platinum Green Exchange in Chicago (http://www.greenexchange.com), to a back office that is as sustainably built and as paperless as possible, to a set of advantaged loan and deposit products that reward our customers for their green choices (i.e., lending to green technology and green businesses). 

As you would expect, starting a bank is not an easy process.  About 2 years ago, we recognized there was an opportunity to create a “back to basics” kind of community bank with a unique point of differentiation through our green mission.  Last spring, we assembled an exceptional management team and Board of Directors, raised our seed capital, and put in an application for a federal bank charter.  The approval process is excruciating – the whole team underwent full background checks by the government, our business plan got pressure tested and challenged, and we generally had to jump through a lot of hoops to show them we’re serious and we’re the right people for the job.  After almost a full year of scrutiny, we received our approvals from the federal regulators.  Most bank groups don’t make it through this process, particularly in this environment, so this is a huge vote of confidence for the quality of the team and our plan.

We are working hard to get our doors open in the first quarter of 2010.  To be able to do so, we had to meet the regulators’ minimum equity capital requirements, as well as hire our staff, set up the operations, and get our location ready for business.  The operational piece is particularly challenging, though we have a great partner in Fiserv, one of the largest providers of bank core processing systems in the country.  Over the next few months, we will be setting up all the software, designing all of the bank products, and training our staff to use the system so we can open accounts, take deposits, set up loans, etc.  The great thing about outsourcing our systems, though, is that as a brand new bank, we’ll still be able to offer best-of-breed “green” technology to our customers including all the online banking and billpay (Fiserv owns Checkfree), image-based check processing, and remote deposit capture so you can deposit checks from your desk.

We think that the economy is starting to level off but it will be a long and slow recovery.  The downturn is having two impacts on our business.  It is actually great for the opportunity we are targeting—the credit crunch has caused most banks to stop lending, so to come to market with a clean balance sheet and a willingness to lend is huge for us.  However, the flipside is that it is also a much tougher environment for capital raising so our sales cycle has been a little longer than it would have been a few years ago. 

This isn’t necessarily a typical venture capital technology play but it's an example of a business that is going to be creating jobs and providing support (in the form of capital) to sustainably minded businesses in our economy.  The economy desperately needs community banks who are willing to take care of the smaller businesses and entrepreneurs who fall through the cracks of the big guys.  The big banks and big businesses are the ones who often drag the economy into a recession, but it’s the smaller guys who can help create the jobs and bring us out.  You can read more about us at http://www.greenchoicebank.com.

Thanks, Steve!