As much as transparency (on a variety of fronts) makes so much sense to me when I read about it I’ll admit it’s still slightly counter-intuitive. One thing that I think has the potential to be particularly interesting is writing about the experiences we’re having building the business from an inside perspective. So to follow up on the previous post about how we picked office space, today we’ll talk about the exciting topic of banking.

When it came time to pick a bank to do business with we had to consider what our needs were. In case we didn’t mention it earlier, Jackson Fish is a bootstrap venture. This means we are not looking to take anyone else’s investment, and intend to finance our efforts through our earnings from day one (or day 31 as the case may be). This also means that our needs from a bank are relatively modest. A checking account is pretty much it. But that may not always be the case. Some day we may need some short term financing, or even a long term loan. And while banks do financing based primarily on the fundamentals of the transaction, there’s certainly some element of trust and track record that comes into play in determining to whom they loan money. And even though that time may be several years from now, it’s never to early to start building a relationship and a track record.

So with that context in mind we decided to find a bank. The first idea that comes to mind is going with the bank you already use for your personal account. In our case that is a huge national bank where even though we get some special attention, the needs of a burgeoning small business simply aren’t going to register on their radar.

Next thought was checking out a bank that focused on high-tech startups. With that I went and met with the nice people at Silicon Valley Bank. I haven’t done a ton of research but from what I could tell, this is definitely a startup’s bank. After a lovely discussion though it was clear that it was a bank for startups that are venture funded. That’s not us. (You may be surprised how many potential vendors and partners mention their great VC connections as major features of a relationship with them.)

So before wasting any more time meeting with banks that weren’t right we started thinking about what we were really looking for. We decided that we wanted a bank that’s:

• local
• smallish
• focused on small to medium-sized businesses

Ultimately the theory is that these characteristics (and some others) will lead you to a bank where:

• you have a chance of working with the same person for a number of years
• they’re big enough to be stable, but not so big that they won’t give you the time of day
• they have a sense of the kind of needs you have as a small business

And all this is in the hope that over the next several years as you keep them posted on your plans, and then you execute on those plans that when the day finally comes that you need their help, that when it comes to your credibility, at least that will be a positive when they consider whether to help you in your time of financial need.

With all this in mind we ended up choosing First Sound Bank. They’re local (here in Seattle) and they’re focused on small businesses (up to 20 million in revenue). There were other things that were attractive too. They have a unique model and focus and only have one branch. Their focus on business and their lack of expensive branches felt to me like they knew what they were about. Even better, they listed all their VPs’ direct phone numbers on their website. In this age where companies’ phone numbers that let you reach human beings are hidden better than the government’s nuclear codes I found this… unexpected? startling? cool? All of the above.

Needless to say they were a little weirded out when I cold called them to discuss giving them our business. They said: “uh, we never get business from people just calling us.” But in the end they took it despite that.

There was one other idea that we had when figuring out our banking needs. A small bootstrapped startup has no credit history and therefore has a very hard time getting a credit card. But, you can guarantee a business credit card personally. As long as you have proper controls on the use of the card it’s a pretty reasonable risk. While you’re guaranteeing the card personally, the new credit history you build will accrue to your startup. Furthermore, if the card has miles (the one we got has miles you can spend on any airline) then you can funnel as many of your expenditures through it as possible to get as frequent flyer miles. (There’s a modest fee for cards that generate miles, but if you funnel enough expenditures through it then it ends up being very worth it.)

I know none of this is rocket science, but this was an educational process for us so we figured it wouldn’t hurt to share.