L'Atelier, a unit of French banking giant BNP Paribas that tracks disruptive technology, is providing office space at its San Francisco headquarters to Clearbon, a Silicon Valley startup targeting the local food sector. Why? Because according to Sergi Herrero, CEO of L'Atelier U.S., a firm like Clearbon just might change how small-business lending and payments are done.

And Herrero says L'Atelier can best help the startup do that—and help BNP take advantage of any success Clearbon might find—by giving advice and support rather than direct investment. "I believe personally that it's the best investment you can do: If you provide good counseling and mentoring for these companies, they remember you well," he says.

Other banks—even small ones—potentially could foster relationships with tech startups like BNP is. The approach is low risk and not capital intensive, so it could be a way for those without the deep pockets of a megabank to get in on innovative ideas as they are being hatched.

But Anand Sanwal, CEO and co-founder of CB Insights, a venture capital data research firm, says those offering investments are more likely to snag the best prospects. "There are some unique and very well-constructed programs that do a great job of marrying bank mentorship with access to capital from VCs," he says. "The two combined are powerful."

Herrero argues that a cash infusion from a bank can be a disadvantage for a startup, though. Other prospective investors might presume the relationship is exclusive or fail to see how the technology could be more broadly applied.

He describes L'Atelier as more of a collaborative partnership-seeker and innovation lab than a venture capital arm. It aims to foster a hive of creative thinking that benefits its banking parent. Equity investment, while available, arrives in later stages of a partnership if it comes at all.

"If you start raising money with a bank, you limit your options, especially in the payments industry," he says. "Startups know very well what they want to do; they don't know how to scale the company to reach millions of customers. We know how to do that. And the best way to help them grow is to help them prove to the market that they are doing something good. So we give them our point of view for free to create a relationship."

The concept behind Clearbon is to enable merchants to raise money from individuals or businesses through a combination of mobile credit and crowdfunding services. So a local bakery could pay for a new oven, for instance, by having customers prepay for their baked goods. Customers would register online and buy digital credits. When visiting the store in person, they could use the digital credits to pay for purchases via their smartphones.

"Like Square, plus Kickstarter," Herrero is fond of saying to describe the venture, a reference to both the mobile payments system adopted by Starbucks and the popular crowdfunding site.

Though neither party would discuss the specifics of their arrangement, Clearbon co-founder Arno Hesse says the office space, while not free, nonetheless provides the perfect lab in which the company and its six full-time employees can test and improve the startup's "Credibles" prepaid credit and "Slow Money" merchant funding products.

"Since our current target market is the local food sector, it doesn't hurt that L'Atelier is in a large, revamped industrial building that is also home to two bakeries, a winery, a brewery, two restaurants and two chocolate companies," Hesse says.

In addition to offering Clearbon valuable input, Herrero has given L'Atelier employees digital credits to local lunch spots, and some of the employees have become repeat users. The office space is large enough that Clearbon has hosted community events with up to 80 people attending. "While our stay is not a free ride, everybody in the office shares all infrastructure, including Internet, printers, projectors, conference rooms, the kitchen," says Hesse. (Clearbon's other co-founder is Guillaume Lebleu.)

BNP is hopeful that Clearbon could provide it with a path to boost lending to small and midsize businesses without shouldering all the risk.

"The idea is to provide merchants another way to finance their businesses," Herrero says. "So instead of issuing a line of credit, maybe we can raise $20 million; the customers raise half and we compliment the other half."

Lending to very small businesses often bedevils large banks; the potential profit is too thin to make the effort (and the risk) worthwhile. "It's something we don't provide much, or we provide half way," Herrero says. "So it's something we want to do better."

If Clearbon's proof of concept running in San Francisco goes well, BNP intends to launch a pilot in France and the United States, he says. For now, "we are studying the company, doing our due diligence," Herrero says. But after testing and regulatory vetting, "we'll probably think about money to expand it."

Herrero, a 32-year-old telecom engineer, has been BNP's top stateside trend spotter in Silicon Valley—particularly in mobile payments—since being appointed CEO of L'Atelier's U.S. unit a year ago.

Hesse and Lebleu first came into contact with L'Atelier's prior CEO, Frédéric Tardy, about four years ago at San Francisco's BarCampBank, a series of informal "unconferences" for innovators in financial services. The chance encounter eventually led to Clearbon sharing space with L'Atelier in the city's bustling Dogpatch neighborhood.

The trend is for banks to do more investment in technology startups lately, according to CB Insights.

Though mentoring has long been a first step, it is unusual for a bank to put a lot of effort into improving the services of companies in which it has no direct investment, Sanwal says. "I'd suspect given the limited hours in a day that VCs will probably focus on helping their investee companies."

But Herrero prefers the slow mentoring approach and values the learning that comes with it.

He says L'Atelier is also looking at potential partnerships with social networks like FancyIt and Pinterest, where users often indicate the stuff they want to buy. The bank could use data from the sites to fine-tune its profiling of customers to sell them products, or enrich consumer data that the bank could sell to merchants.

Other startups with ideas that have piqued BNP's interest include those that use game mechanics to encourage people to save money, such as ImpulseSave and LendUp Ladder. The ImpulseSave app lets users who are tempted to buy something to transfer the amount of the item from their checking to savings account instead. Lendup Ladder's app awards digital badges to users who meet periodic savings goals. Such a tool can be used as "another way to score customers" for lending products, Herrero says.


Shane Kite is a freelancer based in New York.