cnn
,
when on customer Silicon Valley Bank After the rush to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some founders of color who were nervous about losing access to payroll funds.
As a Black woman with nearly 10 years of business experience, Hamilton knew the options for those startup founders were limited.
SVB had a reputation for serving people from underrepresented communities like itself. Its failure has rekindled concerns from industry experts about discrimination in lending in the banking industry and the resulting disparities in capital for people of color.
Hamilton, the 43-year-old founder and managing partner of Backstage Capital, said that when it comes to entrepreneurs of color, “we’re already in the small house. We already have a dilapidated door and thin walls. “And so, when a tornado hits, we will be hit harder.”
Founded in 1983, the mid-sized California tech lender was the 16th largest bank in the US at the end of 2022. It collapsed on 10 March. SVB provided banking services to approximately half of all venture-backed technology and life-sciences companies in the United States.
Hamilton, industry experts and other investors told CNN that the bank is committed to fostering a community of minority entrepreneurs and providing them both social and financial capital.
SVB regularly sponsors conferences and networking events for minority entrepreneurs, Hamilton said, and it is known for its annual funding Status of Black Venture Report Led by BLK VC, a nonprofit organization that connects and empowers Black investors.
“When other banks were saying no, SVB would say yes,” said JoyNicole Martínez, a 25-year-old entrepreneur and chief advancement and innovation officer at Rising Tide Capital, a nonprofit founded in 2004 to connect entrepreneurs with investors and advisors. Was taken.
Martinez is also an official member of the Forbes Coaches Council, an invitation-only organization for business and career coaches. She said SVB is an invaluable resource for entrepreneurs of color and offers its clients discounted technical equipment and research funding.
Many women and people of color say they have been turned away
Experts say minority business owners have long faced challenges accessing capital due to discriminatory lending practices. data from Small Business Loan SurveyA collaboration of all 12 Federal Reserve banks shows the disparity in rejection rates for bank and non-bank loans.
The survey shows that in 2021, about 16% of Black-led companies secured the total amount of business financing they sought from banks, while 35% of white-owned companies did so.
“We know that there is historical, systemic and explicit racism embedded in lending and banking. “We have to start there and not tip-toe around it,” Martinez told CNN.
Asiya is an immigrant founder of several tech companies like Bradley Kinley, a financial services business that aims to help Black Americans build generational wealth. After the collapse of SVB, Bradley said she joined a WhatsApp group of more than 1,000 immigrant business founders. Group members immediately rallied to support each other, he said.
Immigrant founders often don’t have a Social Security number or a permanent address in the United States, Bradley said, and it was important to consider different ways to find funding in a system that doesn’t recognize them.
“The community was really special because a lot of these people were sharing different things they’ve done to achieve success in terms of getting accounts in different places. They were also able to share different regional banks that stood up and said, ‘Hey, if you have accounts at SVB, we can help you,'” Bradley said.
Many women, people of color and immigrants choose community or regional banks like SVB, says Bradley, because they are often rejected from the “top four banks” — JPMorgan Chase, Bank of America, Wells Fargo and Citibank.
In her case, Bradley said her gender may have been an issue when she could only open a business account at one of the “top four banks” when her brother co-signed for her.
“The top four don’t want our business. The top four are constantly dismissing us. The top four don’t give us the service we deserve. And that’s why we’ve gone to community banks and regional banks like SVB,” Bradley said.
None of the top four banks provided any comment to CNN. The Financial Services Forum, an organization representing the eight largest financial institutions in the United States, said banks have committed millions of dollars since 2020 to address economic and racial inequality.
Last week, JPMorgan Chase CEO Jamie Dimon He told CNN’s Poppy Harlow that 30% of his bank’s branches are in low-income neighborhoods as part of a $30 billion commitment to Black and brown communities across the country.
Wells Fargo specifically pointed to its 2022 Diversity, Equity and Inclusion Report, which discusses the bank’s recent initiatives to reach underserved communities.
The bank last year partnered with the Black Economic Alliance to launch the Black Entrepreneur Fund — a $50 million seed, startup and early-stage capital fund for businesses founded or led by Black and African American entrepreneurs. . And since May 2021, Wells Fargo has invested in 13 minority depository institutions, fulfilling its $50 million pledge to support Black-owned banks.
Black-owned banks work to close the lending gap and promote economic empowerment in these traditionally excluded communities, but their numbers have been declining over the past few years, and they have far fewer loans than the top banks. Have less assets.
OneUnited Bank, the largest Black-owned bank in the United States, manages more than $650 million in assets. By comparison, JPMorgan Chase manages $3.7 trillion in assets.
Because of these disparities, entrepreneurs also seek funding from venture capitalists. In the early 2010s, Hamilton intended to start her own tech company — but when she looked for investors, she noticed that white men controlled almost all the venture capital dollars. That experience led him to found Backstage Capital, a venture capital fund that invests in new companies led by underrepresented founders.
“I said, ‘Well, instead of trying to raise money for a company, I should try to raise for a venture fund that will invest in underrepresented people – and now we call them underrepresented – Founders who are women, people of color, and LGBTQ especially, ‘because I am all three,’ Hamilton told CNN.
Since then, Backstage Capital has amassed a portfolio of approximately 150 different companies and made more than 120 diverse investments, according to Data from Crunchbase,
But Bradley, who is also an ‘angel investor’ of minority-owned businesses, said she’s “really hopeful” that community banks, regional banks and fintechs “will all stand up and say, ‘Hey, we don’t want this to happen. Denge SVB’s good work has gone waste.