When Silicon Valley Bank imploded, customers scrambled. Billions vaporized, or so it seemed, in a blink. Yet for a particular subset of founders, the panic hit harder, cutting deeper than just lost funds.
Arlan Hamilton, a veteran venture capitalist and founder of Backstage Capital, saw it firsthand. She watched founders of color, already navigating a stacked deck, suddenly lose access to their very payroll. Hamilton, herself a Black woman with a decade in the trenches, knew their options were meager. Vanishingly so.
The Uneven Playing Field
SVB, despite its recent, stunning failure, had earned a reputation. It served a community often ignored by the banking giants: underrepresented entrepreneurs. Its demise wasn't just a financial earthquake; it ripped open old wounds, reigniting fierce debate about lending discrimination and the gaping disparities in capital access for people of color.
Hamilton, 43, put it starkly: “We’re already in the smaller house. We already have the rickety door and the thinner walls. And so, when a tornado comes by, we’re going to get hit harder.”
Established in 1983, this California tech lender was America’s 16th largest bank. Then it wasn't. Collapsed March 10. SVB had banked nearly half of all venture-backed tech and life-sciences companies in the U.S. It wasn't just a bank; for many, it was an ally.
Hamilton, along with other industry experts and investors, described a bank committed. It fostered a community. Social capital. Financial capital. Both were on offer.
Conferences. Networking. SVB sponsored them, routinely. It funded the annual State of Black Venture Report, spearheaded by BLK VC. Important work.
“When other banks were saying no, SVB would say yes,” declared Joynicole Martinez. A 25-year entrepreneur. Chief advancement and innovation officer for Rising Tide Capital. She's also on the Forbes Coaches Council. Martinez labeled SVB an “invaluable resource,” offering discounted tech tools and even research funding to its clients.
A System Built on Disparity
Experts agree: Minority business owners face a relentless uphill battle for capital. Discriminatory lending practices. They are real. Data from the Small Business Credit Survey, a collaboration of all 12 Federal Reserve banks, paints a grim picture of denial rates.
In 2021? Only about 16% of Black-led companies secured the full amount of bank financing they sought. Compare that to 35% of White-owned companies. The numbers speak volumes.
“We know there’s historic, systemic, and just blatant racism that’s inherent in lending and banking. We have to start there and not tip-toe around it.”
Asya Bradley, an immigrant founder of multiple tech ventures, including Kinley, a financial services business focused on Black generational wealth, felt the shockwaves. Post-SVB, she joined a WhatsApp group. Over 1,000 immigrant founders. They mobilized. Fast.
Immigrant founders often lack Social Security numbers. Permanent U.S. addresses. Basic recognition. Brainstorming ways to find funding in a system that often ignores them? It became a collective mission.
“The community was really special because a lot of these folks then were sharing different things that they had done to achieve success in terms of getting accounts in different places. They also were able to share different regional banks that have stood up and been like, ‘Hey, if you have accounts at SVB, we can help you guys,’” Bradley recounted.
Women. People of color. Immigrants. They gravitate to community or regional banks like SVB. Why? Because the “top four banks”—JPMorgan Chase, Bank of America, Wells Fargo, and Citibank—routinely reject them, Bradley claims.
Her own experience: Only able to open a business account at one of the “top four” when her brother co-signed. Gender, she suspects, played a role.
“The top four don’t want our business. The top four are rejecting us consistently. The top four do not give us the service that we deserve. And that’s why we’ve gone to community banks and regional banks such as SVB,” Bradley insisted.
The top four banks offered no comment to CNN. The Financial Services Forum, representing the eight largest financial institutions, has stated their commitment. Millions pledged since 2020. Addressing economic and racial inequality. JPMorgan Chase CEO Jamie Dimon cited 30% of his bank's branches in lower-income neighborhoods. Part of a $30 billion commitment to Black and Brown communities.
Wells Fargo pointed to its 2022 Diversity, Equity, and Inclusion report. Initiatives to reach underserved communities. A partnership with the Black Economic Alliance spawned the Black Entrepreneur Fund: $50 million for Black-founded or led businesses. Since May 2021, Wells Fargo has invested in 13 Minority Depository Institutions. A $50 million pledge fulfilled.
Black-owned banks exist to close these gaps. Foster empowerment. But their numbers dwindle. Their assets? A fraction. OneUnited Bank, the largest Black-owned bank, manages a mere $650 million in assets. JPMorgan Chase? $3.7 trillion. The disparity is immense.
A Lingering Hope?
This stark reality often pushes entrepreneurs toward venture capitalists. In the early 2010s, Arlan Hamilton herself sought investors for a tech company. She saw it then: White men controlled nearly all venture capital. That realization birthed Backstage Capital. A fund investing in underestimated founders: women, people of color, LGBTQ+ individuals.
“I said, ‘Well, instead of trying to raise money for one company, let me try to raise for a venture fund that will invest in underrepresented — and now we call them underestimated — founders who are women, people of color, and LGBTQ specifically,’ because I am all three,” Hamilton explained.
Backstage Capital now boasts a portfolio of nearly 150 companies. Over 120 diversity investments. A tangible counter-narrative.
Still, Asya Bradley, an angel investor in minority-owned businesses herself, holds a fragile hope. That community banks, regional banks, and fintechs “will all stand up and say, ‘Hey, we are not going to let the good work of SVB go to waste.’” A nice thought. But will the system truly change? Or simply find new ways to exclude?
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