Arlan Hamilton, a venture capitalist, quickly intervened to assist founders of color when customers at Silicon Valley Bank (SVB) rushed to withdraw billions of dollars last month. Hamilton, who has nearly a decade of business experience, recognized the limited options available to these entrepreneurs. The collapse of SVB has reignited discussions about the persistent disparities in capital access for people of color, highlighting the challenges they face in the banking industry.
SVB, established in 1983, was the 16th largest bank in the United States before its collapse on March 10. It was known for its commitment to supporting minority entrepreneurs, providing both social and financial capital. The bank regularly sponsored events and funded initiatives like the annual State of Black Venture Report, which was spearheaded by BLK VC, a nonprofit organization connecting Black investors.
Hamilton, the founder of Backstage Capital, emphasized the precarious position of entrepreneurs of color, stating, “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.” Her sentiments echo the concerns of many in the industry who view SVB’s failure as a significant setback for minority entrepreneurs.
Joynicole Martinez, chief advancement and innovation officer for Rising Tide Capital, described SVB as an invaluable partner for minority entrepreneurs. She noted that SVB often said yes when other banks declined, providing crucial support in tech tools and research funding. This support was vital for many women and people of color who frequently face rejection from larger banks.
Data from the Small Business Administration reveals stark disparities in loan approval rates. In 2021, only 16% of Black-led companies received the full amount of business financing they sought from banks, compared to 35% of White-owned companies. Martinez attributes these disparities to systemic racism in lending and banking practices.
Asya Bradley, an immigrant founder of several tech companies, joined a WhatsApp group of over 1,000 immigrant business founders following SVB’s collapse. The group quickly mobilized to share resources and strategies for securing funding in a system that often overlooks them. Bradley highlighted the importance of community banks and regional banks like SVB, which provide alternatives to the “top four banks” — JPMorgan Chase, Bank of America, Wells Fargo, and Citibank — that frequently reject minority entrepreneurs.
Bradley recounted her own experience, noting that she could only open a business account at one of the top banks when her brother co-signed for her. She criticized these banks for consistently rejecting minority business owners and emphasized the need for community banks that offer better service.
The Financial Services Forum, representing the largest financial institutions in the U. S., claims that banks have committed millions of dollars to address economic and racial inequality since 2020. Wells Fargo pointed to its Diversity, Equity, and Inclusion report, highlighting initiatives like the Black Entrepreneur Fund, a $50 million fund for Black-led businesses.
Despite these efforts, Black-owned banks continue to struggle with limited assets. OneUnited Bank, the largest Black-owned bank in the U. S., manages just over $650 million in assets, a stark contrast to JPMorgan Chase’s $3.7 trillion.
Hamilton’s experience in the early 2010s, when she struggled to secure funding for her tech company, led her to establish Backstage Capital. The venture capital fund focuses on investing in companies led by underrepresented founders, including women, people of color, and LGBTQ individuals. Since its inception, Backstage Capital has built a portfolio of nearly 150 companies and made over 120 diversity investments.
Hamilton remains optimistic about the future, expressing hope that community banks, regional banks, and fintechs will continue the work started by SVB. She believes these institutions can play a crucial role in supporting minority entrepreneurs and ensuring that SVB’s legacy is not lost.
