Silicon Valley Bank’s collapse is a blow to Black founders and immigrant entrepreneurs
As the Silicon Valley Bank postmortem continues, it’s worth sparing a thought for the startup founders of color who lost a valuable resource.
Yes, it’s partly about the cash.
"Less than 1% [of tech sector investment capital] goes to Black female founders,” says Tiffany Dufu, founder and CEO of The Cru, a startup to help women achieve their goals. When SVB failed, she found herself temporarily unable to make payroll. Dufu explained to NPR that she is emblematic of the kind of entrepreneurs who have to fight for both investment and access to expertise. “There are a lot of underrepresented founders and leaders in this community who were grossly impacted by this. There's not a lot of liquidity. We don't have large assets to draw on. And so this really created a crisis for us."
But it’s also about the connections.
The baseless charges of wokeness leveled at SVB are particularly maddening given that the bank did an unusually good job identifying promising Black founders and connecting them to other entrepreneurs, experts, discounted technology tools, and specialized banking services to help them grow. SVB’s sudden collapse sent a ripple of existential dread through the tightknit tech community in Atlanta, for example, which relied on the bank for everything from credit cards to business intelligence to key relationships.
“When our economy catches a cold, the Black community catches the flu,” Kelly Burton, the CEO of the Black Innovation Alliance, told Atlanta World Daily. “There will likely be retrenchment in the space with investors becoming more skittish. That can’t be good for Black founders, especially [considering] there’s all this conservative blowback.”
The loss of SVB means a vital window has closed for immigrants of color, too. The bank had developed unusual expertise in helping entrepreneurs from around the world build their enterprises in the U.S. Shortly after the run on the bank began, more than 1,000 of these founders flooded into a WhatsApp group frantically looking for information.
“All these folks that have very special circumstances based on their identity, it’s not something that they can just change about themselves, and that makes them unbankable by the top four (large banks),” says Asya Bradley, a startup advisor.
It's the American dream on hold.
Going forward, it will be more challenging for "people who don’t fit the traditional credit box, including minorities,” says banking expert Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution. “A financial system that prefers the existing holders of wealth will perpetuate the legacy of past discrimination.”
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
This edition of raceAhead was edited by Ruth Umoh.
This story was originally featured on Fortune.com
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