Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color

When customers at Silicon Valley Bank rushed to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some of the founders of color who panicked about losing access to payroll funds. Entrepreneurs like Arlan Hamilton, left, Joynicole Martinez, center, and Asya Bradley, right, worry the collapse of Silicon Valley Bank could decrease funding opportunities for people of color. CNN — When customers at Silicon Valley Bank rushed to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some of the founders of color who panicked 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 servicing people from underrepresented communities like hers.

Its failure has reignited concerns from industry experts about lending discrimination 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 smaller house. SVB provided banking services to nearly half of all venture-backed technology and life-sciences companies in the United States. Hamilton, industry experts and other investors told CNN the bank was committed to fostering a community of minority entrepreneurs and provided them with both social and financial capital. A bank run took down Silicon Valley Bank on March 10, as depositors withdrew $42 billion in a single day.

She said SVB was an invaluable resource for entrepreneurs of color and offered their clients discounted tech tools and research funding. Minority business owners have long faced challenges accessing capital due to discriminatory lending practices, experts say. Data from the Small Business Credit Survey , a collaboration of all 12 Federal Reserve banks, shows disparities on denial rates for bank and nonbank loans. Asya Bradley is an immigrant founder of multiple tech companies like Kinley, a financial services business aiming to help Black Americans build generational wealth. Following SVB’s collapse, Bradley said she joined a WhatsApp group of more than 1,000 immigrant business founders.

Many women, people of color and immigrants opt for community or regional banks like SVB, Bradley says, because they are often rejected from the “top four banks” — JPMorgan Chase, Bank of America, Wells Fargo and Citibank. “The top four don’t want our business. And that’s why we’ve gone to community banks and regional banks such as SVB,” Bradley said. None of the top four banks provided a comment to CNN. The bank partnered last year with the Black Economic Alliance to initiate 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.

OneUnited Bank, the largest Black-owned bank in the United States, manages a little over $650 million in assets. Because of these disparities, entrepreneurs also seek funding from venture capitalists. That experience led her to establish Backstage Capital, a venture capital fund that invests in new companies led by underrepresented founders. But Bradley, who is also an ‘angel investor’ of minority-owned businesses, said she remains “really hopeful” 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.’” When customers at Silicon Valley Bank rushed to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some of the founders of color who panicked about losing access to payroll funds. Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color