The bank’s failure came as tech giants have slashed expenses and laid off thousands and as venture capital funding nationally fell by nearly a third last year, according to a recent report by Crunchbase.
Angel and venture capital are the mother’s milk of all tech startups. But investment in Black-owned early stage businesses is meager. Though Black Americans make up 13% of the nation’s population, only 1.1% of venture funding in the U.S. last year went to Black-founded startups, according to Crunchbase.
Tech companies, major investors and banks have made public commitments over the past three years to fund more minority ventures as part of broader overtures to racial equity. Jones-Brown raised a $3 million seed round led by tennis superstar Serena William’s venture fund, and moved all of her company’s money to Silicon Valley Bank last spring.
Many of her peers did the same, Jones-Brown said.
Jones-Brown was eligible for credit as soon as she opened her SVB account (something many startups have trouble with at traditional banks) and also got offered intangibles. SVB officials made email introductions to investors, passed along Freeing Returns’ investor presentation to other potential backers and vouched for her company to others in the tech sector.
But last month, Jones-Brown went from pleased to panicked. On Thursday, March 9, the venture capital and startup communities started to pull their money out of SVB, spooked by the bank selling bonds at a loss while it also sought to raise fresh investor capital.
By the end of that day, customers had withdrawn $42 billion, making it the largest bank run in history, according to Axios. The next day, U.S. regulators took control of SVB and shut it down.
Jones-Brown could not immediately access her company’s money. Facing a crisis of confidence in the banking system, the federal government backstopped all SVB accounts, even those like Jones-Brown’s that had more than the $250,000 guarantee from the Federal Deposit Insurance Corp.
The following Monday, she was able to get into her account, start moving money out and the funds are now spread across three accounts at major banks. But it’s been an administrative “nightmare,” she said.
During the initial turmoil, the most pressing questions were whether people would be able to recover their funds and make payroll. Now the dust has settled, and much of SVB was acquired by North Carolina-based First Citizens Bank.
But what about the intangibles the bank provided? SVB had been a key supporter of the Atlanta tech startup community going back years. The bank was a founding sponsor of the Atlanta Tech Village, the decade-old networking and co-working space for founders and has sponsored numerous support initiatives for the city’s Black entrepreneurs.
SVB under new owners is bullish about their future involvement in the Black innovation community.
“[W]e expect to continue to support Black innovators and investors with events, services, sponsorships and business partnerships in Atlanta and in all of our locations across the U.S.,” said Jaisa Gooden, an Atlanta-based vice president of startup banking at SVB.
But others fear that the support the bank provided will not be replicated. Joey Womack is the founder and CEO of Goodie Nation, a non-profit community for diverse founders, investors and experts. SVB was a sponsor of Goodie Nation’s Intentionally Good Summit last October and was partnering with the nonprofit for a series of programs that were slated to start this month, primarily focused on relationship building for diverse founders.
Womack said that Goodie Nation’s programming with SVB included “significant funding” for the nonprofit.
“I think that’s where the larger impact is going to be because what we were already seeing in the tech space was that because of the economic environment, sponsors were already pulling back, but SVB wasn’t,” Womack said.
SVB has said it is working to continue its programming support in general, but they’ve not promised anything yet, Womack said.
For Black founders, these initiatives can be vital, because they rarely receive the same level of institutional backing as their peers.
“Someone has to fill that void, because a lot of people cannot do the programs that they were doing because of the funding,” said Jeanine Suah, an expert in residence at Brex, a digital banking platform geared for startup founders who are venture-backed or on track to raise capital.
In the aftermath of SVB’s collapse, Brex has opened more than 2,000 net new accounts as founders sought new banking relationships, she said.
To help address SVB’s void, Suah herself is stepping up. In August, she will be moving from Miami to Atlanta to help support the city’s Black founders.
“When you are boots on the ground, like you can do more when you are there versus at a distance,” Suah said, noting that SVB supported the ecosystem for years. “I don’t know if I can fill their shoes, but I’m gonna do my absolute best.”
And others also see this moment as an opportunity for new institutions to do more to help Black founders. Justin Dawkins is a managing partner at Collab Capital, an Atlanta-based venture firm that invests exclusively in early-stage Black-led businesses. He learned through SVB’s failure “the true power of cooperative economics.”
“Atlanta has a lot of great things, but one of the things that it could be better about is collaboration and cooperation and having some of those kind of tentpole institutions do more to make sure that the ecosystem is connected and thriving and moving,” Dawkins said. He believes Atlanta’s banking industry and the city itself could be doing more for founders.
For Jones-Brown and other founders, the questions of what to do next in the wake of SVB’s failure still linger. She is currently raising another $3 million investment, so she does not want to be in the position she was in March, wondering if she would be able to access her money.
At the same time, she misses the intangibles SVB provided and has not found another bank that catered to her in the same way.
“Where do we go?” she said. “Where should we put our money?”
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