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. 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, the midsize California tech lender was America’s 16th largest bank at the end of 2022 before it collapsed on March 10. 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.

SVB regularly sponsored conferences and networking events for minority entrepreneurs, said Hamilton, and it was well known for funding the annual State of Black Venture Report spearheaded by BLK VC, a nonprofit organization that connects and empowers Black investors.

“When other banks were saying no, SVB would say yes,” said Joynicole Martinez, a 25-year entrepreneur and chief advancement and innovation officer for Rising Tide Capital, a nonprofit organization founded in 2004 to connect entrepreneurs with investors and mentors.

Martinez is also an official member of the Forbes Coaches Council, an invitation-only organization for business and career coaches. She said SVB was an invaluable resource for entrepreneurs of color and offered their clients discounted tech tools and research funding.

Many women and people of color say they are turned away

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.

In 2021, about 16% of Black-led companies acquired the total amount of business financing they sought from banks, compared to 35% of White-owned companies, the survey shows.

“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,” Martinez told CNN.

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. Members of the group quickly mobilized to support one another, she said.

Immigrant founders often don’t have Social Security numbers nor permanent addresses in the United States, Bradley said, and it was crucial to brainstorm different ways to find funding in a system that doesn’t recognize them.

“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 said.

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.

In her case, Bradley said her gender might have been an issue when she could only open a business account at one of the “top four banks” when her brother co-signed for her.

“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 said.

None of the top four banks provided a comment to CNN. The Financial Services Forum, an organization representing the eight largest financial institutions in the United States has said the banks have committed millions of dollars since 2020 to address economic and racial inequality.

Last week, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow that his bank has 30% of its branches in lower-income neighborhoods as part of a $30 billion commitment to Black and Brown communities across the country.

Wells Fargo specifically pointed to its 2022 Diversity, Equity, and Inclusion report, which discusses the bank’s recent initiatives to reach underserved communities.

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. And since May 2021, Wells Fargo has invested in 13 Minority Depository Institutions, fulfilling its $50 million pledge to support Black-owned banks.

Black-owned banks work to close the lending gap and foster economic empowerment in these traditionally excluded communities, but their numbers have been dwindling over the years, and they have far fewer assets at their disposal than the top banks.

OneUnited Bank, the largest Black-owned bank in the United States, manages a little over $650 million in assets. By comparison, JPMorgan Chase manages $3.7 trillion in assets.

Because of these disparities, entrepreneurs also seek funding from venture capitalists. In the early 2010s, Hamilton intended to start her own tech company — but as she searched for investors, she saw that White men control nearly all venture capital dollars. That experience led her to establish Backstage Capital, a venture capital fund that invests in new companies led by underrepresented founders.

“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 told CNN.

Since then, Backstage Capital has amassed a portfolio of nearly 150 different companies and has made over 120 diversity investments, according to data from Crunchbase.

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.’”

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
 — 

Americans have grown used to corporate executives treading the well-worn paths of the Northeast corridor to convene alongside elected officials in Washington, DC, and discuss geopolitics, policy and all that’s in-between.

In 2017, major CEOs from across the country came together to oppose North Carolina’s transgender bathroom law. In 2019, they called abortion bans “bad for business.”

After the deadly attack on the US Capitol on January 6, 2021, many of corporate America’s biggest names denounced the rioters and pledged to halt their political giving.

Recently, more than 1,000 companies promised to voluntarily curtail their operations in Russia in protest of Moscow’s war on Ukraine.

Dick’s Sporting Goods stopped selling semi-automatic, assault-style rifles at stores and Citigroup put new restrictions on gun sales by business customers after the mass shooting at a high school in Parkland, Florida, in 2018.

A year later, after mass shootings at a Walmart in El Paso, Texas, and a nightclub in Dayton, Ohio, Walmart ended handgun ammunition sales.

Corporate leadership has long been vocal on the issue of gun control – in 2019 and again this past summer nearly 150 major companies – including Lululemon, Lyft, Bain Capital, Bloomberg LP, Permanente Medical Group and Unilever – called gun violence a “public health crisis” and demanded that the US Senate pass legislation to address it.

That’s why corporate America’s silence in the wake of the latest mass shooting at a school in Nashville is so jarring. The United States has come to rely on the increasing power of large corporations as political advocates.

But Yale professor Jeffrey Sonnenfeld, a vocal advocate of corporate social responsibility who has a direct line to major CEOs around the globe, said that top executives are forlorn. Their previous efforts haven’t done much to push the needle on gun control legislation and without more backing, they don’t know what else they can do at the moment, he said.

Before the Bell spoke with Sonnenfeld, who runs Yale School of Management’s Chief Executive Leadership Institute, a nonprofit educational and research institute focused on CEO leadership and corporate governance.

This interview has been edited for clarity and length.

Before the Bell: CEOs have been quiet about gun reform since the latest mass school shooting in Nashville, have you heard anything about plans to speak out?

Jeffrey Sonnenfeld: Where is everybody else? Where is all of civil society? CEOs are just one group of people and it’s like we’re turning to them to be our saviors on every topic. They’ve joined causes with valor and nobility but they can’t just be taking cause after cause as if there’s nobody else in society. The social change that happened in the 1960s wasn’t being led primarily by CEOs. Social changes really happened when we saw the interfaith activity of clergy locking arms and canvassing legislators. We saw campuses alive and aroused. Where’s all the student activism?

The CEOs are still the most active even if they’re less active than they were six months ago. They’re not there as hired hands of shareholders to fill the role of politicians and civic leaders. They’re there to join that chorus, but they don’t want to be the only one singing.

So is this what you’re hearing from top CEOs? Have they gotten tired of advocating?

I just got off of a CEO call on voting rights and this morning we had a forum on sustainability – CEOs are still the most active on these fronts. It’s the same thing on immigration reform. If a CEO was working an 18 hour day on a 12 day week, they still couldn’t address all of the issues that need addressing.

The nation’s CEOs are waiting for everybody else to join them. They don’t need to restate something they’ve already stated. They’ve jumped in the pool, where’s everybody else?

So what do you think has led to this complacency amongst Americans and the growing reliance on CEOs to advocate on our behalf?

They’ve taken a very strong stance and they’ve gone out further than the general public. They are where the general public is on surveys, but they’re not where the general public is on action in the streets. So we’re ready for others to now do something. Enough already on saying ‘what are the CEOs doing?’ Social capital is as valuable as financial capital. CEOs understand that in their soul, they want there to be social capital. They want there to be public trust, but they need the rest of civil society to join them. And that’s their frustration.

It sounds like CEOs are frustrated?

Yeah, they’re frustrated.

But don’t these CEOs hold the purse strings in terms of donating to powerful politicians?

You would think that, but since the 2020 elections much less of campaign contributions have come from big business. Since the 2021 run on the Capitol, a lot of businesses either had an official moratorium or they’ve given mere pennies to politicians. The common impression on the street that CEOs are controlling campaign purses strings is 100% wrong.

By CNN’s Chris Isidore

Tesla reported. a modest 4% rise in sales in the first quarter compared to the final three months of last year, despite a series of price cuts on its lower priced vehicles and talk by CEO Elon Musk about strong demand at those lower prices.

The first quarter also marked the fourth straight quarter that Tesla has produced more vehicles than it has delivered to customers. Some of that may be due to the ramp up in production at two new factories, one in Texas, the other in Germany, which opened last spring, and a lag between that increased production and sales.

Tesla said there was an increase in the number of its more expensive models, the Model S and Model X, in transit to Europe, the Middle East and Africa, as well as to the Asia Pacific region.

But it does mean that over the last 12 months Tesla has produced 78,000 more cars than it has sold, suggesting that talk of strong demand by Tesla executives may not be backed up by the numbers.

“Early this year, we had a price adjustment. After that, we actually generated a huge demand, more than we can produce, really,” said Tom Zhu, Tesla’s executive in charge of global production and sales. “And as Elon said, as long as you offer a product with value at affordable price, you don’t have to worry about demand.”