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: Silicon Valley Bank was ‘a soft place to land’ for founders who were women and people of color. Now they don’t know where to turn.

After the collapse of Silicon Valley Bank, there’s been a lot of talk about the importance of diversification in finance. In the startup world, though, Kange Kaneene says being able to diversify is “a luxury that some people just don’t have.”

“If you’re going to bank after bank and getting told no, it’s hard to diversify,” the vice president for SAP.io Foundries, the software giant SAP SE’s
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startup accelerator in New York, San Francisco, Latin America and the Caribbean, told MarketWatch.

Kaneene said Silicon Valley Bank was “a soft place to land” for many startup founders she called “underestimated,” such as women and people of color. The bank launched a program focused on increasing opportunities for underrepresented people in the “innovation economy,” but the future of that is as cloudy as that of the bank itself.

The venture-capital world, already affected by a tech slowdown and other economic worries before the failure of the bank, is now dealing with even more uncertainty that includes possible long-term effects from a banking crisis. The impact could be worse for VCs and startup founders who are women and/or people of color, a category that already saw a low share of venture funding.

Of all venture-capital funding last year, only 1.9% went to female founders, according to data from PitchBook. Usually, less than 2% of VC funding goes to Black entrepreneurs, according to Crunchbase; last year, while overall venture funding declined 36%, funding to Black-led businesses dropped 45%.

Related: Startups and VCs need another Silicon Valley Bank. Can any other bank fill the void?

“There is a common phrase among Black people,” said Samer Yousif, the interim chief executive of BLCK VC, a nonprofit working to increase Black representation in venture investing. “When others catch a cold, the Black community catches the flu.”

Yousif said there was an “interesting juxtaposition” over the past 10 years, during what he called a tech bull run. “Some people said, ‘Money is so cheap, it’s so easy to fundraise, people are sending out term sheets within 24 hours,’” he said. “At the same time, Black and brown founders are like, ‘Where is this money?’”

After George Floyd’s murder by a Minneapolis police officer in 2020, he added, companies and other organizations made statements and commitments to do more to combat racism, so there was a “slight” uptick in funding to Black entrepreneurs.

“But now we’re back to plus or minus 1%,” Yousif said.

Silicon Valley Bank supported organizations like his. In February, the bank and BLCK VC released a joint report on the state of Black venture investing. Among the report’s findings: Only 4% of U.S. venture capitalists are Black, just 3% of Black investors are in key decision-making roles, and Black women make up just 1% of VCs. In addition, Black fund managers are raising funds that are 35% smaller than their target fund size, according to the report.

“‘Everything [Silicon Valley Bank] did was in service of our unique needs. … They would facilitate intros to investors for my company and other companies. I had founder friends who attended an in-person seminar for children of immigrants and their relationship to money for companies and personally.’”

— Vanessa Pham, co-founder of Omsom

Yousif said organizations like his aren’t being told much right now by the bridge bank set up after Silicon Valley Bank’s failure. Silicon Valley Bank did not return a request for comment about whether its Access to Innovation program, which it announced in 2019, will continue.

“They’re dealing with a lot,” Yousif said. “My main outreach to SVB now is of support. When the time is right, we’ll continue the conversation.”

Among the organizations that the bank partnered with or was in talks with besides BLCK VC were LatinxVC, All Raise, Culture Shift Labs and Black Women on Boards, according to LinkedIn posts by bank employees who worked on the program.

Vanessa Pham, a startup founder and customer of Silicon Valley Bank, said her food company was very candid with its customers about what happened when the bank collapsed and the company lost access to all its capital, and asked customers for their support. She said her company had had a mostly positive experience with the bank.

She and her sister, Kim Pham, co-founded Omsom, a venture-backed company that sells Asian sauce kits at Amazon.com Inc.’s
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Whole Foods Markets and Target Corp.’s
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stores. They are daughters of Vietnamese immigrants, Vanessa Pham told MarketWatch in an interview.

“Everything [Silicon Valley Bank] did was in service of our unique needs,” she said. “They would facilitate intros to investors for my company and other companies. I had founder friends who attended an in-person seminar for children of immigrants and their relationship to money for companies and personally.”

Vanessa Pham said she was impressed by “that level of thoughtfulness of the programs” the bank put together.

When she thinks back to how she and her sister were able to raise funding, “I definitely felt like there was pushback. As a woman of color, raising capital is never really easy.”

Now, she said, how small companies like hers navigate what’s next will depend on what other financial institutions do, and what they see as “risky.”

“Who do these banks take on as partners; who do they extend credit to?” Vanessa Pham said. “This really just brought to light how vulnerable small companies really are, and how we can be at the whim of these larger failures of systems.”

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