Opinion: The SVB debacle shows us the diversity chat was all smoke and mirrors
The opinions expressed in the article are those of the Author and don't necessarily reflect the views of Colorintech
For 5 years we've been in the game supporting a number of tech companies across the spectrum from Google to recently funded Robin AI. We spend a large proportion of our work working with founders from often overlooked backgrounds and apart from dropping a few statistics here, I won't rehash the arguments about why we do what we do or if it needs to be done. For those who aren't aware of how bleak the picture is remind yourself that all female teams raised just 1% of the VC funding raised in 2022, in the decade 2019-2019 only 38 black founders raised any VC money, and 62% of signatories to the Tech Talent Charter don't even collect socio-economic data about their workforce.
One of our partners on our mission for a more equitable tech ecosystem for years has been Silicon Valley Bank, but the weekend's events and its near collapse show us all we need to know; The tech industry’s chat for years about Diversity Equity, and inclusion was all smoke and mirrors
Why? Well when it came to a crunch, there was little support for Diverse founders. Now, this isn’t to denigrate the momentous effort that folks like Demi From Lendoe, Andy Davis, and or even Dom Hallas at Codec were doing on this. Make no mistake these are some of the champions in our industry disseminating info in digestible ways for founders who couldn't afford to sit on Twitter all day, but the scale of it when it comes down to the money available, hardly scratched the sides. When push came to shove, it was the same faces not the big corporations with their swathes of Diversity pledges who were able to step in at short notice.
Now some will point to the bids and the eventual acquisition of SVB and say well there's your evidence of “why you are wrong Ashleigh, The institutions came in and wanted to buy SVB because they value it.” Put it like this, if I had a few billion I would have bought it too. With a client book and balance sheet like the UK entity has it's not a surprise HSBC decided it was able to do something within 72h. The broader point we are making was that the despair that came over many, was because for years there was a collective recognition that, other folks were not on the ground supporting founders like SVB has been doing. It wasn’t too big to fail, it was too important.
The reality is the industry appears too reliant on one entity (as great as it is) to do some of the dirty work, backing their bets and taking different levels of risk on founders through some innovative financial instruments when others wouldn't. That’s why up to 50% of startups banked with them. And look it wasn't just for the financial products but the wider ecosystem initiatives such as free founder education, sponsoring not-for-profits, and crucially plugging that connection gaps for founders to meet investors, customers, and partners. It serves as a connective glue, and no wonder all the VCs were gushing about wanting it to continue. It certainly has been a valuable partner for them.
Still, reliance on one disproportionally influential actor is a systemic risk to the security of the ecosystem.
From a diversity perspective even with all the nice initiatives we’ve seen to support greater inclusion in the industry, it's nowhere where it should be and it's clear more is needed. Case in point no initiatives were suitably in place to support in times of crisis. Now yes we do accept banking crisis aren't really what anyone is planning for, but we do have to question, why in times of crisis or growth do founders from so many underrepresented backgrounds struggle to access meaningful capital? Why are they still some of the most fragile businesses even when they get to that point? It's not like Crisis this decade is unheard of; We’ve have a war in Europe, a global pandemic, and Brexit in the last 5 years alone
In the worst-case scenario, everyone was screwed but those bootstrapped businesses without the VC connections or Credit lines, friends and family bridge finance, or a direct line to the most privileged and wealthy GPs in society were locked out. Make no mistake, frankly, anyone that wasn't well capitalized would have suffered, but it would have been no surprise that women, people of colour, and almost any founder that has one or more of the protected characteristics would have suffered disproportionately.
So what does this mean for DEI efforts in tech moving forward?
The good news is that it looks like, for now, SVB will go on. Some damage will be done. Trust takes years to build and reputations can go in seconds. Convincing the next founder to open an account there will be harder than before, but that's the bank’s issue. From a diversity issue, hopefully, this moment serves as an inflection point for the industry; a point when people recognize those who were the most vulnerable (but no less deserving) in our tech community can have better support, access to capital, and optionality. Until then, we will remember this weekend as the one, when the rug came off the tech sector, under it was what many have suspected for years, a lot of fluff.