- Startup founder Mitchella Gilbert almost lost $300,000 in the Silicon Valley Bank collapse.
- Today’s uncertain banking market does not bode well for founders of color, they said.
- Gilbert revealed how other founders of color can protect themselves amid banking uncertainty.
Switching business bank accounts from Silicon Valley Bank to Chase Bank was a to-do list item in Mitchella “Mitch” Gilbert’s notebook prior to the fallout earlier this month.
The startup founder knew it was time to diversify their capital for financial security. But they were too late. When Gilbert arrived at SXSW on March 10, they learned of the crash alongside their investors.
“It was actually a really great way to learn that you potentially lost over $300,000,” Gilbert told Insider, adding that they were happy to have investor support in such a tumultuous time.
Gilbert, who is the cofounder and CEO of the femtech and athletic apparel company Oya, regained access to their funds on March 13, after the Federal Deposit Insurance Corporation said it would protect depositors with funds in SVB. They transferred their funds to Chase Bank and plan on moving half of that money into First Women’s Bank.
However, the experience has altered Gilbert’s business mindset and financial plans, they said.
“We’re already in an economy that is having a detrimental effect on founders of color,” Gilbert said, noting the decrease in venture capital investments in Black-owned businesses. “When you’re adding in this additional volatility, those numbers are in no way going to get any better.”
Gilbert, who has raised $1.3 million in pre-seed VC, revealed how other founders can protect themselves amid banking uncertainty. This is an as-told-to story based on an interview with Gilbert that has been edited for length and clarity.
SVB’s detrimental impact on founders of color
I could have lost over $300,000, which would’ve cut my runway from 14 months of capital to about six months and drastically changed our strategy.
Payroll was the biggest concern: Even investors were texting us ensuring we knew how important it was to make payroll despite the news.
I know multiple other founders who gave up additional equity that weekend for bridge capital (a interim form of financing a founder can use until permanent funds are available), negatively impacting their balance sheets. They were trying to do the right thing in order to pay employees but it was discouraging to see venture capitalists who were essentially acting like sharks and taking advantage of that need.
Many of the women who were impacted by SVB, specifically the Brown women, noticed how quickly our government reacted. It was this crazy feeling of “I think we’ll get the money back because our government doesn’t let rich white men fail.”
Yet still, the uncertain banking market does not bode well for the future of investments in diverse founders.
Founders need to find opportunities that will serve them
It’s important that founders find opportunities that will protect them along the way.
There’s a lot of fear, sadness, and frustration right now. But I advise entrepreneurs to go after non-dilutive capital (funding that doesn’t require the recipient to give up equity in the company), which can be won through business and pitch competitions. I also advise them to go after low-interest or interest-free loans. These alternative methods of generating money are especially important post-SVB-collapse and while speculation spreads about other banks.
I am excited about a new bank called First Women’s Bank that opened in 2021. It was started by women to support underfunded entrepreneurs. When SVB closed, I was pushed toward FWB by my investors as the bank opened floods of accounts for other women founders and founders of color.
What that really means is that our community has just become that much tighter. We don’t expect these other big groups to take care of us. So we have to band together and figure out how to take care of ourselves.