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In my first year as an investment banker, I was a young analyst, full of energy and eager to begin what I assumed would be a decades-long career with my organization. And while it was an exciting job, I was struck that when I looked around the table at our client meetings, I was one of the few Black people in the room–or sometimes only one.
As I joined meetings with management teams and watched companies raise money to support their businesses, I learned quickly that securing capital is crucial for long-term growth. However, there was a stark contrast in the types of companies that receive funding. Of the roughly 300 companies the firm helped take public that year, only three had Black executive teams, and zero had Hispanic/Latino ownership.
Seeing such a clear lack of access to capital for diverse businesses motivated me to become part of the solution. I spent the next decade honing my skills at bulge bracket firms and deepening my market understanding as I earned my master’s degree at Columbia Business School. Those experiences made one thing clear: Access to capital is the lifeblood of successful businesses–and access is not equal for all business owners.
This spurred me to launch my own investment banking boutique specifically focused on advising and financing diverse-owned businesses. While we were seeing success, I wanted to have an even larger impact–and I knew that meant I needed more resources. That’s how I came to JPMorgan Chase, where I am today, serving as commercial banking’s national head of diverse businesses.
After sitting on both sides of the table, here’s what I’ve learned about the challenges facing diverse entrepreneurs.
The numbers don’t lie
Discrimination and systemic inequities have long inhibited diverse entrepreneurs’ ability to gain funding. This not only limits their growth, but research shows it has also made business ownership in the U.S. unrepresentative of the overall population–one of the many factors contributing to the racial wealth gap.
Over the last few years, awareness about funding inequalities has grown significantly, and there’s been an increase in calls for action to address the issue. While some progress has been made, most investors still aren’t consistently deploying capital to diverse businesses. For example, according to Crunchbase data, in 2022, Black founders received just 1% of venture capital funding, and companies founded solely by women received less than 2%. The statistics are similar for other underrepresented groups, including veterans and the LGBTQ+ community.
This financing gap is largely due to the lack of diversity within the investor ecosystem itself. In my experience, many investors prioritize investments that feel familiar. They aren’t comfortable branching out of their existing personal and professional networks, which tend to be made up of people who have similar backgrounds and perspectives as their own.
While funding is a top challenge, it’s one of many that diverse business owners are facing. For example, many diverse entrepreneurs also struggle to access the insights and information they need to take the next step in their business, and they often lack access to professional networks and mentorship opportunities that can help them overcome systemic barriers.
Building a better future
Helping diverse businesses access capital, insights, resources, and relationships that might not otherwise be available to them is an essential part of building a more equitable system. My role in this is helping business owners lean into their strengths and position themselves for success.
As a former business owner, I know that it’s easy to become hyper-focused on near-term goals. But as a banker, I also know that it’s vital that we help CEOs make decisions, not just for today and tomorrow, but for the next five, 10, and 15 years. Entrepreneurs should plan for the future and understand how to utilize capital for strategic, long-term investments that will lead to sustainable growth.
To access that capital, entrepreneurs must position their businesses in a way that gets investors excited. This begins with showing a deep understanding of the market opportunity, a clear, value-driven business proposition, and a strong leadership team to back it all up. In time, investors will also expect to see profitability and other meaningful performance metrics.
I’m a corporate leader but also a former entrepreneur and a Black man in America, so this work is personal for me. Supporting diverse business owners is about helping them succeed–but it’s also about creating jobs, strengthening communities, and building wealth for historically underrepresented groups. Advising a company and playing any small role in their eventual success, is the reason I’m excited to get up every day and come to work.
While there is much more work to do, I’m encouraged by the progress we’ve made and look forward to creating greater opportunity and prosperity for diverse businesses across the country.
Fred Royall is the national head of diverse businesses for JPMorgan Chase commercial banking.
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