Open letter from Black Women in Venture Capital to Andy Kessler & WSJ Editors

Re: Op-Ed “Who Killed Silicon Valley Bank?”

Dear Wall Street Journal Editors:

Every day, there is new analysis or additional opinions on the cause of the collapse of Silicon Valley Bank (SVB). SVB has played a foundational role in the infrastructure of the venture capital industry for decades. In fact, SVB’s failure was the second-largest bank failure in all of U.S. history. On Sunday, March 12th, the Federal Reserve, Treasury Department, and the FDIC took unprecedented measures to guarantee the $175 billion in deposits at the time of failure, way beyond what is required by the FDIC. This action demonstrated to the world that the bank’s failure was too big of a risk to the U.S. economy and that the venture capital industry is a key component of the fabric of the U.S. economy.

Following the FDIC’s decision, Andy Kessler published an Op-ed in the Wall Street Journal, “Who Killed Silicon Valley Bank?” in which Andy Kessler claims: “I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.” This insinuation is insulting and a slap in the face to the many organizations that exist to increase diversity at every step in the tech value chain. It is also part of a broader straw-man argument made by many individuals and organizations that believe making American society more inclusive for historically marginalized groups is detrimental to our economy’s growth.

Kessler’s argument presumes that by increasing the diversity on the SVB board, the bank’s non-diverse leaders may have been too distracted to avoid the fastest bank failure in U.S. history. This couldn’t be further from the truth. Black Women in Venture Capital, BLCK VC, 1863 Ventures, and Living Cities are speaking out to deny these claims vehemently, offer data to support the contrary, and invite others to join in on productive discourse on how to increase stability and equity in our tech ecosystem for years to come.

Diverse boards and investing in diverse entrepreneurs has proven to be better for business and the U.S. economy. It has been well documented, including by the Harvard Business Review and Mckinsey, that increasing diversity across organizational leadership results in greater economic upside. In fact, the importance of a diverse board was also highlighted when the Nasdaq’s Board Diversity Rule went into effect last August, requiring that corporations listed on the U.S. exchange disclose the ethnic and gender makeup of their boards.

In addition, numerous studies conducted and published by firms like Morgan Stanley and CitiGroup have shown that there has been a multi-trillion dollar loss in U.S. gross domestic product because of a lack of investing in diverse business owners over the past two decades. Slight progress has been made in the past few years. However, in 2022 the Russell 3000 index found that Black directors occupied 6% of total board seats available, and in that same year, only 1% of venture capital dollars was invested in Black founders, according to Crunchbase. Black representation on both boards and within venture capital investing in the U.S. is greatly below the share of the Black population represented in this country, which according to the 2020 Census, was 12.4%. 

This Wall Street Journal article is another unfortunate example of the backlash historically marginalized groups face when we begin to advance. There have been many statements but limited movement in terms of actual capital and resources invested into the Black community. This is why Mr. Kessler referring to this important work as a “distraction” is actually very toxic; it could further hamper a movement that still has much work to do. Although Black venture investors make up 4% of all venture investors and 3% of Black partners, they’re 4x more likely to invest in Black entrepreneurs than their non-Black peers, per the BLCK VC State of Black Venture Report. Additionally, Black investors are much more likely to invest in women and Hispanic founders than the industry average.

One thing that Mr. Kessler did get right was that SVB has made an intentional effort to increase diversity within its organization and the broader venture ecosystem. They’ve been a strategic partner and ally for many organizations, including BLCK VC, Black Women in Venture Capital, VC Familia, All Raise, and many others. We all have been working diligently to help build a more equitable ecosystem for all founders and funders. However, assuming that having one Black, one LGBTQ+, and two veterans on SVB’s board led to its downfall is beyond ludicrous. Allow us to highlight just a few key statistics that demonstrate the positive financial impact of diverse teams. McKinsey notes the following:

• Companies in the bottom quartile, both for gender and for ethnicity and race, are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).
• In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.
• Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

These statistics demonstrate the impact when diversity is not significantly present in leadership, as was the case for SVB. Imagine if the majority of the board had been comprised of Black board members. There is much work to be done, starting with ensuring that our communities aren’t overwhelmingly negatively impacted by the current economic situation. As often happens in these situations (i.e., 2008 Great Recession), BIPOC communities are oftentimes worst impacted by these situations and left behind in any recovery.

We believe that making our financial system more diverse and equitable will not only lead to stronger, more balanced economic growth in the U.S., it would lead to more stability within our system.

This “distraction” is potentially the solution.

Signed,

Black Women in Venture Capital
BLCK VC
1863 Ventures
Living Cities, Inc.

About Black Women in Venture Capital
Black Women in Venture Capital (BWiVC) is a private community of Black women investment professionals at every stage of their careers. From Analyst to General Partner, whether Platform or Investor, members experience intentional programming and curriculum aimed at accelerating their careers in Venture.

About BLCK VC
BLCK VC is a 501(3)(c) non-profit organization built for and by Black venture investors dedicated to increasing the representation of Black investors within venture capital now and for generations to come. Through educational programs, networking opportunities, and national chapters, BLCK VC provides the tools and connections to accelerate the careers of Black investors in venture capital. When venture capital mirrors the diverse demographics of the U.S., all communities benefit from the wealth created by technology built for the world.

About 1863 Ventures
1863 Ventures is a leader in providing culturally competent accelerator programs, non-dilutive financing, and mentorship to Black, Latino, and other historically underestimated entrepreneurs. By addressing the unique needs of this demographic, 1863 Ventures assists entrepreneurs in transforming high-potential business ideas into high-growth, profitable companies that generate jobs and wealth for their communities. For more information, visit 1863ventures.net or follow @1863ventures on Instagram, Twitter , and LinkedIn.

About Living Cities
Founded in 1991, Living Cities is a collaborative of the world’s largest foundations and financial institutions. Living Cities fosters transformational relationships across sectors to connect those who are willing to do the hard work of closing racial income and wealth gaps. The organization partners with cross-sector leaders in cities across the country to imagine and create an America in which all people are economically secure, building wealth and living abundant, dignified, and connected lives. To learn more about Living Cities and its member institutions, visit www.livingcities.org.