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Kelly Ifill, a former MBA in accounting from Columbia Business School, is banking for black entrepreneurs.
After working in venture capital after business school, she saw how difficult it was for black entrepreneurs to help startups get off the ground in early fundraising rounds known as friends and family rounds. As the handy term suggests, founders are expected to receive investments of $10,000 to $150,000 from trusted, well-heeled connections in angel and institutional investors to serve as seed money before moving on to larger investments.
Yet Eiffel quickly realized why this process—considered a startup’s first sign of success—was problematic for black founders. “Most black people don’t have access to the capital to test the idea,” she says. “He shed a bright light on the matter.”
She has seen this issue with her own eyes. She grew up in Brooklyn in a family that had immigrated from Trinidad, and her relatives often struggled to raise money to grow their cleaning, contracting, landscaping and bakery businesses.
Lack of access to capital was not just a problem for black tech founders, but for the entire black business community. And as Ifil investigated further, she realized that the problem was getting worse. Black entrepreneurs often do not have access to banking services, much less capital.
In zip codes with high concentrations of black residents, banks are less frequent, meaning 46% of black adults are unbanked or underbanked, making it impossible to build credit or get mortgages or business loans. And even though they charge higher fees, their loan applications are twice as denied as white-owned businesses and face the highest decline rates for credit cards. These are systemic differences that create huge racial wealth disparities. And Ifill knows the solution is to expand her focus beyond black tech entrepreneurs.
And earlier this year, she founded Guava, a digital community bank to help black small business owners access capital and help close the racial wealth gap.
To achieve these goals, IFIL designed Guava to provide black entrepreneurs with equitable financial products, such as checking and, soon, savings accounts and credit. Instead of relying on traditional models to determine loan eligibility, Guava offers low-barrier loans that use alternative data sets to assess risk.
She is pushing the boundaries of banking even further. Guava is about helping black entrepreneurs build social capital rather than just providing financial support. The Guava app connects black entrepreneurs with each other, providing a place to trade and leverage their investment networks. It also serves as a hub where black entrepreneurs can find mentors and peers.
“This is a place built by black entrepreneurs for black entrepreneurs.”
Kelly Iphil
“People especially enjoy a place to talk to other black entrepreneurs, and that doesn’t exist in the world right now,” Ifill says. “This is a place built by black entrepreneurs for black entrepreneurs, and people are really excited. That’s very validating.”
Entered into a private beta version in January, Guava’s full release is planned for the fall.
To navigate the complexities of running a bank, Eiffel worked with Piermont Bank to provide Guava with FDIC-insured bank accounts, debit cards, and ACH and wire payments that allow customers to purchase inventory, make payroll, and receive payments.
Earlier this month, Guava joined MasterCard’s StartDukan in Solidarity, a startup participation program led by typically underrepresented fintech founders in the US, where black-owned startups still receive less than 1% of venture capital. 2021 Crunchbase Report.
As part of its global Startup Pathway program for later-stage startups, the In Solidarity program, part of MasterCard’s $500 million pledge to close the seed wealth and opportunity gap, helps fintechs scale and scale their products and create the connections they need. It attracts investment and strategic partnerships. Ifill has big plans for the future and believes the program will help her hit those goals.
“In five years, we want to be the benchmark for what it looks like to create equitable access to capital for black entrepreneurs and provide loans in a way that eliminates discrimination,” she said. “We want to create a place where black entrepreneurs can come together … and celebrate their achievements and support each other.”
After all, isn’t that what friends and family do for each other?
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