Mark Cuban (Photo by Mark Wilson/Getty Images)
During a thrilling opening weekend at SXSW, following the sudden collapse of Silicon Valley Bank that served almost half of venture capital-backed startups in the USbillionaire investor Mark Cuban sat down with me to discuss options for entrepreneurs trying to raise funds amid unprecedented economic chaos.
“I would encourage people to do their homework,” he said. “This is a learning experience. It has been a learning experience for me.”
Cuban, whose CostPlusDrugs.com had tied up millions at SVB, went on to say that the Federal Reserve, Treasury and FDIC making “all savers healthy” would go a long way toward calming things down, as a large percentage of the accounts was for operational purposes. expenses and too large to be insured. The FDIC insurance only covers up to $250,000, a limit that was set in 2010more than ten years ago.
“If you’re a $2 million a year business, have four employees, and you’re in Dubuque, Iowa, between your inventory, your payroll, and your suppliers, there will be times when you might have a million dollars in the bank and that goes out the next day. And if those dollars aren’t available for some reason, everything implodes,” Cuban said. The workers aren’t paid, the vendors aren’t paid, and there’s a destructive ripple effect that’s rippled through the entire system is felt.
Hours later, Cuban got what he wanted. SVB received a systemic risk exception to make all depositors healthy. But a media frenzy over contagion had already begun with attacks on other banks, and with no guarantee of general insurance, what had been a healthy financial system a few days earlier began to tank on fear alone.
In his March 22 remarks, Fed Chairman Jerome Powell acknowledged the crisis and stated that the Fed would use all necessary tools, including providing adequate liquidity, to all the savings of the depositors and the banking system safe.
But Powell also signaled that the Fed was on track to bring inflation down to 2% and as core inflation came in higher than expected for February, interest rates were raised another quarter point from nearly zero a year to 4.75% up to 5%. past. With the rapid rise in interest rates nearly breaking banks, Powell said the Fed would switch from pending hikes to possible hikes, potentially marking a pause at its next meeting (May 2-3). However, with credit tightening weighing on private equity, many tech founders are struggling to find alternative financing.
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Enter the Small Business Administration
At SXSW, Cuban took the stage with US SBA administrator Isabella Guzman to highlight the resources available to people who want to start their own businesses.
For his part, Cuban said Shark Tank is still receiving 40,000 to 50,000 applications and encouraged the public to sign up.
The session was hosted by ZenBusiness, an Austin-based Series C startup in which Cuban is an investor and a one-stop shop for legal and banking services to help people set up their businesses. The company reported 200,000 users in 2021 with a rating of $1.7 billion backed by Breyer Capital, SoftBank, Greycroft, Oak, Cathay and others.
Guzman talked about the critical role small businesses play and how they are too small to fail as giants in our economy generating two-thirds of net job creation. She shared how budding entrepreneurs can find support to succeed on sba.gov, including access to mentors, grants, loans, and the world’s largest buyer, the U.S. government.
She also shared details about the National Science Foundation American Seed Fund where early-stage startups working in artificial intelligence and other fields can apply for up to $2 million in non-dilutive funding, meaning no equity interest is taken. The program has funded more than 400 startups, including Massachusetts-based Righthand Robotics, which makes warehouse-picking robots, and was awarded nearly $1 million in 2014 to start the company. According to Crunchbase, the company is now a Series C startup backed by Google Ventures, SoftBank and Menlo Ventures.
In a backstage interview, I had a chance to ask Guzman how the SBA was leveling the playing field for underrepresented entrepreneurs, particularly female-founded startups that still only get about 2% of venture capital. according to pitch book. She told me that the SBA has specific programs to support female founders, as well as veterans and underserved communities that have been capital deserts. “We see that women and people of color are the ones starting businesses at the highest rates, and yet the underinvestment is really impacting our economy because they can’t create the jobs or grow their businesses for the revenue we need. globally competitive,” she said. With an eye for fairness, she added that the SBA designs products, conducts outreach and develops partnerships to get women to sit at the table, and works with fund managers to get more women writing the checks .
Big Tech also has funding
Google for Startups also provides founders with non-dilutive capital. I had the chance to speak with Lisa Gevelber, Chief Marketing Officer of Google, who said that the program is similar to other accelerators in that it offers sales training, public relations support, direct investor introductions, and fundraising demo days, but that it also provides mental health services to help founders build resilience. “We started it a few years ago and now it’s the most commonly used feature,” she said. Google for Startups has physical campuses around the world, in London, Madrid, San Paolo, Tokyo, Seoul and Tel Aviv, with virtual accelerators in North America and Canada focused on climate. “Much of the physical startup space in Warsaw is now dedicated to helping Ukrainian startups,” she said.
Google’s Black Founders Fund, which provides $150,000 in cash prizes and $100,000 in Google Cloud credits, is open for applications through March 26. And the Google Cloud Summit AI Startup program, which provides $250,000 in Google Cloud credits, is open for applications through April 25. More details at startup.google.com/about-us.
Closing the funding gap
While Google for Startups boasts of creating 130,000 jobs and $6.7 billion in funding from its portfolio companies, only 23% were led by women, according to its website. If even the best-intentioned investors fail to meet DEI targets, how will we ever reach parity?
Shelley Zalis, founder of Female Quotient, says she has the answer. Hosting FQ’s Equality Lounge at leading conferences including the World Economic Forum, CES, Cannes Lion, and SXSW, she told me she’s been researching it for decades. “What you cherish, you measure,” she told me.
“The World Economic Forum says it will take 132 years to close the gender gap, which means they don’t believe it’s a reality,” she said. “My goal is to close the gap in five years. I just need 10 Fortune 500 CEOs with a moonshot mindset to raise their hands and tell me they’re going to make this a priority and a choice. And when I have 10, the other 490 will follow.”
Following Guzman, Zalis added, “If you look at the biggest problem today, it’s all about representation. And the biggest problem is at the GP level. It’s all about the share of the decision makers.” She gave the example of how Melinda French Gates is changing the business model with Pivotal Ventures by investing in high-impact startups where social progress has stalled. Not the type of investment a traditional VC would make, she said. “It has to change from the top down. We have to get more women to write the checks.”
