In a macroeconomic environment filled with uncertainty and twists and turns, small business leaders can find themselves stuck in a constant reactive mode. However, companies must remain committed to their core values, especially those that drive better outcomes for shareholders, customers, and employees.
said Fred Royal, head of diversified business in commercial banking at JPMorgan Chase. Royal leads a team of bankers across the country to identify opportunities and build on existing relationships with executives and founders from diverse backgrounds. He was the founder and CEO of Royal Capital Holdings, a specialty investment bank that raised capital for a variety of middle-market private companies.
In the interview below, Royal explores the business outcomes of investing in founders from underserved backgrounds, unequal access to capital, and ideas and metrics that appeal to VC investors .
How can supporting women and minority business leaders foster greater economic and financial growth?
Investing in founders from underserved backgrounds is not a nice-to-have, but an important part of strengthening the U.S. economy. Supporting founders from diverse backgrounds means:
- More jobs will be created, contributing to lower unemployment rates and higher household incomes
- Economic mobility by enabling underserved communities to build wealth and reinvest in their communities.
- Attract new customers by diversifying the economy and contributing to sustainable and resilient development
- Innovation in the form of new ideas from untapped talent and leadership to serve customers in new ways
- Supporting local infrastructure and services, strengthening local community development
The U.S. Department of Commerce states that diverse entrepreneurs generate approximately $2 trillion in revenue annually. Supporting diverse businesses through access to capital, resources, and relationships that were previously unavailable is an essential part of building a fairer and stronger economy. Being involved in that work gives me great pride.
What strategies can CFOs of women- and minority-owned early- and growth-stage companies adopt to ensure capital reserves?
Capital reserves are key to unlocking your business' long-term potential. It's not just about having enough capital, it's about managing finances strategically to drive growth, seize opportunities, weather recessions and attract investors. This fosters efficient operations, ensures that every dollar is used effectively, and builds a solid foundation for sustainable success. However, there are significant disparities in access to capital.
Black founders received just 0.48% of venture capital funding in 2023, down from 1% in 2022, according to data from Crunchbase. Meanwhile, companies founded entirely by women secured just 2.2% of VC funding last year, according to PitchBook data. These numbers are similarly discouraging for other underrepresented groups, such as military veterans.
To address this disparity and ensure capital reserves, CFOs of women- and minority-owned early- and growth-stage companies need more than just a good idea to attract investors. is. Entrepreneurs need to paint a compelling picture that shows a deep understanding of market potential, a clearly defined business model that delivers value, and a competent leadership team at the helm. From day one, investors will understandably want solid performance metrics, profitability or a path to near-term profitability, and a valuable profile that supports the original vision.
Founders from underserved backgrounds also need to find key partners who can help them connect with resources such as mentors, industry leaders, and talent in the VC field.
How can CFOs of women- and minority-owned businesses effectively partner with financial institutions to drive growth and build resilience?
Financial institutions can be an essential resource for assessing your financial needs and seeking appropriate solutions for long-term success.
From managing cash flow to securing loans and investments, our team's knowledge of financial tools allows you to optimize your company's capital structure. However, cooperation with banks is not limited to financing. Bankers can provide insight into your business strategy by considering your long-term plans, analyzing your product offerings, and even helping you expand into different markets. In my experience, this strategic partnership helps companies see around the corner, solve pressing challenges, and shape the future.
Additionally, partnerships with community organizations and local chambers of commerce give CFOs access to a variety of resources. These organizations often offer mentorship programs, educational workshops, and networking events. By leveraging these community resources, you can address immediate business challenges and foster a supportive ecosystem.
