I have built my career in the financial industry by driving the growth of diverse businesses.this is what i learned

Finance


Fred Loyal is the country manager for the diversified businesses of JPMorgan Chase Commercial Banking. Courtesy of Fred Royale

In my first year as an investment banker, I was a young analyst, full of energy, embarking on what I assumed would span decades in an organization. And while it was exciting work, when I looked around the table at client meetings, I found myself one of the few black people in the room, or sometimes the only black person.

After attending meetings with management and watching companies raise capital to support their operations, I quickly learned that securing capital is critical to long-term growth. However, there were significant differences in the types of companies receiving funding. Of the roughly 300 companies it helped go public that year, only three had Black executives and none had Hispanic or Latino executives.

Seeing the apparent lack of access to finance for diverse businesses made me want to be part of the solution. I spent the next decade honing my skills at bulge bracket companies and gaining a better understanding of the market while earning my master’s degree from Columbia Business School. These experiences have made it clear that access to capital is the lifeblood of any successful business, and access is not equal for all operators.

This inspired me to start my own investment banking boutique specializing in advising and financing diverse owner-owned businesses.. I could see success, but I wanted to make an even bigger impact. We knew we needed more resources to do that. That’s how I joined JPMorgan Chase, where I am now the National Head of the commercial bank’s diversified businesses.

After sitting on both sides of the table, here’s what I learned about the challenges faced by diverse entrepreneurs.

numbers don’t lie

Discrimination and institutional inequalities have long hampered the ability of diverse entrepreneurs to obtain funding. Not only does this limit their growth, but research shows that business ownership in the United States is becoming less representative of the population as a whole, one of many factors contributing to racial wealth disparities. increase.

Awareness of funding inequalities has grown significantly in recent years, fueling calls for action to address the problem. While some progress has been made, most investors are still unable to sustainably fund their diverse businesses. For example, according to Crunchbase data, only 1% of venture capital funding will be received by black founders in 2022, and less than 2% will be received by all-female-founded companies. The statistic is similar for other underrepresented groups, such as veterans and the LGBTQ+ community.

This funding gap is largely due to the lack of diversity in the investor ecosystem itself. In my experience, many investors prioritize investments they feel familiar with. They are reluctant to step outside of their existing personal and professional networks, which tend to be made up of people with similar backgrounds and perspectives.

Funding is the biggest challenge, but one of the many challenges faced by diverse business owners. For example, many diverse entrepreneurs also struggle to access the insights and information they need to take the next step in their business, with expert networks and mentorship to help overcome systemic barriers. Opportunities are often inaccessible.

build a better future

Helping diverse companies access capital, insights, resources and relationships that may not otherwise be available is an essential part of building a more equitable system. My role in this area is to help business owners leverage their strengths and set themselves up for success.

As a former business owner, I know it’s easy to become overly focused on short-term goals. But as bankers, we also know it’s vitally important to help CEOs make decisions not just today and tomorrow, but over the next 5, 10, 15 years. Entrepreneurs need to plan for the future and understand how to use capital for strategic, long-term investments that lead to sustainable growth.

To access that capital, entrepreneurs need to position their business in a way that excites investors. This starts with demonstrating a deep understanding of the market opportunity, a clear, value-driven business proposition, and a strong leadership team to back it all up. Over time, investors will also expect profitability and other meaningful performance metrics.

I’m a corporate leader, but I’m also a former entrepreneur and black American, so this job is personal to me. Supporting diverse entrepreneurs not only helps them succeed, but also creates jobs, strengthens communities and builds wealth for historically underrepresented groups. Advising the company and being able to contribute a little to its ultimate success is what makes me look forward to getting up and going to work every day.

While there is still much work to be done, we are encouraged by the progress we have made and look forward to creating greater opportunity and prosperity for our diverse businesses across the country.

Fred Loyal is the National Head of Business Diversity for JPMorgan Chase’s Commercial Banking Division..

The opinions expressed in commentary articles on Fortune.com are solely those of the authors and do not necessarily reflect the opinions or beliefs of the authors. luck.

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