Banking platform Guava supports Black-owned businesses as capital access wanes

August is Black Business Month and Yahoo Finance Live is exploring the struggle for funding Black-founded companies face after seeing sharp investment declines since 2020. Guava Founder and CEO Kelly Ifill joins hosts Brad Smith and Julie Smith to talk about how her online banking platform is supporting Black-owned businesses.

"Guava's numbers are small business owners that are starting out — kitchen table businesses is something we like to call them — you think of someone that's doing taxes on the side or making candles in their kitchen and really thinking about that as their entrepreneurial starting point," Ifill explains. "So we come in as a way... to support them in not having them be by themselves, there's not that many resources for entrepreneurs that aren't venture-backed."

Ifill breaks down Guava's business services for clients, the difficulties banking credit and loan environments present for aspiring business owners, and advice for Black business owners.

This post was written by Luke Carberry Mogan.

Video Transcript

[AUDIO LOGO] JULIE HYMAN: August is Black Business Month.

And we're taking a closer look at one of the biggest hurdles facing Black business owners access to capital.

Black-owned businesses secured around two and a quarter billion dollars in funding last year.

That is just 1% of all available capital, according to data from Crunchbase.

Efforts made in recent years to support Black business owners have been effective, but only temporarily.

2020 saw a surge in support for Black founders and startups during a reckoning sparked by the murder of George Floyd, but the boost sharply dropped off the following year.

Though macroeconomic factors slowed VC funding in 2022, total capital fell 36% while Black businesses saw financing fall by 45%.

Kelly Ifill is the Founder and CEO of Guava.

It's a digital banking platform designed by and for Black small business owners.

And she's here with us in studio.

Kelly, thank you so much for being here.

KELLY IFILL: Thank you for having me.

JULIE HYMAN: So let's talk about the sort of capital-raising journey for you and what it has looked like.

KELLY IFILL: Yeah.

It has been really arduous, I think, for most people.

As you just talked about, we raised a pre-seed fund last year-- pre-seed round last year.

And I talked to hundreds of investors, you know, we have a few investors that are really supportive of Guava and of me.

But yeah.

The experience is a rough road.

- So tell us a little bit more about Guava, and what you're looking to do.

How you differentiate from what is the typical banking experience.

KELLY IFILL: Yeah.

So the way that we think about Guava is a kind of small business growth platform.

And so we provide all of the resources necessary for traditional or kitchen table businesses to build and grow.

And that started with a commercial bank account.

So making it really easy to access financial services, like a checking account.

And then we've expanded now to Huddle, which is our community platform that brings all of the resources-- the auxiliary resources.

So the networking, the expert office hours, the coffee chats, the lawyers the accountants, all to bear so that entrepreneurs aren't googling for things and making, you know, unnecessary mistakes.

JULIE HYMAN: And so it sounds like that your audience is also different organizations that might have a tough time having access to capital, right?

KELLY IFILL: Yeah Guava's members are small business owners that are starting out.

Often, they are-- like I said, kitchen table businesses is something that we like to call them.

But you think of someone that's doing taxes on the side or making candles in their kitchen and really thinking about that as their entrepreneurial starting point.

And so we come in as a way for us to support them and not having them be by themselves.

You know, there's not that many resources for entrepreneurs that aren't venture-backed.

- This is a different type of environment for many small businesses that are even just trying to get funding, trying to get started up.

KELLY IFILL: Yeah.

- And the credit conditions are vastly different than they were in years prior.

So what is the top kind of theme or topic that you're hearing them come to you about or even discuss amongst themselves in terms of getting financing and even getting a better credit condition for themselves?

KELLY IFILL: Yeah.

It really is just understanding that the landscape.

So where do I go to get the best rate on a loan?

How do I ensure that I my business is well positioned to even get that credit?

What are the different types of funding mechanisms that it might not always be alone?

It could be invoice-based financing.

And so there are lots of things that kind of come up and conversations to support entrepreneurs trying to scale their businesses using financing that we are able to help them navigate.

JULIE HYMAN: How has this sort of flow changed since you started the business a couple of years ago?

In terms of demand from those folks and how much of a tough time they are finding getting that advice and that financing elsewhere.

KELLY IFILL: Yeah.

For us, it's been consistent.

You know, I think, we focus on underrepresented entrepreneurs, Black entrepreneurs.

And like that graph showed, right?

We had a little blip of a peak where people were really excited to support Black entrepreneurship.

But we're noticing now that it's kind of going back to the norm where it's more difficult for entrepreneurs like me to get financing.

So Guava has always been kind of a place for those conversations to happen.

- Certainly, walk us through the revenue model, profit.

Where does that start to kind of come in for you guys?

How do you kind of make sure that you're securing those margins over an extended period of time?

KELLY IFILL: Yeah.

- I'm sure a lot of investors are asking you about that and what that road map looks like.

- Yeah.

So we have a few revenue mechanisms.

We have a Guava-branded MasterCard.

And so we generate revenue from that.

Our membership platform has a subscription fee as well.

So there's revenue that we generate there.

From some of our partners, we generate revenue.

So we have a few mechanisms to generate revenue as we support entrepreneurs doing the same.

JULIE HYMAN: So just to circle back quickly to the beginning of the conversation and raising capital for a business, particularly, a Black startup.

Any like key advice you would offer to other people who are trying to do this?

KELLY IFILL: Absolutely.

I would say, use your network.

It's really important to be able to connect with people that you know that can speak on your behalf.

I'd also, you know, recommend kind of doing the homework.

Right?

Finding out the funds that invest in businesses like yours that are investing in stages that you are at.

And then using that list that you generate to get the introductions to those investors, is a really great starting point.

That's the method that I use as well.

- Kelly Ifill.

Guava Founder and CEO joining us here live in Living Color on set.

Thanks so much for taking your time.

KELLY IFILL: Thank you for having me.

JULIE HYMAN: Thank you.

- Absolutely.