How Guava Will Level the Playing Field

Audio Description

Did you know that 90% of Black small businesses are sole proprietors or only have one or two employees? In this episode, we bring you a conversation between James Seth Thompson, host of Changing the Trajectory, and Kelly Ifill, founder and CEO of Guava, a full-service digital bank working to become Black Americans' financial institution of choice. How will Guava help create wealth for communities systematically boxed out of the game?


This transcript has been generated by an AI tool.

00:02 - 00:49

Hi everyone and welcome to the inflection point where we talk to entrepreneurs, business leaders and innovators about their journey and the make or break moments of their careers. I'm your host, Brian Haloossim. Today, I'm excited to bring you a fantastic conversation that originally aired on another Bernstein podcast, Changing the Trajectory. Host James Seth Thompson speaks with Kelly Ifill, founder and CEO of Guava, a full service digital bank working to become black Americans financial institution of choice. In 30 minutes, Kelly and James unpack some of the challenges facing black entrepreneurs and how Guava is tackling them. Let's hear that interview.

00:53 - 00:55

Kelly, so happy about your launch. Thanks for joining me today.

00:56 - 01:01

Thank you for having me. And thank you. Launching is exciting. In a word.

01:01 - 01:39

Yeah. And I'm sure there's a lot of work that's going into it. So I am going to congratulate you for everything you've done and how far you've come. Look, it's great to have you on. You know, I'm really excited for people to really hear your story and really learn more about how you are looking to address well for black Americans and business owners. But I also know that you are very proud of your background. That really contributes to who you are and what you seek to achieve. So by way of introduction, why don't you just start talking about yourself? The inspiration from coming from an immigrant family of entrepreneurs from Trinidad?

01:39 - 02:35

Yes. Being in Trinidadian, our first generation is super important. I grew up in Brooklyn where there's a huge West Indian community that is very important to who I am. Like I said, I'm first generation and like the, you know, the typical American immigrant story is that people come here and often start small businesses for a number of reasons. So, that sure, for my family, it was kind of the thing that was I didn't think about when I was growing up. It was just the the way it was. I started my career actually in education with seven other teachers. We started a public school in Brooklyn. I was in education and at leadership for nearly ten years and then decided to go to business school to kind of understand the financing component that was impacting education technology that I was working with and thought that I wanted to be a VC and sit on that side of the table and help influence the types of tech that was being built for schools.

02:35 - 03:13

So I went to school and worked at a EdTech Venture fund and then went to a couple other funds in the interim of all of that. I started a nonprofit with a colleague. At the time, it was really jarring to not see anyone that looks like me and any of these, you know, venture rounds founders or investors. And so he and I started this nonprofit is to support black and Brown founders when they were trying to raise friends and family around, which are really particularly difficult for us because of the racial wealth gap. So our goal was to make introductions that would close that gap for those founder.

03:13 - 03:41

And as I was doing that, that was kind of my side hustle, which became more than a side hustle. I got really passionate about ways to mitigate that walk up. I had experienced that without recognizing the term and having all of the research, but as I was doing that and getting a better understanding of all of the vectors in someone's life, where my life that is impacted, that was something that I really wanted to focus on hopefully seeing close in my lifetime.

03:41 - 04:20

And so that was kind of the impetus for starting Guava that, you know, while startups are great and really exciting and sexy, the majority of business owners and the majority of black business owners are not venture startups. They are traditional mainstream businesses that are employing people, selling a product or service and have really intractable problems when it comes to access to capital and being a part of our economy. And so I wanted to build something that addressed their issues. And I really, for me, circle back to, like I said, you know, being from the family that has a bunch of small business owners and something that felt really familiar.

04:20 - 04:28

Right now with this next question, I run the risk of not getting a very provocative answer. Tell us about the name Guava.

04:30 - 05:18

Okay. So the name is an inside joke. When I was going through all of these names that I can't even remember what they were. My sister sent me this satirical piece about tech companies being named after fruit, and we're like a full day. We were just going back and forth about all the fruit names that we could name his company. And I think like papaya was inherently cheap and we said guava at some point and it stuck with me. It's something that, you know, it's easy to pronounce. It just like kept a lot of the boxes and something. I was like, Can I say this 100 times a day? And the answer was yes. And so I kept it. And then I learned about like all of these other definitions and meanings behind the word, and there's a guava crystal and all of these things that are really, really aligned.

05:19 - 06:02

So Blackberries didn't make the cut. I guess that would have been so easy. Let's spend some time talking about guava like the what the why I share with you before. I hope what you have started and what you are doing will be and serve as a broader North Star. You are quoted as saying that guava is helping create wealth for our communities through a focus solution for entrepreneurs who have systematically been boxed out of the game. So when you think of. About the things right that have box people that look like you and I out of the game. What are some of those key challenges that have really negatively impacted black entrepreneurs and small business owners?

06:03 - 06:45

Yeah, I mean, they're so much right. And it's so much is predicated on like the historical racism, you know, and I try to say it in ways that are like less inflammatory, I guess. I don't know. But it really is is this is structural racism and of course, things like that. More black people live in bank deserts than not that we are more denied for bank accounts because I'm checking FICO score, which is a measure to to some extent a measure of risk. But that has nothing to do with the bank account rate that a FICO score in and of itself is really tied to home property values, which, as we know, historically black neighborhoods with high black populations have been devalued.

06:45 - 07:05

So it's all of these things that are kind of embedded in the way that black bank customers are to an extent devalued in our system and really kind of taking and stripping that away to say, well, we're not necessarily getting the full picture of someone's credit worthiness by using their final score.

07:05 - 07:31

What other more modern sets of data can we use that will give us a better picture that will be more equitable and not predicated on these racist belief systems that black people are somehow more risky or less valuable. That's not true. And we know that to not be true. But what we haven't done is really kind of that thinking, implications of that thinking out of the rest of our society and specifically in our banking products so that we do it.

07:31 - 07:59

Yeah. So when we think about the typical experience of a black entrepreneur who is seeking a banking relationship, yes, they're a black business owner. But the challenges of being a social entrepreneur or having employees less than five people, how would you describe that experience today? And then specifically, what are you trying to fix to help create these relationships between black business owners and Guava?

08:00 - 08:38

Yeah, I mean, to start, you know, something like 80% of black business owners who are more than likely a sole proprietor don't have a commercial bank account which like on its face works because you're not really paying anybody but yourself. And so it just kind of becomes that pool of capital. But what that means is that those entrepreneurs are not getting access. They're not building relationships with institutions that could give them greater access to lending, capital, etc. So they become overwhelmingly more likely to be identified for predatory products, the higher interest rate on their loans, etc..

08:38 - 09:19

So, you know, you kind of start at the beginning where not having that relationship means that you're in a different bucket, even if your business is profitable and you're doing well and you're making all the right choices. And so we're trying to combat that by, you know, just making it really, really streamlined to get a checking account with us. And you can sign up in 10 minutes and you can do it all on your phone. So just making it as accessible as possible, which, you know, like I talked about before, isn't always the case. Getting a business account for many people isn't as easy as, you know, opening an app and filling out the pertinent information. It might mean going to a bank branch. It might mean getting if I goes for your credit score pulled, none of that is happening with that.

09:19 - 09:20

That's pretty amazing.

09:20 - 09:53

The one thing I try to preach and teach all the time is for people to leverage whatever resources they have to level the playing field. And obviously leveling the playing field in addition to providing access to your services now is really important. How do you think about the evolution of leveling the playing field, or are you just getting started now? Are there other things that you or Guava or the industry as a whole needs to take a look at with respect to level the playing field for minority of black business owners?

09:53 - 10:13

Yeah. And so the other thing that we're doing is ensuring that not only will the entrepreneurs and business owners have access to products that are not predatory, that are, you know, are thinking about their wealth creation and the success of their business, but also really building up the social capital that entrepreneurs need.

10:14 - 10:54

And so I in a position as I am a tech founder and so there are all of these things that I have access to. And one of them are all of these like accelerators and incubators that are for venture scale, venture backed tech startups. But the value of those types of organizations and experiences is talking to other founders, like there are other fintech founders that I talked to that have been invaluable to me from everything being a sounding board or making introductions or helping me avoid just catastrophic mistakes. And that doesn't exist for mainstream small business. Specifically is lacking for black entrepreneurs.

10:54 - 11:17

And so what we're building is a network within Guava so that you can open one app and get all of the capital, all of these resources, whether they are financial or social or knowledge. So that, again, building your business is not just predicated on how much money you have or who you know. And if you don't have access to any of them, then you're just stuck by yourself.

11:17 - 11:45

We're actively thinking about ways to ensure that businesses, yes, have the right access to capital, right access to financial products, but also have the right access to networks, and that they can build those network, they can grow together and then bring in those knowledge, resources of experts into that community so that they have this kind of trifecta of resources to be able to grow and build their businesses. Because for us, obviously, their success is our success.

11:45 - 12:32

But really thinking about wealth creation and having those sole proprietors grow their business to make their first hires. Right? Like right now, of the nearly 3 million black small businesses, only 125,000 are employer businesses. So only 125,000 of them employ other people. And that number is really important because, one, black people are more likely to hire other black people so we can create spaces and create businesses that hire others. We're likely to have this domino effect in our communities, but it also has implications for that business owner. It means your business is bigger, is more profitable, generating more revenue, and we can really be, you know, making strides with the wealth of that individual and their family know.

12:32 - 12:32


12:32 - 12:58

And I think the networking part that you just highlighted kind of ties in to what I said when we first started talking about being this broader North Star and in fact, Guava being a broader North Star in a role that community and networking play. You know, if you would outline a case study or a success story of how this community and networking element shows up, what would that look like off the top of your head?

12:58 - 13:58

This is like the dream case that you're asking me to build, which is awesome. But, you know, I think about Guava being the ubiquitous name that people think of when you want to start a business. So it's kind of like you have an idea for a business, you get a Guava account or you have a name, you get a Guava account and someone you know, being really early in an entrepreneurial journey and starting with us using the community to meet other founders, meet other entrepreneurs, having a mentor, potentially meeting a partner that they can work with and grow with, getting access to the right lawyers and tax and accountants through the Guava ecosystem, their business growing. We can see that as being the institution that they think with them growing and making their first hire. All of that happening within the ecosystem because of the relationships that they're building and because of the decisions that they've made early on to ensure that their business is built on a solid financial footing by starting an account early in its inception. That to me would be an ideal case for an individual.

13:58 - 14:27

The thing that I'm excited to see long term for us is in neighborhoods that have high concentrations of black businesses that they're all banking with us, they all have global accounts, and that online or digital community is also in real life. So, you know, post-pandemic, whenever that is, that people will actually connect in real life. They will use that community to take it offline, to build relationships with each other. And that Guava can kind of be the glue that keeping it all together.

14:27 - 15:04

I love that because that's the ecosystem that I think is required. I think a lot of resources and companies and the Guava like things that have started to address this wealth and wealth gap challenge. There's a great opportunity for those initial relationships to spin off and then create another ecosystem of similar successes, right? And the more we do that and charter that, I think that's where we start to see a more rapid advancement of the successes that's required to really address income and wealth for our community.

15:04 - 15:32

And in fact, this networking and community thing specifically resonates with me because as a very underserved or under-resourced demographic in financial services, we have a lot of black business owners who are getting started for the first time, but they don't know what they don't know. Yeah, there are a lot of potholes and pitfalls and opportunities that may be somewhere up the road that they have no idea is in their purview.

15:33 - 16:17

So it is important for operations like yours to create these like trusted advisor roundtables to really spur the opportunity, say, hey, I know you don't know what tomorrow looks like, but I have a pretty good idea. You need this in place. You need em in place. You need hard. In place. You need this cooperation, you need this resource, you need this lawyer. And often times that's really missing from many of the financial solutions that exist. When you buy a solution, you get that solution. A lot of times you don't get the other things, the ancillary fringe things that are really required for you to optimize what success looks like. So I say all of that to really highlight how important that vision is for you and the role Guava will play.

16:17 - 16:45

Yeah, I, you know, I think about a lot of other institutions that are serving small parts of the needs of a small business owner or an entrepreneur. But our mission isn't just to ensure that your taxes are good or that your like your books are clean or that you have a bank account. Obviously, all of those things are important, but our Northstar is to close the racial wealth gap and using entrepreneurship as the lever that we're pulling to do that.

16:45 - 17:26

And so if we have this longer term view, this bigger goal, then we have to think about the holistic picture for our business and what it needs to be successful or what that entrepreneur needs to be successful. And it's not just the bank account or the lawyer or the tax everything, and it's having people around you that are going to support you. And often, always, you know, being an entrepreneur is really lonely. Even if you have a co-founder or even if you have a partner, it's super isolated because there aren't many people who are going through that experience in your immediate circle. So you often find, like your friends and family, it will be really supportive and they'll buy the thing or they'll be a patron of your business.

17:26 - 18:01

But when you're talking to someone about how to make the right hiring decision or how to think about taxes or all of those things that weigh on you that have nothing to do with the service that you are an expert at finding a network of people that you can just ask that question and get a clear, concise, quick answer is so important. Like, I've experienced that firsthand. Our families experience that firsthand. And you know, Guava is trying to create a place where hopefully those entrepreneur that stress is being alleviated and they're able to focus on their business and growing their business.

18:01 - 18:59

Yeah, absolutely. And at the end of the day, I think access and opportunity or two key factors to any individuals like success metrics. And I'm once again at home kind of conducting this episode because we're still in COVID 19. And, you know, one of the most basic things that I think has failed many minority and black businesses is just like the access to PPE, right. As an example. And that just really highlighted the need for the guavas of the world to be able to step in and be a key and core relationship for many businesses. Because if you don't have that relationship with like a Guava, they you tend to get left out of the resources that were available through a PGP program. And, and I know this idea started long before this challenge, but I have to imagine that's in the back of your mind as an immediate area of opportunity to always show for business owners.

19:00 - 19:41

Yeah, absolutely. It almost felt like when that was happening, when the PPE fiasco started and we were getting all of these reports and people started paying attention to the inequity of being a black owned business or black business owner. I was like, Wait a second. CNN is actually talking about the wealth gap, like the thing that happened and talking about for, what, 2014 or something. It felt a little surreal. But yeah, I think nothing that happened during COVID with regard to the PPE loan or the small business experience was particularly new, right? We had to shut down businesses, of course, but the inequities that it magnified had existed for decades or maybe centuries.

19:42 - 20:05

And so what I think the benefit of it was that it just showed that light writer and it exacerbated some of those problems where, you know, you saw that 1% at best of PCP loans went to black owned businesses. And I think, you know, that number is a little bit higher when we include all our minorities. But I'm excited for the role that Guava can play for these entrepreneurs.

20:05 - 20:54

I think, like I said, that that like the light is signed on it, you know, and hopefully that's like the beginning of closing that disparity, right? Like we know what the problem is now. Many of us knew before, but it's now the problem that more of the industry is talking about, more of the industry is aware of, and their marketing campaigns and all of these dedications that large corporations are making. And so I just hope to be a part of that. And I hope that they're not just marketing dollars and it's not just in vogue to do it now. Like we're going to be here in perpetuity, regardless of what anybody else is doing, but ensuring that like there is an ecosystem of others that are also trying to solve this problem and trying to build equity. Any entrepreneur is, you know, the thing that excites me. One of the things that excites me.

20:54 - 21:09

Yeah. So, look, it's September 20, 21. Let's fast forward to September 20, 22. What excites you about that 12 hour period about Guava? How would you define that Guava North Star a year from now? What do you want to see?

21:10 - 22:02

Oh yeah, that's hard. I'm excited about being able to offer more to our members. Right now we're doing a a checking account and debit card. I'm excited to offer a business credit card to really be, you know, hopefully at that point at least talking about lending soon thereafter. And for the community, really just thinking about that, the ambassadors that can be talking about Guava and some of those like aspirational brands that really define or at least show the possibilities of being a black business owner, what they should be talking about, Barbara, and their members of our community and are baking with us as well. And that it's a brand that people are, you know, like I said, kind of equating with being a black small business owner that it's the first thing that you do when you have a business idea that Guava is the next thing that you think of.

22:02 - 22:49

Now, that's awesome that we know small businesses are the heart of the economy and having resilient black businesses as well as other minority businesses will have great positive impact on the economy. But certainly black businesses are ready to be at the center of wealth creation. It's not rocket science with respect to the things that are creating new income and creating new wealth. Opportunities for families and specifically black families is entrepreneurship. So we definitely need more people like you who are very authentic, who are true, who are bringing true resources to entrepreneurs and black business owners. And again, as I said to you on a number of occasions, I want Kelly Ifill and Guava to be that North Star.

22:49 - 22:50

Thank you.

22:50 - 23:10

Before I close out what call the action do you have? Or it could be to our listeners, it could be to entrepreneurs. It could be to other companies who are looking to create resources to really address the wealth gap and the inequalities that exist. What are some of the top cold actions you have for people?

23:10 - 23:36

Yeah, I mean, shameless promo sign up. If you're an entrepreneur, join Guava dot com. First and foremost. But then when I think about other entities that are making large proclamations about their commitment to closing the wealth gap, I would just encourage them to work with other people who have been focused in the space that are experts here.

23:36 - 24:15

Because I've found as I'm building Guava and talking with large corporations about partnership, some of them are really engaging community organizers are engaging. Folks who have nonprofits that work with small business owners are talking to small business owners directly. There are many of them who are doing that, but there are others who are seeing this as a marketing opportunity, are seeing this as a way to sell more of their product or service. And I would just encourage them to be authentic about really closing this gap and thinking about the business applications that it could have for them unselfishly.

24:15 - 24:41

There is this larger macro economic implication of the wealth gap, right? You talked about it, but the number is $13 trillion, right? That's what we've lost as an economy in the country with black small business owners not having equitable access to financial products. And I'm sure there are all of these caveats that were made into that calculation where that number is probably a little bit bigger.

24:41 - 25:21

And so I think about know if you think about that from a large organization, if all you are concerned with is selling your widget, that's a small gain. But what's the long term gain that you can have if you really do empower black small business owners to have equitable access to products to like building wealth? That means that you might have more customers, that you might have more suppliers and more vendors, that you can start to build those relationships from those companies and sections because they trust you. Right. Like really building that trust and building that community with entrepreneur or is it just something that would allow you to sell more of your widget, but it would really allow you to do something impactful for our economy.

25:22 - 25:44

If you're going to talk about it, be about it, right? That's one of the things that immediately come to mind in response to what you just mentioned. Also, one way to determine how a population or demographic is thriving has always been purchasing power. Oh, this group of people or this community or this demographic has x trillions of dollars of spending power.

25:45 - 26:23

I want to look at banking power. Why? I think if we are focused on the ability. To have equitable banking opportunities and use those relationships to continue to create an ecosystem that benefits everyone else in that ecosystem or in that community or in that population. I think we would advance the ball slightly if we just change our perspective of spending versus banking. If you have a true understanding of how powerful banking relationships are. So I just want to thank you again for being at the forefront of something that is really great but so necessary with respect to the black business community.

26:23 - 26:33

Thank you for having me. I'm excited to talk about this with you and Bernstein community and just by faith in general for being someone that I have come to over the years.

26:34 - 26:51

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