The Important Reason Why Venture Firms Are Beginning To Fund Latino Investors — digitalundivided

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Did you know that Latina-owned businesses account for nearly all (93%) of the growth in women-owned businesses? Hispanic-owned businesses play a huge role in the economy. That impact is expected to grow in the coming years despite the shortfalls of economic investment in Latino-owned businesses. That being said, the recent announcement of investment into Latina and Latino-owned venture capital funds is the first step in sustaining a booming entrepreneurial ecosystem. Here’s what every Latina entrepreneur — and investor — needs to know:

Hispanic-Owned Business Is Booming

Hispanic-owned businesses play a strikingly important role in the economy. Currently, 350,000 Latino-owned businesses employ more than 3 million people. That impact is only predicted to grow in the coming years. Latino-owned businesses outperform white-owned businesses in their median three-year compound annual growth rate by 3%. Further, Latino-owned businesses are some of the fastest-growing in America and one of the fastest-growing business groups in revenue — even when accounting for pandemic-related setbacks.

According to the Hispanic Wealth Project, entrepreneurship has increased Hispanic median household wealth in America by 137% from 2013 to 2019. That wealth is expected to grow again by nearly $10,000 by 2024.

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Latina-Led Economic Growth

Latina entrepreneurs have been vital in that wealth accumulation within the Hispanic community. Latina founders run nearly 2 million businesses — which has grown 87% since 2007. This mighty community starts businesses at a rate 6x faster than any other group.

But, given that Emprendedoras make 55 cents to every white, non-Hispanic man, they start their companies with considerably less money than their peers. They also have access to a minuscule amount of loans or funding. According to the 2022 digitalundivided Project Diane report, Latina and Black women entrepreneurs collectively surpassed 1% of all venture capital funding for the first time in 2021. Despite having less debt, similar credit scores, and three times the gross revenue of White-owned businesses, Latina-owned businesses were substantially less likely to receive larger loans over $50,000 from banks. For Latina-owned firms, that means they tend to start small and stay small.

Yet, according to The National Women’s Business Council, if Latina-owned businesses were proportional to those established by other women-owned businesses, they would add $155 billion in revenue and create 80,000 new jobs to the economy.

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New Funds To Investing in Latina-Owned Businesses

One striking reason for this lack of investment in Hispanic-owned and Latina-owned companies is the need for Hispanic representation in the investor space. Only 4% of investment partner positions in U.S. venture capital firms are held by Latino descent.

This month, The Sorenson Impact Foundation funded $250,000 to launch ALZAR — a pilot program and philanthropic capital initiative to support the development of Latina/partners in venture capital. This program, in partnership with LaFamilia Foundation, VCFamilia, and FounderFamilia will support eight qualified current and future Latinos to develop the next generation of Latina VC fund managers.

This fund marks similar moves to change the face of venture capital investing. Organizations like Pipeline Angels is a national organization training women and minority founders to be friends and family around for those trans women, cis women, nonbinary, two-spirit, agender, and gender-nonconforming founders without the connections. Yale graduate and Latina Natalia Oberti Noguera founded and ran the company over ten years ago, identifying the need to diversify investors — and their portfolios — years before it became a trending concern for mainstream investors. Pipeline Angels was recently acquired by The Institute for Entrepreneurial Leadership (IFEL) — a non-profit organization that supports inner-city entrepreneurship and has empowered 6,800 small business owners and entrepreneurs.

Sandra Campos, a veteran business executive active on several boards, including the DealmakeHers, is an “angel investor” focusing on female entrepreneurs. She notes that in the last five years, Latina entrepreneurs “have been able to raise a significant amount of capital or scale their businesses at a greater rate than typical female-founded businesses.”

With this next push from the startup community to focus on training Latin investors, seeing the growth in this space will be exciting.