Discover how Latinx investors are working to change the current socio-economic landscape for Latinoowned businesses in the US Investors may be disregarding the full potential of Latinx-owned enterprises in the United States as they explore chances in the private markets. According to a recent analysis from a management consulting firm, Latinx-owned enterprises accounted for 52% of all net new small businesses founded in the US between 2008 and 2020. During the same time period, however, less than 2% of the top venture capital and private equity companies invested in Latinxowned enterprises, and the largest part of investments came from Latinx investors.
The most recent data reveals that Latino-owned enterprises are expanding at a rapid pace, and many experts believe they have lower risk profiles than most other new businesses. This could be because statistics show that Latinxowned enterprises in the US are increasing at a pace of around 10% annually, while white-owned enterprises are only growing at around seven percent. Some analysts even anticipated that if Latinx-owned enterprises could attain parity with white-owned businesses, a total of one trillion dollars in sales growth could be available. During the early stages of the development of Latinx-owned enterprises, resources and capital are mostly lacking. As a result, these entrepreneurs are more likely to rely on personal relatives or friends for funding, credit cards and other costly means of debt (bank loans), or even their savings to get their enterprises off the ground. The problem is that the investment community across the US is yet to realize the potential of these minority-owned businesses, and Latino-owned businesses are still mostly backed only by Latinx investors. Although it appears to be a broken cycle, this difference is not new. Latinx investors recognize this and strive to assist Latino-owned businesses in gaining access to capital funds and resources, but there is also the problem of representation to consider. The issue of representation is crucial for both Latinx investors and founders. At present, the US venture capital industry does not reflect people from all socioeconomic backgrounds and many experts feel that the investor community's homogeneity and intrinsic bias have a substantial effect in determining which enterprises acquire finance, and which do not. There may be more prospects for Latino entrepreneurs once there is a wider range of investors who are more representative of the country, and not only Latinx investors. Latinx-owned enterprises are, according to some reports, underfunded at every step of the growth cycle, with less than 30% of Latinx-owned small businesses expected to be completely funded by smaller loans from local banks, compared to over 45% of white-owned businesses. For example, only around 7% of Latinx-owned enterprises with a valuation of over one million dollars obtained all capital funding requested from both national and local banks (for requests more than $100 000). The same banks, on the other hand, provided funding to up to 45 percent of white-owned enterprises. As a result, Latino entrepreneurs are more likely to seek finance from Latinx investors rather than local or national banks, but the difficulty is that there will be a direct impact on Latinx founders as long as there is a scarcity of Latinx investors and decision-makers in the country.
For a significant shift to occur, other investors in the country must see that the Latinx business sector is not a monolith and that it has enormous potential. Investors should also be aware that there is undoubtedly not a single profile when it comes to Latino-owned enterprises, but rather a diversity and widely varying growth strategies, risk profiles, and business demands. For the time being, one possible solution is for lenders and equity providers to collaborate in closing the current gap in this sector, by seeking out more Latinx-owned businesses and assisting them in scaling, while Latinx business owners, on their part, can seek more funding from Latinx investors, who may be more willing to fund smaller businesses.
About us L’attitude Ventures is a mission-driven venture fund that invests in early-stage Latino-led and owned businesses in the United States with substantial and high-growth potential that may be realized through technology. The company was founded in 2019 by L'ATTITUDE co-founders Sol Trujillo and Gary Acosta, as well as Kennie Blanco, to address a disturbing economic cost to our country: the underfunding of US Latino entrepreneurs. Our fund is sizable, and it will stimulate a significant number of Latino entrepreneurs from the Seed to Series A stages, with significant investor round participation; initial check sizes range from $200,000 to $1,500,000. We also act as a trustworthy intermediary, bringing cash from investors of all stages and types together to support the success of Latino entrepreneurs today and in the future. Please visit our website at https://lat.vc/ for more information.