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Venture Capital, The Most Accepted by Latino Investors

Although they constitute a significant percentage of the population (almost 20%) and create new businesses every year, Hispanics or Latinos occupy few executive seats in large American companies. 

However, some firms are providing venture capital, the most accepted by Latino investors, so that they can create or improve their companies and redirect resources to communities. 

Latin presence in the US company

Latinos in the United States, traditionally called Hispanics, are a minority that is already a majority. According to the data from the 2020 census, there are more than 62 million (about 20% of the total).

They are even above the African-American population (46.9 million), and only surpassed by non-Hispanic whites, who with 204.3 million are still the largest group, despite having decreased by 8.6% since the previous census of 2010.

Latino participation in economic production has also increased, as reported by the organization Latino Donor Collaborative. Thus, the Hispanic contribution increased from 1.7 billion USD in 2010 to 2.7 billion USD in 2019. A growth of more than 58%.  Likewise, 29% of the income increase in the US has been generated by Latinos, since 2005. 

However, wages and other social benefits remain lower in Hispanic households. For example, only 26% have access to a qualified deferred compensation plan (401k) employer-sponsored; compared to 37% of African-American households.

On the other hand, it is considered that this group is underrepresented in the business world, particularly in the financial field. A survey by the Hispanic Association for Corporate Responsibility (HACR, for its acronym in English), points out that Latinos are 8% of the workers in investment managers.

And the higher the charges, the lower this percentage becomes. In this regard, it is pointed out that of the management positions in Fortune 1000 companies, only 4% were held by Latinos

Recently, Priscilla Almodóvar was appointed as the CEO of Fannie Mae. This is only the third time a Latina woman has led a Fortune 500 company. And she is currently the only one.

However, the picture has improved a little, if compared to that of a few years ago: in 2022, 35% of Fortune 1000 company boards have at least one Latino; in 2011 it was only 13%. 

Venture capital for Latino investors

Latinos are less likely to access investment or capital markets. And due to the fact that they are underrepresented as shareholders of companies, as noted, they do not own shares or participate in investment decisions. All this makes it difficult for Hispanics to build wealth.

Despite this, they are the owners of 5 million companies and responsible for almost 80% of the new ones that are created, generating revenues of up to 460 billion USD annually, according to a report by Stanford Latino Entrepreneurship Initiative, the number of jobs generated by Hispanic entrepreneurship went from 1.9 million to 2.9 million in twelve years (2007-2019).

In turn, a report by McKinsey & Company points out that, in the last five years, 1 out of every 200 Latinos started a new company, every month; which explains why they are the group that shows the fastest growth in the economy, despite the difficulties they experience in other areas.

To try to compensate a little for such disadvantaged situations, there are organizations such as Latinx VC, a group of experienced investors, who have focused on growing and supporting the venture capital ecosystem, which is the most accepted by Latino investors.

In this sense, they believe that work should be done to change this landscape, where there is such a low percentage of Latinos as partners in institutional firms. They also believe that all of this can have positive effects in the medium and long term, in terms of increasing investment and wealth; hence they bet.

Another firm interested in providing venture capital to Latino investors is Boston Impact Initiative. This proposal is particularly focused on those who want to invest in their communities. To this end, a USD 20 million fund has been created to finance start-up companies.

Mendoza Venturas is another group that has raised funds to give accredited investors an opportunity to access venture capital for the first time. They are especially focused on entrepreneurship carried out by women, as well as Latinos and African Americans in general.

Bridging gaps

Latinos in the United States, in addition to being the second largest racial group, are great entrepreneurs and drivers of the economy. However, their average income (47,000 USD per year) is still below other groups, such as Asians (54,000 USD).

Now well, providing venture capital for Latino investors is something that can benefit in various ways. First of all, it means generating more jobs and improving income. It is interesting to note that, according to another report by McKinsey & Company, Latinos represent the $1 trillion annual market, and their purchasing power is increasing, for the good of the economy.

And there is much more to it than what only amounts of money can mean. As it is known, the generation of wealth also means the reduction of crime and delinquency rates, which constitute one of the biggest problems present in the Latino communities of the USA.But, all of these are potential benefits, which could be much greater. And the fact is that the amount and number of venture capital initiatives for Latino investors still represent only a small share, compared to what would actually be needed.

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