Latinos are growing quickly in the United States business ecosystem. According to a recent Stanford Graduate School of Business study, the number of Latino-owned businesses grew a remarkable 57% from 2007 to 2022, and tech-centric Latino-owned companies have shown the strongest revenue growth rates over the past five years compared to other demographics.
Significant barriers remain, however, to the success of Latino founders in the U.S. For example, Latino founders received just 1.5% of U.S. venture funding in 2022, and have some of the lowest approval rates in the country for business loans.
What's more, immigrant Latino entrepreneurs report "more financial struggles and operating less prosperous businesses than U.S.-born entrepreneurs," according to the Stanford study. Native U.S. Latino-owned businesses brought in a median revenue of $300,000 compared to $270,000 from immigrant Latino founders.
Despite the challenges, Latin American immigrants are launching companies at twice the rate of the overall U.S. population, according to a recent article by The Wall Street Journal. So how can Latino immigrant founders find more success in the U.S.?
"Immigrants possess qualities such as resilience, perseverance, and comfort with ambiguity, which are essential for building successful ventures," said Leonardo Arango, a partner at One Way Ventures, a Boston-based venture capital firm that invests in immigrant founders in the U.S.
Arango, who is Colombian, said that outside of system-wide changes that can help level the playing field for entrepreneurs, Latino immigrant founders can focus on some key areas to help them grow their businesses in the U.S.
Overcoming the lack of network in the U.S.
Many Latino immigrant founders that come from countries facing economic hardships -- like Venezuela or Cuba -- and have left professional careers and their network of colleagues behind. They're forced to start anew in the U.S.
Especially in the world of startups, raising capital and finding customers is heavily based on previously existing relationships -- something new founders to the U.S. just won't have at first. "Although Latinos represent almost 20% of the population, they receive less than 2% of venture capital, which is related to the lack of relationships that Latinos have compared to native-born Americans," said Arango.
Building a network of potential funders becomes even more important when we consider that Latino founders also face challenges accessing business loans and government grants, according to the Stanford study.
To better build relationships that could help grow their businesses, immigrant Latino entrepreneurs should join entrepreneurial communities and accelerator programs supportive of diverse founders.
Last year, Black & Brown Founders, a venture capital firm that supports Latino founders, held its first-ever "LatinX Innovation Hub" networking event at SXSW in Austin, and the Latino Business Action Network, which partners with Stanford University, holds regular in-person and online events for entrepreneurs.
National conferences like the Hispanic Leadership Summit, as well as smaller, local events, like those held by the Latino Entrepreneurial Network of Southeastern Wisconsin, can provide opportunities for founders to meet like-minded professionals. Also, accelerator programs like EY's Entrepreneurs Access Network accelerator, and Parallel18 in Puerto Rico, can help Latin American immigrant founders scale in the U.S., while VC firms like One Way Ventures specifically cater to the immigrant population.
"Fostering entrepreneurship as a viable career is important," said Arango. He suggests that founders "surround [themselves] with mentors, advisors, and other entrepreneurs who understand the challenges and can provide guidance and support."
Make sure your company addresses the pain points of US customers
Companies that have found success abroad sometimes think they can replicate that model in the U.S. by following the same strategy that made them rich at home. Arango says that's almost never the case.
"Often, strong founders say, 'this is the market I want to play in, this is my solution,' but they haven't researched their customers' pain points and the value proposition they offer," he said.
A clear example of this was the British grocery chain Tesco. When the company attempted to enter the U.S. market via their Fresh & Easy stores in the late 2000s, they struggled to understand the shopping habits of American consumers, leading to disappointing sales, and ultimately, failure in the market.
To help ensure traction in the U.S., immigrant Latino founders should conduct thorough market research before launching or expanding their startup in the country.
The U.S. Small Business Administration (SBA), an independent agency that supports entrepreneurs and small businesses, is a good place to start for resources for new founders. Additionally, companies like Nielsen, Forrester, and Gartner provide comprehensive market research reports across various industries, while more affordable market research tools like digital survey platforms, social media analytics tools, and Google keyword research software are also helpful.
Of course, if resources are really tight, immigrant founders can also rely on the best market research -- speaking directly to would-be customers about their needs and how a new product could help.
According to Arango, founders must have a clear understanding of the pain points facing their target customers and "articulate a clear value proposition" to solve for them.
Identify investors that align with your goals in the US
Immigrant founders could be forgiven for getting distracted by all the zeros scribbled on investment checks from U.S. venture capitalists, especially when you consider that Silicon Valley's ecosystem is valued at $7,300 billion, while Latin America's top ecosystem, São Paulo, is worth $127 billion, according to Dealroom, a data intelligence firm that analyzes startups.
But immigrant founders must look beyond check size. According to Arango, they should find investors that have the capability to help them achieve their U.S. goals, and can provide a visible track record of similar results.
First, founders must "clearly define the business model and what [they] are seeking with that round of financing," said Arango. Then, they should research investors who align with the current stage, thesis, sector, and values of the business.
A spray-and-pray approach to pitching VCs almost never works, and immigrant founders will end up wasting time preparing pitch materials and cold emails for VCs that have no real alignment with their business.
Instead, founders should reverse-engineer the VC search process by identifying companies in a similar sector and stage that have received investment, and researching the VCs or angel investors who participated in their rounds. For more insight, founders can contact the startups who received investment to ask how they were treated by their investors.
This match-making approach goes both ways. A 2021 Harvard Business Review survey of venture capitalists found that "many VCs try not to focus too narrowly on financial terms during their courtship with start ups—and give equal emphasis to how the company fits into their portfolios and why their experience and expertise can help the founding management team."
"Look for [VCs] who have a track record or interest in supporting Latino entrepreneurs," adds Arango.
The venture capitalist also suggests that immigrant Latino founders, in their conversations with VCs and other startup ecosystem players, should always be champions of Latino entrepreneurship. "It's essential to showcase this success to the world," said Arango.
He added that it's important we recognize the success of Latino entrepreneurs, both in the U.S. and in Latin America, "to demonstrate the potential of immigrant-founded companies" and their positive impact on our economy.
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