Many fled political, religious or economic oppression. America offered a cornucopia of opportunities. Many saw fresh possibilities and reinvented themselves. Some became Entrepreneurs.
College students who manage to stay awake in Economics 101 learn that four elements are necessary for a business to succeed: land, labor, capital and an entrepreneur. The latter being key – a person with a vision who establishes and leads fledging initiatives.
Entrepreneurs are part of the nation’s DNA. Since its founding, people with dreams have taken chances and worked extremely hard to achieve them. Many failed; others succeeded. Recently Silicon Valley spawned a new wave of entrepreneurs. Interestingly three out of every five Silicon Valley millionaires are foreign born.
I have been studying “State of Latino Entrepreneurship.” This 42 page, well-written, fact-laden report issued by The Stanford Graduate School of Business is a lodestone of information. It presents a national overview with vivid language, charts, pictures, and extensive references. Its presentation of successful Latino entrepreneurs enriches the study. The report raises a few pertinent points.
Most HO readers know that Latinos, at 62.1 million, represent 19 percent of the nation’s population. They have long been the predominant “minority” in the country. Their numbers exploded a surprising 23 percent since 2010 and represent a formidable consumer base of over 1.85 trillion dollars.
Unknown to many, Latinos entrepreneurs start businesses at a much higher rate than other groups. Specifically, in the last 10 years, there has been a 44 percent Latino growth rate compared to just 4 percent for non-Latinos! This resulted in a robust $2.75 trillion economic output generated by Latinos.
It has not been easy. Significant challenges remain. Using acronyms to identify Latino-owned businesses (LOBs) and White-owned businesses (WOBs), the report points out succinctly that:
• Latinos are important job creators, growing their number of employees at a faster rate than White-owned businesses.
The number of employees at LOBs has grown 55 percent since 2007, compared to 8 percent growth at WOBs. The roughly 5 million LOBs employ over 2.9 million people.
• Latinos are 1.7 times more likely to start a business than other demographic groups.
Roughly 5 million Latino-owned businesses comprise the fastest growing segment of the small business ecosystem.
In 2018, some 350,000 Latino-owned businesses generated over $460 billion in annual revenue and employed 2.9 million people. Although hard hit by the pandemic, there are today between 400,000-450,000 Latino-owned businesses.
• Latino business ownership has created significant wealth. To be precise, Latinos with business assets have an impressive personal net worth of $314,380. That is nearly nine times the wealth of Latinos overall.
Understanding how LOBs navigated the challenges of the pandemic and the financing realities they face, has important implications for the nation’s economic recovery. It is encouraging that “Latino business owners are more likely to provide opportunities for the growth and advancement of their employees than White business owners.” LOBs invariably provide their employees opportunities for promotions, employer paid benefits, above minimum wage jobs, and the development of skills and training.
LOBs are heavily represented in food services, labor intensive industries. WOBs tend to concentrate on professional services. But recently, rapid growth has been evident in the number of LOBs in virtually every industry. A stark example is that contrary to stereotypes about the industries Latinos own, they are equally likely as their White counterparts to own technology companies.
Unfortunately, Latinos are frequently required to provide collateral to secure credit, even though Latino-owned firms have credit characteristics similar to White-owned firms. LOBs and WOBs show no statistically significant difference in low risk credit scores (720+), with 60 percent of LOBs and 63 percent of WOBs represented in this credit range.
Even though LOBs demonstrate similar overall financial viability and credit worthiness as WOBs, LOBs are more likely to be asked to provide collateral, personal guarantees, and personal and business assets to receive loans.
This inequity should be addressed. More has to be done to encourage venture capitalists, state and federal governments to level this playing field by actively seeking out Latinos.
So, how does one become an entrepreneur? Once, it was by trial and error in the School of Hard Knocks. It could be brutal. But now, wise, useful suggestions based on successful experiences are readily available. Credible classes are offered in institutes, colleges, and online -- including free YouTube videos. A simple Internet search provides more sources than one can ever access.
EdX, for example, is a particularly interesting portal for free online courses from Harvard, MIT, and other top business schools. As they tout:
“Discover decision making techniques, problem-solving solutions, and early stage conclusions to run your own business. Learn how to become a successful entrepreneur in digital marketing, traditional marketing, or any other field today!”
Further, Bank of America and Cornell University have a program, which assists and provides resources targeted to Hispanic women entrepreneurs.
Half of all pre-pandemic growth among new small businesses came from Latino entrepreneurs. They increased their revenue faster than non-Hispanic businesses.
Latino companies attracted $6.8 billion in 2021, compared to $2.8 billion in 2020 -an enormous one-year increase. If funding were equal, Latino enterprises could generate $1.4 trillion in revenue this year.
Axios Latino noted part of the problem is that funding is concentrated in Silicon Valley, where Latinos have yet been able to pierce the network. Financiers exist, but connections to Latinos are faulty – manos a la obra.
We need to encourage and fund more Latino entrepreneurs. The record is clear: Latinos have been very successful entrepreneurs. Opportunities and optimism abound. There are many reasons to be hopeful; the glass is more than half full.
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