Latinos are a fast-growing segment of the U.S. population, yet startups run by Latino entrepreneurs still struggle with structural obstacles, particularly funding and the ability to scale.
“It is the Latino entrepreneur that has the most difficult time of any cohort in the United States to access capital,” Sol Trujillo, founder and general partner of L’Attitude Ventures and chairman of Trujillo Group, told Yahoo Finance at the L’Attitude conference (video above).
There’s a clear disconnect between the growing Latino population and the attention paid to its entrepreneurs by the venture capital and private equity sector. The Latino population has grown 23% overall over the past decade outpacing the nation’s 7% overall population growth, according to a Pew Research Center analysis, while money going to Latino founders has barely increased over the past five years.
Data from Crunchbase shows that U.S. startups and companies with Latino founders received around 2% of venture capital funding in 2021. This disparity was also seen in 2020 when less than than 1% of the top 500 VC and private-equity deals involved Latino-owned businesses, a study from management consulting firm Bain & Company showed.
Latino-led businesses "are a great source of growth in the United States," Trujillo said. "They're a great place to make money because they are growing and there's very little capital going there.”
In an effort to narrow the funding gap, Trujillo's L’Attitude Ventures announced last month that it closed its first institutional fund — raising more than $100 million with several financial services heavyweights, including JPMorgan Chase and initial investments from Trujillo Group and Bank of America.
“People are not flowing capital," Trujillo said. "So that says there's either a person problem or maybe there's just a structural problem, meaning they haven't created funds."
The goal of the fund, he said, is to spark interest among the investing class to address the need for more funding in Latino businesses.
“I know that when you're managing a trillion dollars of assets, it's hard to put a hundred million dollars to work because it doesn't move the needle that much,” he explained. “We have two major changes: the digitization of everything and the demographics of our country. And the demographics have shown where the growth is: 70% of the growth in the United States is coming out of this cohort."
Indeed, some venture capital firms have funded Latino-run companies but Trujillo believes that the investment community needs to step up to the plate and help further dissolve systemic barriers.
“Right here within our own borders, inside our country with dramatically fewer risks, we have a cohort that's growing faster,” Trujillo said.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv