2014 – The Year of the Latino Entrepreneur

Despite somewhat anemic economic growth, a variety of factors are creating more opportunities for Hispanic entrepreneurs

The number of Latino startups is poised to grow in the coming year. This is despite—and perhaps because of—inequality in both corporate America and venture-capital circles.

The International Monetary Fund predicts the U.S. economy will grow at a faster pace in 2014, given positive economic data, including lower unemployment figures. Growth does indeed seem to be picking up, and the U.S. economy is projected to expand by 2.6 percent in 2014.

Despite these statistics, the economic outlook for 2014 is a mixed bag of gloom and shine, but one thing remains clear, the growth will be coming from small businesses and entrepreneurs, with experts predicting that 2014 will be “The Year of the Entrepreneur.” One of the reasons for this anticipated breakout year is that technology has leveled out the playing field for businesses of all sizes, and continued innovations in technology will only increase the velocity at which startups and other organizations can grow.

Hispanic Start-Up Contributions

With Hispanics most likely to start their own businesses, it’s not too far fetched to say that 2014 could be called “The Year of the Latino Entrepreneur.” Currently, 9.1 percent of Hispanics are self-employed compared to 7.8 percent for the general U.S. population. That’s an estimated 3.2 million Hispanic-owned businesses across the U.S. that contributes in excess of $468 billion to the U.S. economy.

According to the Kauffman Foundation, that number represented in 2013 almost 20 percent of total entrepreneurs in the U.S. (versus 10.5 percent in 1996). And while economist are quick to characterize this segment as small, a study by the United States Hispanic Chamber of Commerce (USHCC) showed Latino businesses grew on average at nearly 7 percent annually from 2007 to 2013, compared to the average 3 percent overall business growth rate. It’s very important to stress that these businesses contribute positively to the bottom line and are impacting GDP growth.

The Growth Disparity

But what’s needed to continue to fuel Latino entrepreneur growth? According to a 2013 study by the Small Business Association (SBA), when compared to Caucasian-owned businesses, Latino entrepreneurs lack access to capital, which remains the major stumbling block for growth.

What are the factors that are responsible for this disparity? One could say that venture capitalists (VCs) are always looking at the tech industry, where Latinos are terribly underrepresented, or for the next “gazelles,” high-growth companies. Additionally, VC firms typically latch on to their social networks and rarely look beyond them. This influences their investment decisions.

This has led to Latino entrepreneurs typically starting their businesses with less money and becoming more reliant on owner-equity investments and family loans than on outside lenders or investors. Changing this by increasing access to capital could dramatically impact the growth and potential for Latino-owned businesses and demonstrate to VCs and lenders that this is a viable investment opportunity.