Empowering Latino Entrepreneurs in the World of Venture Capital
LaFamilia Foundation and the Alza Initiative are two organizations addressing inequities
Editor’s note: this article will serve as a benchmark going forward in 2025 and beyond.
The racial wealth gap can be closed through inclusive venture capital – this is a truth I witness firsthand in my work both as a marketing consultant to startups, as an Advisor and as a Builder in Residence in the Builders + Backers program.
Venture capital (VC) in the United States has a very big problem when it comes to diversity and inclusion, this starts with the severe underrepresentation in the VC world itself – those who decide where $$$ are allocated to the actual allocation itself. This isn’t news, white men manage 93% of all VC funds, and 40% of these white men went to either Harvard or Stanford. Starting with overall funding statistics, around 77% of VC funds go to companies with White founders, with just 3% of venture funding going to Black and Latino entrepreneurs, despite representing over 30% of the population in the U.S.
I have been writing about access to Capital for almost a decade and things haven’t changed much until now. So far, the VC ecosystem has done little more than make pronouncements during Hispanic Heritage Month to become more intentional about investing, but what we see year over year is that discriminatory practices are real, the numbers bear it out. We see a historical, consistent almost identical demographics in Venture Capital companies.
Morgan Stanley’s third survey of venture capitalists (VCs) reveals that VCs’ increased focus on addressing the funding gap disparities for multicultural- and women-founded companies is low. Alarmingly only 42% of VCs report they are more likely to invest in multicultural-founded companies in the next 12 months, down from 69% in 2020!! VC firms need more diverse talent on their teams and GPs who are well-versed in investment opportunities with diverse-owned companies, according to the survey findings over the past three years. Latino entrepreneurs are still thriving despite this.
LaFamilia Foundation, a non-profit organization seeking to close the capital gap by bringing together Latino founders and VCs through community. It is the largest community of Latino founders in the United States. They have created a transformative initiative and are actively working to change this reality. ALZAR is a groundbreaking Capital Program Powered by LaFamilia Foundation, designed to help alleviate the financial burdens of operating a fund by providing qualified emerging GPs with $25k in operational capital. Eight awardees will be selected for ALZAR’s Pilot Program.
In the long run, it is expected that the ALZAR initiative will help to foster diversity and inclusion within the venture capital ecosystem. Its first cohort, it is being funded by a $250k Grant from The Sorenson Foundation.
With the ALZAR initiative, LaFamilia Foundation is continuing to lay the groundwork for the future of venture capital, by fostering the creation of a more inclusive and representative VC workforce and addressing closing the capital gap. One of the founders, AF Hernandez, Principal, NextEra Energy Investments, cites his own experiences and passion for fostering diversity and inclusion in venture capital as the driving force behind LaFamilia Foundation’s vision and mission. The idea stemmed from a desire to address the isolation many Latino GPS face when navigating the intricate world of venture capital. Often being one or two of the few people of color in investment groups, he realized the importance of forming a community that understands and supports this unique struggle and background. After all, Venture is an industry that is taught through mentorship and apprenticeship.
Hernandez, has himself had some very challenging life experiences, as a first-generation Colombian American, he lost his mother at an early age and was raised by his immigrant grandparents in Hialeah, and although he came from humble economic circumstances, he has brilliantly made the journey into venture. Although it was difficult and appeared impossible at times, Hernandez is a self-described statistical outlier thriving in VC in San Francisco.
Because of Hernandez’s story and so many others, LaFamilia Foundation recognized that breaking into the VC industry is already a high-barrier endeavor, and it becomes even more daunting when trying to raise funds.
Five insights empowering Latino entrepreneurs in VC:
1. The ALZAR Initiative: Empowering Latino Entrepreneurs
At its core, the ALZAR initiative is designed to uplift and support Latine fund managers in the venture capital landscape, one of the primary objectives of this program is to back Latino GPS who have the potential to make a substantial impact on their communities. By identifying and investing in these individuals, LaFamilia Foundation aims to address the existing diversity deficit within the VC industry. Hernandez’s experiences and passion for fostering diversity and inclusion in venture capital serve as the driving force behind LaFamilia Foundation’s vision and mission.
2. Removing Bias in the Selection Process
One of the key innovations of the ALZAR initiative is its approach to application review. LaFamilia Foundation acknowledges the presence of biases in the selection process, which can hinder the growth of underrepresented entrepreneurs. To mitigate this, they have implemented a review process designed to eliminate as much bias as possible.
The foundation seeks fund managers with the necessary investment experience, expertise in the venture space, and a commitment to diversity. The aim is to identify those who are actively working to create a more inclusive environment within their firms. This approach ensures that the selection process remains objective and focuses on the candidates’ qualifications rather than any preconceived notions.
3. The Importance of Community Support
Education plays a pivotal role in the ALZAR initiative’s mission. Beyond financial investments, LaFamilia Foundation provides resources and support to help fund managers grow and succeed in their roles. This holistic approach acknowledges that support extends beyond the initial funding stage and is crucial for long-term success.
4. The Opportunities Ahead
When asked about their long-term goals, LaFamilia Foundation has a bold vision. They aspire to catalyze change in the VC space by providing Latino entrepreneurs with the capital and resources they need to succeed. Similar to the impact that Facebook had in reshaping the social media landscape, they envision a future where a Latino-founded venture disrupts and innovates in a major way. This ambitious goal drives their commitment to empowering and uplifting the Latino community in the VC industry.
5. Financial Goals and Sorensen’s Support
LaFamilia Foundation is actively working to secure the resources necessary to drive their mission forward. The foundation acknowledges the critical role played by organizations like the Sorensen Foundation Grant in enabling their initiatives. Sorensen’s support signals a belief in LaFamilia Foundation’s ability to effect change in the venture capital landscape through diversity and inclusion.
The LaFamilia Foundation and the ALZAR initiative are beacons of hope in the venture capital world, they are working tirelessly to dismantle barriers and provide opportunities for Latino VCs and entrepreneurs. By backing Latino GPS, eliminating bias in the selection process, and fostering a supportive community, LaFamilia Foundation aims to revolutionize the VC landscape. With a vision to empower Latino entrepreneurs and catalyze change in the industry.
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