Latino Entrepreneurs Account for 2% of all Venture Funding

A coalition of Latino venture capitalists and business advocacy organizations have voiced their frustration with new data indicating that Latino startup founders continue to have a disproportionately hard time raising money to fund their ventures, and have called for investors to “commit to meaningfully moving the needle” to address inequities.

VCFamilia, a group of 250 Latino venture investors, teamed with five other organizations—the U.S. Hispanic Chamber of Commerce, the National Association of Investment Companies (NAIC), Angeles Investors, LatinxVC and the Latino Corporate Directors Association—to issue a statement on Wednesday responding to a new Wired report highlighting the ongoing challenges that Latino founders face in raising capital.

The report noted a study by consulting firm Bain & Co. that found that less than 1% of the top 500 venture and private equity deals in 2020 involved a Latino founder. It also cited Crunchbase data indicating that Latino founders accounted for only 2.1% of all venture funding in 2021, and that Latinos’ share of early-stage startup funding has actually decreased since 2018.

“The reasons for this disparity are nothing new: our community is not part of the networks that give founders access to significant capital, and there is a lack of opportunity to demonstrate that we are fully capable of building and scaling large enterprises,” the coalition wrote in its statement.

The groups took particular aim at the decline in early-stage funding for Latino-led startups, noting that stage as “the most critical in any startup’s journey.” Inadequate funding made it “more difficult for Latinx founders to keep their businesses alive during the pandemic,” they said—even as Latinos continue to account for an ever-increasing percentage of the U.S.’s labor force and small business growth.

“The Latinx community is a key economic driver of America’s future, but we are still being left behind even as we help push the country forward,” the coalition wrote. “By overlooking companies built by the U.S. Latinx community, venture capitalists and their limited partners are leaving an opportunity for capturing growing economic power and returns on the table.”

The statement called on VC investors and limited partners (LPs) to commit to “meaningful change” by building “a diverse network that includes Latinx funders and founders,” with the goal of “increas[ing] investing in early-stage U.S. Latinx founders.”

The coordinated response to the Wired article was spearheaded by Alejandro Guerrero, general partner at Los Angeles-based VC firm Act One Ventures and an advocate of pro-diversity efforts in the venture capital industry. Guerrero circulated the group’s statement on Twitter and described the data as “completely unacceptable.”

“We are calling on all Latinx founders, funders, directors, & all of our allies who support the advancement of diversity in venture & tech, to please read this, reshare it, & help bring attention to this,” he wrote. “We will not accept this treatment & we will continue to fight for the change we deserve.

Correction, Jan. 27: This article has been updated to note that it is consulting firm Bain & Co., and not investment firm Bain Capital, that compiled a study highlighting the inequities facing Latino startup founders. It has also been updated to include the names of the five other business advocacy organizations that joined VCFamilia in signing the statement, and reflect their coalition’s joint effort in issuing the statement.