SomosVC’s 2023 Annual Report and What it Means for the Latino Investable Opportunity
If you have read other articles on the Chingona Ventures blog (see The Latino Investable Opportunity, Highlighting Our Latinx CEOs, or Why We Invested in SUMA Wealth), chances are you may have seen some of the staggering statistics regarding the growing Latino population in the U.S.
At a glance, here are a few of the metrics that we have previously shared:
1. U.S. Latinos currently represent the second-largest ethnic group in the country, accounting for 19.1% of the population and expected to increase to 26.9% by 2060.
2. Over the last decade, Latinos have driven 53% of U.S. population growth.
3. If we considered U.S. Latinos as a country, its economic output would match that of France, and its gross domestic product (GDP) growth rate would be third to that of China and India over the past decade.
It is clear from these remarkable statistics that the Latino market — at 63.6 million individuals and counting — is anything but small. However, despite this massive demographic shift, investment in Latino VCs, founders, and consumers continues to lag.
This past April, SomosVC, a nonprofit organization focused on growing and supporting the Latino venture capital ecosystem, published its 2023 Annual Report. The publication uncovers several key findings regarding the state of Latino VCs in the U.S. that further reveal this discrepancy and underscore the importance of having Latinos represented as capital allocators (see the full SomosVC 2023 Annual Report here).
Here are three high-level takeaways from the report that reinforce why Latino-led venture capital firms are an essential part of the VC ecosystem.
1. There is still a long way to go in terms of Latino representation in VC.
Despite the substantial presence of Latinos in the U.S., there remains a glaring disparity in their representation within venture capital. SomosVC’s latest report reveals that Latino investors make up just 1.6% of investors at venture capital firms with assets under management (AUM) exceeding $100M, and a striking 79% of such firms lack any Latino representation at all. Furthermore, in emerging funds where Latino investors are involved, less than a quarter of partners are women, underscoring significant gender disparities even within the Latino community itself.
Similarly, Latino founders face significant challenges. In 2022, only 1.5% of U.S. venture capital funding went to Latino-founded startups. Even during periods of increased VC activity, such as the upturn seen in 2021, Latino-led startups received just 2.1% of overall VC investment. This lack of funding for diverse founders contributes to large consumer segments — such as the Latino market — being underserved.
2. Latino VC firms often support diverse founders.
In an effort to better understand the impact of Latino-led funds, SomosVC surveyed the investment activity of more than 65 Latino-led firms. The results uncovered a positive correlation between Latino-led firms and their support of diverse founders.
The report found that, on average, SomosVC member portfolio companies consisted of 48% diverse founders, 36% Latino founders, and 28% female founders. Notably, Latina-led firms exhibited a higher propensity to invest in diverse founders compared to Latino-led firms, with 54% of their investments going to diverse founders versus 42% for Latino-led firms. Additionally, Latina-led firms directed their investments to female founders to a greater extent, with 39% of their investments directed towards women founders compared to 17% for Latino-led firms. These findings underscore the instrumental role of Latina-led firms in allocating capital towards diverse and female founders, contributing to greater inclusivity and representation in the venture capital ecosystem as a whole.
3. Latino VCs help drive job creation.
Latino-led firms have also made a significant impact on job creation and economic development. According to the report, investments made by Latino-led firms within the SomosVC community have resulted in the creation of an estimated 51,612 jobs. This figure is particularly noteworthy considering the modest number of funds and their relatively smaller sizes and emphasizes the importance of Latino-led firms in catalyzing the growth of domestic enterprises.
Chingona Ventures: Uncovering Opportunity in the Latino Market
At Chingona Ventures, while we have no formal mandate around founder background or target audience, we find opportunity in companies that are positioned in growing markets that coincide with the generational and demographic shifts occurring in the U.S. — including those positioned in the Latino market. As we shared in a previous article on the Latino Investable Opportunity, this means finding Latino entrepreneurs building venture-backable businesses, entrepreneurs whose businesses materially target Latino populations, and Latino entrepreneurs building venture-backable businesses for Latino populations.
This underlying thesis has led to several investments in Latino-led/focused companies. For example, in 2020, we invested in Encantos — a company that creates culturally authentic and educational content for kids and families. Encantos’ CEO, Susie Jaramillo, cited her Latino community and culture as both the source of inspiration and opportunity for co-founding the company, as she saw a need for authentic ways to pass on her Spanish language and love of her Latino heritage to her children.
We also have invested in companies promoting the financial wellness and livelihood of the Latino community. For example, in 2020, we invested in SUMA Wealth — a financial technology company devoted to increasing prosperity, opportunity, and financial inclusion for young U.S. Latinos and their families. SUMA is led by CEO Beatriz Acevedo, a seasoned entrepreneur with a strong track record of building iconic brands for Latino audiences. Beatriz and team have set out to tackle a $182 billion opportunity, with a goal to narrow the Latino wealth gap by creating personalized, user-centric content and brand-based experiences that inspire, inform, and support young Latinos to build wealth and control their financial futures.
We also invested in Sigo Seguros — a technology-enabled insurance platform that provides Latino, immigrant, and working-class populations with affordable auto insurance. Sigo’s CEO, Nestor Solari, started the company after seeing his own family members struggle to access auto insurance online, despite having clean driving records and a U.S. driver’s license or foreign ID. Sigo Seguros removes the biased rate factors and predatory fees that are often implemented by legacy carriers, and in turn provides fair, transparent, and affordably-priced auto insurance to its Spanish-speaking customers.
We applaud the important work of SomosVC in highlighting, supporting, and growing the Latino venture capital ecosystem. We look forward to continuing to support investors, founders, and consumers of all backgrounds, including those that are a part of the Latino community.
→ If you’re a founder raising a pre-seed or seed round, we’d love to learn more about your business! To be considered, please fill out this form.
(Note: At Chingona Ventures, we’re intentional but not exclusive. We do not require any demographic makeup among CEOs or founding teams.)
