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Latino small businesses account for 1 in 4 new businesses, according to a 2021 brief from Democratic members of a congressional committee and research from a nonprofit.
A 2021 report from a consulting firm found that from 2007 to 2017, Latino-owned businesses received roughly 1% of funding from the top 25 venture capitalists and private equity firms.
The report also said that Latino-owned businesses got less than 1%, or approximately $680 million, of the $487 billion invested by the top 500 largest venture capital and private equity firms in 2020.
During an interview with Noticias Telemundo, Vice President Kamala Harris said that Latino entrepreneurs don't get as much financial support as other business owners do, and the Biden administration wants to change that.
Venture capitalists need to invest more in Latino-owned businesses, Harris said.
"Latino small businesses are 1 in 4 new businesses, but only 1% of venture capital funding goes to Latino businesses," Harris said April 21. "Yes, we've got to change that."
We wondered whether Harris’ claim was true.
Bain & Co. analyzed data from several sources for its report, including:
CrunchBase, a company that provides business data on public and private companies;
A 2021 brief from Democratic members of Congress’ Joint Economic Committee about Hispanic businesses and entrepreneurship; and
Data from the Stanford Latino Entrepreneurship Initiative, a collaboration between Stanford University and the Latino Business Action Network, a nonprofit organization advocating for Latino entrepreneurship.
Those sources relied on data covering 2007 to 2021 and predictions for 2022.
Bain & Co. did not define "Latino-owned business," but the Stanford Latino Entrepreneurship Initiative said they are companies with 50% or more ownership that identifies as Latino or Hispanic.
The Joint Economic Committee’s brief said that nearly 1 in 4 new businesses are Hispanic-owned. (The U.S. Small Business Administration has also used this statistic, citing the committee brief as its source.)
Staff for Rep. Don Beyer, D-Va., who chaired the committee when the report published, told PolitiFact the figure comes from a 2018 report by the Federal Reserve Bank of New York. (The report includes data up to 2016.) The Federal Reserve Bank of New York also shared this statistic in a 2019 tweet.
An October 2022 report by the Ewing Marion Kauffman Foundation, a nonprofit that provides grants to other nonprofits and businesses, said that in 2021 nearly a quarter of new entrepreneurs were Hispanic or Latino. The foundation used data from the Census Bureau’s Current Population Survey for its analysis.
The Census Bureau’s 2021 Annual Business Survey offers a different and lower figure for the share of Hispanic-owned businesses. That survey showed that in 2020, there were approximately 375,000 Hispanic-owned businesses, and about 12.4% were new (operating for less than two years).
But the two surveys are not directly comparable, "because the survey samples, questions and size may not be the same," said Patricia Ramos, a Census Bureau spokesperson.
The Current Population Survey data centers on the labor force — people who are working or actively looking for work. The Annual Business Survey focuses on business and business owners by demographics; it also excludes data for businesses without employees.
Small Business Shoeshine Stands Jairo Cardenas owner the Alpha Shoe Repair Corp., polishes a boot he is repairing, Friday, Feb. 3, 2023, in New York. (AP).
Bain & Co.’s report said that cumulatively, Latino-owned businesses received roughly 1% of capital from the top 25 venture capital and private equity firms between 2007 and 2017.
Separately, the report noted that Latino-owned businesses received less than 1%, or approximately $680 million, of the $487 billion invested by the top 500 largest venture capital and private equity firms in 2020.
Crunchbase reported that Latino-owned companies received $2.7 billion — or 1.7% — of $161.4 billion from venture capitalists in 2020.
Private equity firms generally invest in companies from any industry, and venture capital firms focus on innovative sectors, such as technology. Most Hispanic-owned firms are related to construction, administrative support, and transportation and warehousing, according to Census Bureau data.
"Based on existing research, the statement on venture capital funding for Latino-owned businesses seems to be in line with existing estimates," said Barbara Gomez-Aguinaga, associate director at the Stanford Latino Entrepreneurship Initiative.
Ilene Grabel, an economics professor at the University of Denver, said that historically, Latino entrepreneurs have not received significant financing from traditional banks and instead turn to venture capitalists for funding.
Still, Latino-owned businesses need to enroll twice as many investors as white-owned businesses to get the same level of funding, according to the Bain & Co. report.
Harris said, "Latino small businesses are 1 in 4 new businesses, but only 1% of venture capital funding goes to Latino businesses."
The 1-in-4 statistic is supported by a 2021 brief from the Democratic members of a congressional committee and research from a nonprofit that provides grants to other nonprofits and businesses. A Census Bureau survey found a smaller percentage of new Hispanic-owned businesses in 2020 — 12.4%.
The claim about 1% of venture capital going to Latino-owned businesses matches estimates from a consulting firm’s 2021 report. That’s based on investments from 25 venture capitalists and private equity firms from 2007 to 2017. Investments in 2020 from these companies was under 1%, according to the report. Another source pegs that investment as high as 1.7%.
We rate this claim Mostly True.
CORRECTION, May 17, 2023: This fact-check was updated to clarify Rep. Don Beyer’s former leadership of the Joint Economic Committee.
Telemundo, "Interview with Vice President Kamala Harris in Telemundo Center", April 21, 2023
Stanford Latino Entrepreneurship Initiative, "State of Latino Entrepreneurship", accessed April 26, 2023
Crunchbase, "Crunchbase Diversity Spotlight 2020: Funding to Black & Latinx Founders", accessed April 26, 2023
Email interview with Barbara Gomez-Aguinaga, April 26, 2023
United States Census Bureau, "Who Owns America’s Businesses?", January 4, 2023
Axios "Latino businesses get scant venture capital", October 7, 2023
Stanford Latino Entrepreneurship Initiative, "Latino Entrepreneurs Are Thriving, But Access to Contracts and Capital Remains Challenging", April 26, 2023
Census Bureau, Annual Business Survey (ABS) APIs, November 10, 2022
Census Bureau, "Who Owns America’s Businesses?", January 4, 2023
PolitiFact, "Do Hispanic entrepreneurs often start three times as many businesses as white males?", November 14, 2017
Bain & Company, Closing the Capital Gap: Fueling the Promise of Latino-owned Businesses, accessed April 26, 2023
Email interview with Ernesto Apreza, Deputy Press Secretary at the Office of the Vice President of the United States, April 26, 2023
Phone interview with Ilene Grabel, Professor at the University of Denver, April 26, 2023
Investopedia, "Private Equity vs. Venture Capital: What's the Difference?, January 27, 2022
Joint Economic Committee Democrats, Hispanic Entrepreneurs and Businesses Are Helping to Drive the Economy’s Entrepreneurial Growth and Job Creation, November 4, 2021
Crunchbase News, "VC Funding To Early-Stage Latine-Founded Startups In The US Has Stalled. Here’s Why That Matters", January 26, 2022
United States Hispanic Chamber of Commerce, Annual Report 2020, accessed April 28, 2023
Latino Community Foundation, Latino Entrepreneurship Fund, accessed April 28, 2023
U.S. Small Business Administration, Hispanic Heritage Month, accessed May 3, 2023
Email interview, Patricia Ramos, Public Affairs Specialist at the Public Information Office of the Census Bureau, May 8, 2023
Email interview, Dileep Rao, Clinical Professor Department of International Business at Florida International University, May 5, 2023
Email interview, Aaron Fritschner, Deputy Chief of Staff & Communications Director at the Office of Congressman Don Beyer, May 8, 2023
Interise & Stanford Graduate School of Business & Federal Reserve Bank of New York, "Shining a Light on National Trends", November 2018
Ewing Marion Kauffman Foundation, "Trends in entrepreneurship series", October 2022
National Bureau of Economic Research, "Who creates new jobs? Small VS. Large", August 2010 (and revised in 2012)
Diversity VC and Rate My Investor, "Diversity in U.S. Startups", 2017
LA Times, "Black, Latinx and female entrepreneurs are still ignored by most venture capitalists", June 5, 2019
Latinx VC, "State of Latino/a VCs Second Annual Report", November 2022
U.S. Census Bureau, Current Population Survey (CPS), accessed May 11, 2023
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