[MUSIC]
On behalf of the board and team of
the Latino Business Action Network LBAN,
we welcome you to the fourth annual
state of Latino entrepreneurship forum.
Yes.
>> [APPLAUSE]
>> This
event has now become a tradition at
Stanford Graduate School of Business
through the Stanford Latino
Entrepreneurship Initiative,
a collaboration between LBAN and
the Stanford GSB.
We're most grateful for
your attendance and
support of our American
economic imperative.
And we thank the Stanford GSB
ecosystem and team members for
their outstanding contributions
to make this day possible.
In addition, we thank our LBAN principal
partners, Wells Fargo 21st Century Fox,
Chavez Family Foundation, John Arriaga,
Pitch Johnson, and all of our sponsors and
strategic partners, for
their enduring investment in us.
>> [APPLAUSE]
>> Thank you.
It is now my high honor to
introduce Professor Jerry I Porras.
Professor emeritus of
organizational behavior and advisor
of the Stanford Latino Entrepreneurship
initiative, Professor Porras.
>> [APPLAUSE]
>> Thank you, Mark.
And also I like to add my welcome
to all of you for being here.
I know that some of you had a tough time
getting here because of the parking and
all of the construction that we
at Stanford are doing here to
make this an even greater university,
so appreciate you overcoming
all those barriers to get here.
I'm really happy to see so
many of you here today.
As Mark mentioned, the Stanford Latino
Entrepreneurship Initiative, or
SLEI as we call it, is a collaboration
between Stanford Business School and
the Latino Business Action Network,
which we call LBAN, and
it's a nonprofit organization
located here in the Silicon Valley.
The essence of the collaboration revolves
around Stanford providing the academic
resources to carry out projects that
are proposed and funded by LBAN.
This collaboration has made it
possible for SLEI to produce research,
offer educational programs, and
facilitate the development of an ecosystem
supportive of the growth of US,
Latino-owned businesses.
We're very pleased to share the findings
from our most recent research,
a national survey of Latino-owned
businesses in the US.
But before we get into the research, I'd
like to tell you a bit more about SLEI,
which not only produces the research
described here today, but
also engages in other research and
education-related activities.
When one examines the demographic data
on Latinos in this country, it quickly
becomes clear that not only do Latinos
currently represent a significant portion
of our economy, but that they would be
even more significant in the future.
Their current impact, both as consumers
and business owners, is substantial.
Today, Latinos represent
17% of the US population.
And over 5 million businesses
are owned by Latinos.
Tomorrow it will be even more significant
as the number of Latinos grow to
approximately one third of the US
with a commensurate growth in
the number of Latino owned firms.
Very clearly, not only are Latinos
a significant part of the mainstream of
the US economy today, but tomorrow, their
impact will be substantially greater.
Given these demographics, we believe
that effectively promoting the continued
economic growth and success of
Latinos is a national imperative.
I really want to stress
the word imperative.
SLEI's research program
is driven by this belief.
As well as by the understanding that in
this arena, governmental policymakers and
business leaders need hard data
in order to do their job well.
Providing some of these needed data
is the basis for our research agenda.
So in addition to the annual national
surveys of Latino entrepreneurs that SLEI
has conducted over the last four years.
We've also collaborated with the Federal
Reserve Bank of New York in [INAUDIBLE]
to create a white paper titled,
Latino on Businesses,
shining a light on national trends,
which was published in this past November.
SLEI also generated another
white paper earlier last year
in collaboration with Morales, titled,
The US Latino Entrepreneurship Gap,
a comparative measure of Latino
entrepreneurship activity.
And finally, we coalesced a group with
academic researchers to produce a book of
readings on Latino entrepreneurship
to be published early next year.
All of these efforts have sought to
add more research based facts to our
understanding of the important role Latino
owned businesses play in our economy.
Anyone interested in reading these studies
can access MU at the GSB website or
the LBAN website which
is lban.us SLEI is also
involved in a series of efforts focused
on making a difference in the success and
growth of Latino-owned businesses.
Most important of these,
is an innovative hybrid six week
executive development program
focused on helping Latino chief executives
successfully scale our companies.
By hybrid, I mean it's both in
residence here at Stanford and online.
Restricted the companies with over
1 million in annual revenues or
if at the start of phase, having raised
500,000 from professional investors.
This program targets companies
that want to grow big.
By big, we mean over 100 million, 500
million, and 1 billion in annual revenues.
To date,
SLEI has offered this program six times
to cohorts of approximately
75 businesses each.
Our current scaling program
alumni total over 430.
The next program will be
offered this coming May, so
if anyone in the audience
is interested in enrolling,
please log on to the LBAN website at
lban.us for access to an application.
We'd love to see you.
Finally, SLEI is developing a national
network of individuals and organizations
that make up a portion of the ecosystem
Latino entrepreneurs operate in.
Derived from both our research
in educational activities,
the current ecosystem consists of over
100 business executives who have mentored
participants in our educational program.
50 capital providers who have listened to
pitches by our educational members focused
on securing financing.
And finally, not finally, but third,
organizations across the country
that focus on helping Latino
businesses to succeed,
such as the Hispanic Chamber of Commerce.
Local business development agencies,
and Latino professional associations.
And finally,
the 430 alumni of the program, who
are committed to doing business with each
other and getting business for each other.
This is a mantra, we promote in
the program and we believe that the more
Latinos do business with each other,
the more everybody will benefit.
So together, these three major
efforts make up the agenda for SLEI.
They're inter-connected and synergistic.
And it's our goal to substantially
promote the health of our US economy
by strengthening the economic
well being of US Latinos.
So now I would like to introduce Professor
Persis Drell, Stanford University Provost.
Since her inauguration two years ago,
she's been a staunch supporter of our
efforts and a real champion for
diversity at the university.
We're very honored to have
her here with us today.
So please help me welcome her
to our program, Professor Drell.
>> [APPLAUSE]
[APPLAUSE]
>> Thanks to Jerry, and
it's a pleasure for
me to add an additional welcome
to all of you here to Stanford for
this year's forum.
The university and the graduate school of
business have really been proud to join
with a Latino business
action network to support
the Stanford Latino Entrepreneurship
Initiative since its inception in 2013.
And, in a few minutes, you will be
hearing presentations on the findings
from Slaysforth annual survey of
Latino owned businesses in the US.
This is a really important study as it
examines activities and the performance of
Latino owned businesses and
measures their impact on the US economy.
The report also brings to light
some of the challenges and
opportunities Latino entrepreneurs face in
sustaining and growing their businesses.
And I'm not going to steal any
thunder from our upcoming presenters,
no spoilers here.
But it is clear from the previous studies,
as Jerry has already mentioned,
that Latino owned businesses
are a significant force in the US economy.
And Latino entrepreneurs are playing
an increasingly important role in
the overall economic
success of our country.
And that makes sense when you consider
that the Latino population is one of
the country's largest,
fastest growing minority groups.
And by my data and
the experts are in the audience, by 2050,
Latinos will be a third roughly
of the population of the US, and
will have a huge impact on all
aspects of our nation, business,
education, health, government.
And this just presents enormous
opportunities for Latino business leaders.
But, as you're going to hear, they,
Latino businesses today face challenges
ranging from common, small business
growing pains and financial barriers to
larger systemic issues such as the need
to strengthen the business ecosystem.
Research, education, mentorship,
these are all really critical components
of a vital business ecosystem.
And we're pleased to contribute
to this effort through
the Latino Entrepreneurship Initiative.
Now, this initiative is just one
of many efforts that Stanford
supports to ensure a culture of diversity,
inclusion, equity, and access.
And I want to talk about this for
a few minutes.
Advancing these values across
the university in every school,
in every program,
in every area of operation is actually
a key component of Stanford's vision for
the future.
Why is this effort so important?
At Stanford, our mission depends
on embracing diversity of thought,
backgrounds, approach.
We know that in research and education
breakthroughs in understanding come from
considering a broad range of ideas and
engaging in rigorous testing of them.
And, it is an imperative for
all our students to interact with
a broad spectrum of interests,
identities, and perspectives.
Because the future is diverse,
all our students must
be able to embrace that
diversity in order to thrive.
Now, I'm going to give you a personal
example of what can happen to
an institution when diversity of
thought and approach is not present.
So, I'm going to ask for
show of hands, if you don't mind.
How many of you know what
SLAC National Accelerator Lab is?
Okay, so a fair number of you.
For those of you who don't, it's
a Department of Energy funded national lab
sort of $350 million that
is managed by Stanford.
And if you drive down 280
between the Page Mill and
the Sand Hill exits,
you're driving right over it.
That lab had storied history,
it was the center of the universe for
the field of particle
physics in the 1970s.
But in the early 2000s, the frontiers
of the field had moved to Europe and
the lab needed to reinvent itself,
find a new scientific mission.
See a future that was
different from the past.
I'm sure you can think of a few
business that have had this problem.
At that time, everyone on the management
team could only see the past.
And their idea of success
was to go back to the 1970s.
If we could just go back to the 1970s,
everything will be okay again.
Now that is not going to happen.
I came in as the director of the lab in
the middle of that crisis, and had to
replace the top two layers of management
of the lab to get it to face forward.
I brought in a diversity of thought,
a diversity of backgrounds, and
along with it diversity in gender,
ethnicity, approach, and training.
And the lab today is doing great.
But it was essential to bring
in that diversity of thought.
Now, equity and
access are equally important cornerstones
of the university's vision for the future.
I did a stint as the Dean of
Engineering here, and at that juncture,
we asked our mid career faculty
to tell us what the future
should look like for
Stanford School of Engineering.
And they came back and
said the single most important cultural
challenge facing Stanford School
of Engineering was diversity.
They said it was the one area
where the Stanford School of
Engineering was content to be
merely average, that hurt.
>> [LAUGH]
>> But it was also true.
So to remedy that, we needed to
ensure that the school was welcoming
an inclusive to students
of all backgrounds.
And we particularly focused on
increasing participation of women and
underrepresented minorities and
engineering.
Now, I have to tell you,
it was just an honor to work with groups
like the society of Latino engineers
sold to help further our goals.
I learned so much from those students.
And, I observed something.
And this is where I think you can help,
one of the many places.
But I observed that our Latino students,
and women students, and
Black students, and Native students,
simply didn't have access to the same
robust professional networks that
other student populations had.
And so it made success just
a little bit harder for them.
I spoke earlier about the need to
strengthen the Latino business ecosystem.
Here's an area where many of you here
today could contribute to that and
to help us.
And I'd love to encourage you to
provide opportunities, mentorships, and
professional networks for
a Latino students.
Help them make the valuable
connections that would be
critical to their future success.
And ultimately, I believe will help
the Latino business landscape and
will be critical to our
success as a nation.
We do see this is
a significant challenge for
our students, give them the importance
of networks in the tech and
business worlds in particular,
although in the academic worlds as well.
As Stanford looks to the future,
we know diversity, inclusion, equity, and
access are essential to our success,
to Stanford's success And
one of the initiatives in our long-range
vision is called IDEAL, which stands for
Inclusion, Diversity, Equity, and
Access in a Learning environment.
It's not about counting numbers and
checking boxes.
It's about cultural and
institutional change.
It's about ensuring that all members of
our campus community feel they belong and
are supported regardless of their
backgrounds or affiliations.
It's about ensuring diversity of thought,
experience and
approach, is represented in all sectors
of our education and research enterprise.
It's about equality of access within
our community to the opportunities and
the benefits of Stanford.
And it's about transparency on how well
we are meeting our own expectations for
ourselves to ensure
diversity in our community.
Ultimately, it's about ensuring
that Stanford continues to be
an outstanding institution that
attracts the best students and
the best faculty now and
in the decades to come.
I believe the future will be
owned by the institutions
that get this right and I want Stanford
to be one of those institutions.
So let me just wrap up,
we have many great efforts
that refelt flect the goals of ideals
at Stanford, and that really includes
the important work of the Stanford
Latino Entrepreneurship initiative.
I applaud the efforts of all of those who
are involved with this important research,
and I really look forward to I hope,
hearing a bit about this year's findings.
Getting our arms around the data is
essential to understanding the successes,
the challenges, and the opportunities for
the Latino businesses.
And of course there is
the bigger story line here.
We know that supporting
Latino Entrepreneurship is critical to
the overall economic growth and
success of this country.
Thank you very much.
[APPLAUSE]
>> Thank you, Provost, and thank you for
your reinforcement on the significance
of diversity and inclusiveness.
Now, ladies and gentlemen, it is time.
It is time for the latest of
the state of Latino Entrepreneurship.
Which will be presented in two parts.
The first by Paul Oyer,
professor of economics and
adviser of the Stanford Latino
Entrepreneurship Initiative.
The second research portion will
be presented by Marlene Orozco,
SLEI lead research analyst.
So now it is my honor to introduce
to the stage, Professor Paul Oyer.
[APPLAUSE]
>> Thanks, Mark.
Thanks to everybody for coming.
Thanks to all of you out there just for
showing an interest in what we're up to,
as well as the many of you who are
supporting us financially and otherwise,
we really appreciate that.
Thanks very much Persus for
that introduction and
giving us the broader perspective
of the university overall.
And most of all, thanks to Jerry Poros,
who's made all this possible over
the years and who I've had
the good pleasure of working with
since I stepped in as one of the faculty
directors, along with Jerry of Slay.
So I'm also one of the faculty
directors of the GSB Center for
Entrepreneurial Studies, and
I've spent a lot of time out on the road,
interviewing owners of small and
growing businesses.
Many of which are a lot like the employer
firms you're going to hear about on
the research side, and
Slay ad firms, which we've seen.
And I've had two of the best parts of
being involved with Slay over the last few
years have been one working with Marlene
and Eleana who've really devoted so
much energy to pushing
the research agenda forward.
And then, the other part that's really
great is the Slay ad program when Elban
and Slay bring in the 60 or so
entrepreneurs every few months.
Working with that group has
been always a highlight.
And I'm so happy that we have
managed in this year's report
most of the pictures are of,
are actual alumni.
Somebody changed my slide.
The guy who was up here a minute ago is
on the cover of the report this year,
is he here by any chance?
I was always curious if
he was going to be here.
Anyway, we have a lot of alumni here, and
anyway it's great to see
their pictures in the report.
Marlene is much closer
to details than I am, so
I'm going to leave that to her, I just
wanted to introduce some of the themes and
some of the big pictures of
the research side of things.
So I believe this is figure
one of this year's report and
it tells you the story of Latino business
in the last few decades on the left.
And so what do we see?
We see that there's been tremendous growth
in the total number of Latino owned
businesses much faster than the growth
of Non-Latino owned businesses,
and that's for two reasons.
One is we have more and more Latino's
in the population and we have more and
more Latino entrepreneurs among
those who are in the population.
And it's just sort of capturing
partially the fact that Latino
population is growing as a whole,
as well as a share of entrepreneurs.
However, as you can see on the right,
these Latino-owned
businesses remain relatively small
compared to other businesses.
So as Slay's work over the last
few years has made very clear,
there's a small but not very significant
Latino Entrepreneurship gap.
But there is a large gap
on the scaling side.
So what is it that's keeping
these firms from growing?
Now slay add,
which Jerry was talking about is
one initiative based at addressing that
and it's a small step in that direction.
We think a very successful one.
But, as Marlene will make clear,
there's just so
much to be done to help
these businesses scale.
Some of the more recent data, and
now I'm focusing on firms that have
employees as well as more recent years in
this figure which also comes from this
year report, tells a similar story.
You can see from the table that we have
fast growth in Latino firm population
just as their been incredibly fast
growth in The Latino population.
But even in this very successful,
even in this more successful group that is
firms that have employees, we still see
this big scaling gap on the right side.
Much smaller, the Latino owned firms
are much smaller than the rest.
And I want to now highlight
a different sub-group,
where the scaling issue is
even sort of more central.
So within the Latino-owned business
community, you find a sub-group that's
growing even faster but
having even more trouble scaling, and
that is female-owned Latino businesses,
or female-owned businesses in general.
Now, by day, I'm a labor economist,
and that means that
other people like me, and
myself, we've done a lot of
research documenting tremendous
labor market progress for women.
Here in the United States in the last few
decades, and we see trends going forward
that are likely to continue
favor progress for women.
So I always say, not just in the context
of Latino issues but more broadly
in the labor market, I'm very bullish
on women in the American labor market.
Now having said that,
Slay has shown similar trends for
Latina's in terms of their strides
they're making in entrepreneurship,
female run Hispanic businesses
have become a bigger share
of this broader Latino
entrepreneurship community.
However, as this graph begins to get at,
The scaling limits are even
more binding for women.
So look, most of the most Latina-owned
businesses are very small outfits.
And we've had some really great success
stories, within Slay Ed of bringing in
female entrepreneurs who've scaled
their business to the next level.
And hopefully, we can think of,
we can see ways to expand that network and
to make that continue to happen.
I think there's real opportunity for
progress there, but it would be
nice to kick it into the next gear.
This is actually from the Gap Report,
the entrepreneurial GAP Report
that Jerry made reference to, and
that Arnobial Moralex Drove the process
on behalf of Slay recently.
And this just gets at this idea about
the difference between, it's not so
much the entrepreneurship gap as the
scaling gap that I think is so important.
So what this shows is that
the gap between Latinos and
non-Latinos is not at
the business foundation level.
Latino entrepreneurship is pretty much,
not quite, but pretty close to
the same rate of overall business
development as a share of population.
The overall self employment and business
formation rates are about the same for
Latinos and other groups, but
it's taking that next, those next steps.
Which in this graph,
we're showing in two ways.
One is, hiring people,
becoming an employer-owned firm.
And then, another way, we're showing
it is becoming a scaled firm,
a firm with a million dollars of
revenue or something like that.
That's where Latinos and
others are diverging,
and that's part of what Slay Ed and
part of what Slay's research agenda is.
It's trying to figure out what is causing
that funnel to hold up so many Latino on
businesses to keep them from getting over
the hurdle to becoming scaled businesses.
That differences in scaling and
making businesses more professional and
poised for growth,
is what we're really trying to study here.
So I'll just leave it at that,
because I want to give Marlene plenty of
time to go through much more detail of
what she and Ileana have been working on.
These are exciting times for
Latino entrepreneurs, and I just want to
reinforce, I mean, it's almost cliche,
but I want to reinforce the term used,
it really is a time of both opportunity
and challenges for this population.
Right, the Latino entrepreneurship
world has made great strides and
there's great opportunities out there.
But these challenges in terms
of financing, and scaling, and
other things remain out there,
and so, hopefully,
our researches give some insight into
thinking about how to get past that.
So to give you more detail on the state
of the Latino entrepreneurship, let me
introduce Marlene Orozco, one of the key
drivers of the research side of Slay.
Thank you very much.
>> [APPLAUSE]
>> Good afternoon,
and thank you, Professor Paul Awyer for
providing those big picture trends.
It's a real pleasure to be here with
you today to share key findings
of our 2018 Slay survey of
US Latino business owners.
We began collecting data in the Summer of
2018 through proprietary business panels,
and with the support of several
organizations throughout the country,
including the Latino Community Fund in
Georgia, the Hispanic Chamber of Commerce
in Houston, Camino Financial,
Colmina 66, and several others.
We are indebted to this growing
network that supports the study
of Latino business owners.
This year, we're really excited
to form an ongoing research panel
with Latino business owners of all sizes
and industries across the country,
which will provide important
insights around long-term growth and
rates of business failure.
Before Slay's efforts, much of what
we knew about Latino business owners
centered around some big picture trends.
For instance, a few years ago, while
the total number of businesses in the US
was on the decline, the number of
Latino-owned businesses grew by 46%.
Today, SLEI estimates that there
are around 5 million Latino-owned
businesses in the US.
We also know that Latinos are starting
businesses at a higher rate
relative to all other demographic groups.
However, most Latino-owned businesses
start small and stay small.
With only 3% of all Latino-owned companies
generating at least a million dollars
in annual gross revenue, which we defined
as skilled firms throughout the report.
Since 2015,
we have been surveying around 5,000
US-Latino businesses to dig deeper into
the challenges facing this segment of
the business owner population, but also,
we highlight the opportunities ahead.
In the State of Latino Entrepreneurship
report, which we just release today,
we share insights into a growth framework
that highlights characteristics and
strategies, prevalent among Latino owned
firms that have successfully scaled,
grown their number of employees,
and generated profits.
The corollaries of success outlined in the
growth framework may be interesting for
other Latino firms seeking to grow,
and also, for
those who wish to support this growth.
We also examine Latino
entrepreneurs' attitudes and
experiences with accessing capital.
In addition, we supplement this data with
government surveys on business owners and
data from entrepreneurs that go through
the Slay education scaling program,
a few of whom you'll
hear from later today.
So in what follows,
I'll start by presenting key findings
based on the analysis of
the 2018 national survey.
We'll start by reviewing
four key findings.
First, we collect a lot of data
on both the business owner and
business characteristics.
This year, we highlight several
business strategies and
characteristics that positively
correlate to scaling Latino businesses.
This includes being
a certified minority or
woman-owned enterprise, which we
define as a business certification.
Being networked, which means you
participate in formal business
organizations, like chambers of
commerce or trade associations, and
exporting goods and services,
among other strategies.
We developed a growth framework
with these characteristics,
which I'll detail in just a bit.
Secondly, we have historically
collected detailed data
on the types of funding Latino
business owners access.
This year, we follow Latino business
owners through a function pipeline,
starting with the reasons for
not applying, and
among those who did apply, the amount
they requested, what they received,
and their self identified reasons for
loan denials.
We find that among Latino business owners
who apply for funding, only one in four
gets fully funded compared to half
of white business owners who apply.
Related to their funding experience,
we also find that Latinos bear greater
personal financial risk related
to lower credit scores, and
the types of credit they are using,
personal as opposed to business.
Lastly, we know Latinos are not
homogeneous group, and our large sample
allows us to consider a variety of data
cuts, looking at female-owned firms
compared to men, immigrants versus US
native-born Latinos, as a few examples.
And this year, we also consider
the childhood class background of Latino
entrepreneurs, and find that most scaled
business owners were raised in lower and
lower-middle income households.
I'll detail all of these key
findings in what follows.
And we'll start by looking at
the characteristics that positively
correlate to scale, which we position
in the report as a growth framework.
Now, the figure I'm about to show
you contains a lot of really useful
information.
So I'll share it with you piece by piece.
First, we consider three
measures of growth.
Scale, number of employees, and profit.
Scaled firms, again,
are those that are generating over
a million dollars in annual revenue.
And we compare those to firms that
are not yet there, the unscaled firms.
Employer firms are those with paid
employees compared to non employer
firms which have no employees.
And profitable businesses
are those that generated a profit
in the 12 months prior to
taking the survey compared,
to those who broke even or had losses
which we categorize as unprofitable.
We also consider business
owners characteristics, gender,
and nativity, as these have
the greatest within group differences.
Then we consider what business strategies
broadly are most positively correlated
with these measures and
business owner characteristics.
The business strategies that
we consider are the following.
Whether the business is formally
registered which will be indicated in
purple on the graph.
Whether the business owner is networked or
connected to these formal business
organizations, in orange.
Whether the business operates in purchased
real estate compared to renting or
working from home which
will be noted in blue.
Whether the business exports products or
services internationally, marked in green.
Whether the business sells or
develops software,
which we define as being a tech company
which will be noted in darker blue.
Lastly, whether the business
operates as a franchise or
has franchisees which
will be noted in yellow.
And we rank order these strategies,
starting with the highest percentages of
each business strategy found among Latino
business, among scaled Latino businesses.
So when we take these strategies and
see their averages
across the different growth measures and
these groups, this is what we find.
Very clearly, we see that all
these measures are most strongly
correlated to scaled businesses, as all
of these positive business strategies
are being pulled in the scaled direction,
which is the lower left-hand quadrant.
You can determine the percentages of
each of these business strategies
with the location of each point on
the rings, starting with 0% in the middle.
Each subsequent ring represents
a ten percentage point increase.
For example, close to 90% which is
the final outer ring of all scaled
businesses are registered compared
to only 67% of unskilled businesses.
I should also note here that
immigrant-owned businesses are more likely
to be registered compared to businesses
owned by US native-born Latinos.
This is likely because it adds
a layer of protection and
can come with some potential benefits.
You can also see that for networked firms,
which are noted in orange, there's a huge
gap between scaled and unscaled firms,
a 45 percentage point difference.
Being networked, or connected to formal
business organizations is important for
scale and success, as these can
provide access to information and
business opportunities.
Which really speaks directly
to what Provost Drell
was talking about in terms of
professional organizations.
There is much to learn from the figure, so
we'll hope you'll spend some time
digesting the information in the report.
Of particular note, I want to call
out two business strategies for
growth, business certification and
exporting.
Here, you can see that
business certification,
the distribution across scaled
firms compared to all Latino firms.
58% of all scaled firms have some
type of business certification,
whether they're minority-owned,
women-owned,
8(A) government certified, veteran-owned
or some combination of these.
Being a certified business is a prominent
strategy in the growth framework,
as it provides access to contracts at
the government and corporate level,
which are simply not available
if you're not certified.
Exporting is another growth strategy,
as businesses that export not only
grow faster, but
are also nearly 8.5% less likely to go out
of business than non-exporting businesses,
according to the Department of Commerce.
Among those in our survey,
14% of all Latino-owned companies,
export products and services, while scaled
Latino companies, export at about 30 %.
Latino export businesses
are more likely to be profitable,
immigrant owned,
scaled and tech companies.
And you can see here from this figure that
the top two export markets include Mexico,
with 18% of Latino-owned exports going to
Mexico and 13% of them going to Canada.
In total, our survey repsondents
export to over 25 countries,
including a mix of Latin American and
European countries.
So we now have a better sense of the
strategies that are positively correlated
to growth.
But this framework would be
incomplete if we didn't also discuss
the barriers to growth.
We find that the factors that
negatively impact profitability and
growth include access to capital,
the cost of that capital, labor,
taxes, government regulations,
slow business, late paying clients,
market unpredictability,
and changes in technology.
We focus heavily on access to capital
to better understand the financing
experiences of Latino entrepeneurs.
Our next key finding.
First, we note that the majority of
Latino business owners, or 60% of them,
did not apply for financing in the 12
months prior to taking the survey.
This percentage, however,
is comparable to other small businesses,
including those of white business owners.
So Latinos and
white business owners are applying for
loans at pretty comparable rates.
However, in a recent
report we collaborated on
with the Federal Reserve Bank of New York
we found that among the Latino business
owners that do apply for funding,
one-quarter gets fully funded compared to
half of white business owners who apply.
In other words,
Latino business owners are denied more
often than white business owners.
Furthermore, the majority of
Latino business owners apply for
less than $100,000, even among the most
successful Latino-owned businesses.
For example you can see in this figure,
22% of scaled firms applied for
$100,000 or less, which are the gray and
orange buckets combined, and
36% of tech companies applied for
that amount.
So even though Latino business
owners are mostly applying for
relatively small amounts, they're still
not getting all their funding approved
as shown in this figure here.
Take scaled firms for instance,
which is the second bar on the screen.
While half of Latino scaled firms received
the funding they applied for, again,
relatively small amounts,
over one-quarter receive some or
none of the funding they requested.
Now it's hard to say for
sure with these data all of the reasons
why their funding was not fully approved.
We do ask the entrepeneurs why they
think they weren't approved and
the reasons vary across
the type of business.
For scaled firms, they say it's because
they didn't have sufficient collateral,
and for unscaled firms, they say it's
because they have low credit, and
some number simply don't know
why they were not approved.
While this may all be true and
valid reasons overall, we see that
Latino business owners are taking on
personal responsibility without much
accountability ascribed to lenders.
In fact, very few say their denials
were due to unfair lending practices.
We're just beginning to
uncover potential biases but
need additional data from
the lender's perspective.
Certainly, from interviews
with Latino entrepreneurs
we hear some of these stories.
And you'll get to hear about some of
their funding experiences in the next
part of the program.
We now move on to our next key finding
which relates to how Latinos go about
securing capital.
Just as a personal credit score
provides information to lenders
when an individual seeks a mortgage or
personal loan, business scores indicate
the credit risk of a business.
However, other research has found
that 72% of all small business owners
do not know their business credit score,
and 60% don't know how to find it.
So this is a pervasive problem.
This leads to low rates of use,
Even though owners who understand their
business credit score are 41% more
likely to be approved for a loan.
Our study found that one-third of
Latino owned scaled firms, and
16% of employer firms use their
business scores to access capital
noted in light blue in this figure.
This means that many firms with
proven track records continue to rely
on the owner's personal credit scores
when seeking funding for the business.
For Latino business owners with
good personal credit in our survey,
they are more likely to have
higher business revenues and
also use a wider variety of funding.
However, in interviews with Latino
business owners, we do see that even with
good personal credit, some are still asked
to put down extensive personal collateral
rather than business assets, which
exposes them to greater personal risk.
This is certainly another funding area for
future studying.
Moving on to our last key finding,
we highlight an under-studied
personal characteristic of
successful Latino business owners.
Social mobility in entrepreneurship has
become an important topic of study.
And business success may be
linked to personal success.
In our survey, we find that
a plurality of Latino business owners
who have scaled their company,
they report having been raised in lower
to lower middle income households.
This suggests that childhood
class background need not
be an insurmountable barrier to
building a successful business.
In fact, 44% of scaled firms
report coming from low income and
lower middle income backgrounds.
Which are subjective measures as
interpreted by the entrepreneur but
telling nonetheless.
Furthermore, we see that nearly an equal
amount of scaled and unscaled Latino
businesses report coming from upper
middle and upper income households.
So wealth in this case does not
predict successful entrepreneurship.
So, to conclude here's a look
at a few summary statistics
related to our key findings.
This year the SLEI survey of US Latino
business owners provides a framework on
the factors related to growth.
We also dug deep into the funding
experiences of Latino business owners
to uncover the multilayered barriers
along the funding pipeline.
From reasons for not applying, there is
some debt aversion that we didn't cover,
but you can read more about in the report,
to the amounts of funding
received when funding was sought.
In future longitudinal surveys,
with our growing research panel,
we will be able to capture experiences
over time with individual businesses.
This research direction will provide
valuable insights in the years to come.
So we encourage all Latino business
owners to be part of our panel and
spread the word.
We also encourage you all to read our 2018
State of Latino Entrepreneurship Report to
learn more about these findings and many
more that we were unable to cover today.
And as Paul was mentioning earlier,
this is a SLEI-Ed alum, Tony Aguilar,
who's on the cover of this year's report,
thank you.
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