Latino Startups to Watch in 2014

This article was originally posted on Vista Hispano as part of a series on Latino startups. For the rest of the series, go here.

When Peter Wilkins of New Futuro set out to raise a round of venture capital this year, he found very few investors that understood his target market: US Hispanics. In the VC community, he still says, “there is no one that I know of focused on Hispanic market companies.”

That lack of understanding on the part of investors hasn’t slowed down New Futuro. Through its events, resources, and online community, New Futuro now provides educational advice and material it says reaches millions of Hispanics every year. In the footsteps of companies such as HolaDoctor, Xoom, Progreso Financiero, and Consorte Media, New Futuro is part of a new crop of Latino market startups that are raising cash, building teams, and charging into the Latino market.

The most active sector for Latino market startups is financial services. Regalii, led by Wharton MBA and Echoing Green Fellow Edrizio de la Cruz, follows in the footsteps of iSend in allowing families to have some a say in the spending of remittances. Currently in beta launch according to its website, Bucks Bill Pay allows customers to pay their bills in cash at local agents. And Juntos Finanzas, a product of Stanford d.school, empowers Latino customers to track their own expenditures by SMS, similar to India-based social enterprise InVenture.

Along with New Futuro, another crop of Latino market startups focuses on education: YogoMe is an educational app with plans to move into language learning. Backed by 500 Mexico City (which announced its new batch of startups just last week), YogoMe is one example of how companies are pulling in resources from both American and Mexican startup ecosystems. Sleek-geek has three educational tablet apps for teachers, and is one of seven companies in the first Manos Accelerator cohort that includes Antonio Altamirano’s InteresantePlaza Familia is another educational venture founded by Latino social media veteran Ana Roca Castro.

Beyond financial services and education, immigration services platform LexSpot has raised over half of its $750,000 convertible seed round. YaSabe, another 500 Startups portfolio company building a bilingual, local search engine, closed a $2.7M funding round in the first half of 2013. AssuredLabor, based in NYC and with operations in Brazil and Mexico, raised $5.5M earlier in 2013 to expand its job-seekers platform.

Keep an eye on these companies in 2014–no doubt at least one of them will soon stand with Xoom and others that have built successful businesses by serving a large and growing US Hispanic market.

The State of Latino Startups: Exploring the Challenges

This blog was originally posted on Vista Hispano as a series on Latino startups. Read the first one here

Startup struggles, generally speaking

If there is one topic that entrepreneurs love to talk about more than any other, it is be the trials and tribulations of being a founder. You work impossibly long hours; you wake up with cold sweats knowing that every moment you’re not working on your idea, your competitor is. You spend more time managing people than you do with the product that you wanted to build; you are constantly reminded by more ‘reasonable’ friends and family members that you are sacrificing prime earning years to chase a dream. Money is always in short supply, and no one–no one–can ever truly give you the peace of mind that you are doing it right.

In nearly one hundred conversations about Latino startups over the last eight months, I’ve also heard and identified a handful of other hurdles specific to Latino startups. Some of them are relevant to Latino founders; others are particular to startups whose primary customers are Latinos.

Latino founders’ uphill fight for funding?

Latino founders, just like their non-Latino counterparts, point to the lack of high-risk capital as a significant barrier to the growth of Latino startups. Unlike in conversations with white founders, however, hints at racial bias among funders are pretty common in conversations with Latino founders. Few accuse venture capital investors of outright racism. Instead, they make two arguments. The first, voiced by at least one venture-funded entrepreneur, is that venture investors have the same subconscious racial bias that Chicago Booth researchers discovered among hiring managers in Boston and Chicago. Venture capital (VC) investors retort that if they see a strong team with a good idea in a growing market, they don’t care about someone’s race or country of origin. In fact, Silicon Valley is so dependent upon foreign talent that they now lobby ferociously for immigration reform.

The second, related argument is that the nature of many VC investors’ networks is such that black and Hispanic entrepreneurs are excluded not due to racial bias but because of the nature of social networks. In a recent conversation about the opportunity for a Latino-focused startup fund, one VC asked me if I was saying all VCs were racist. “No,” I said, “We’re lazy.” When some VCs proudly trumpet that a resourceful entrepreneur will find the right introduction to them, they are trusting their network to complete the first round of vetting of potential startups. In the aggregate, such a closed-network approach to deal-sourcing means out-of-network ideas are shut out until someone (a “broker” in network theory) connects them.

Before they approach VCs for scale-up funding, however, Latino founders point to another gap in funding. Unlike founders from well-connected, wealthy backgrounds, Latino founders have fewer wealthy friends and family members waiting in the wings to pump $20,000 into their startup. One Latina founder told me that, as the most educated and successful member of her extended family, asking her family for money would be laughable; instead, she is expected to be the one with a steady job providing cushion for everyone else. In this way, Latina founders, already carrying much of the weight of the growing Latino startup community, may be loaded down even more than their male counterparts by familial expectations.

The Latino market: large, nuanced, tough

What of startups that are not run by Latinos but focus on the Latino market? They too, face special struggles both in financing and execution. In seeking financing from VCs, Latino market startups struggle to get attention from investors rightly inclined to fund what they already know–e.g. tech, life sciences, solar, mass market retail, defense. Why educate yourself on a new, unproven market, exposing yourself to even greater risk? The answer, of course, is that not only are Latinos a large and growing group of upwardly mobile young consumers, but they are early adopters of new technologies and bellwethers for shifts in consumer trends; but as Antonio Altamirano points out, this case has yet to be made in a clear and compelling way.

Even given funding, Latino-focused startups face a special challenge: the Latino market may be huge, but it is incredibly nuanced and diverse. Most obviously, Latino market startups have to balance the needs of English-dominant and Spanish-dominant customers; the fluently bilingual customer support and content creators required to do this are tough to find and harder to retain.

Yet both Latino founders and those interested in the Hispanic market are plowing ahead. One example of such forward momentum is Manos Accelerator, which has recently accepted their first cohort of Latino startups. In our next article, we’ll take a closer look at a few of the Latinos and Latino-focused entrepreneurs blazing the trail–if you know of a few, send them our way!

Where are all the Latino startups?

This was originally posted on the Vista Hispano blog.

The US Hispanic consumer market is bigReally big$1.3-trillion-dollars-and-counting big. Major corporations like Best Buy, Yahoo, and The Home Depot are paying attention and have piled in, attempting with varying degrees of success to capture a piece of this large and growing market.

Over the course of the last six months, my colleagues and I have researched the Hispanic market with a specific hypothesis: Given its potential, surely there are dozens of startups launching clever, scalable businesses serving Hispanic consumers. As it turns out, we were (mostly) wrong.

Over a series of posts on Vista Hispano, I’ll discuss three elements of the Latino startup ecosystem: What barriers are blocking the creation of a Latino startup market? What startups are already plowing through those barriers? Where do they find the capital they need to start their business?

First, let’s clear up a bit of confusion about what we mean by Latino startups. When people say Latino startups, they mean one of two things: either startups operated by Latinos, or startups serving the Latino market. And when they say Latino startups, they mean either small companies with huge growth potential, or small businesses. The result is a conversation about four different types of companies, often all in the same conversation.

Latino startupsThe vast majority of businesses in the US fit into the bottom half of this matrix. Venture capitalists sometimes derisively refer to these small businesses as “lifestyle” businesses. But they are the blood pumping through the American economy, and Hispanics start such small businesses at a faster clip than non-Hispanics.

These companies are very different than the high-growth entrepreneurs on the hunt for venture capital or private equity investment–the companies we’re interested in here. Some of those companies, such as Marc Barros’ Contour, are Latino-owned but not Latino market-focused. Others, like pre-paid phone provider MetroPCS, find success by reaching out directly to Latino customers; but they are not Latino-owned. A handful of companies, such as Alicia Morga’s previous company Consorte Media, are both Latino-owned and Latino-focused.

Why do these distinctions matter? Because each type of business faces unique challenges, taps different sources of capital, hires a different type of employee, and demands a different set of skills. If we want to build a Latino startup ecosystem, driving resources to the entrepreneurs who create value and wealth in the Hispanic community, clarity of conversation is key.

In our next post, we’ll take a look at some of the challenges–both real and imagined–faced by Latino startups.

SVCO 2014?

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Prompted by Oxford professor Marc Ventresca, a list of potential topics for Silicon Valley Comes to Oxford in 2014:

  • Machine learningand its effect on different industries (automobiles & finance being the most obvious both in application and in local networks)
  • I heard quite a bit of noise at SVCO this year about Bitcoin. What about a virtual currency theme along with a fintech theme?
  • 3D printing would be a playful theme, with an emphasis on building real things rather than not apps
  • Building healthcare, how about genetics? Perhaps in conjunction with the Wellcome Trust
  • If we want to mimic the development of the internet, how about we track DARPA’s focus on robotics?

My turn? Rafael Correa angles for regional leadership in South America

Just for kicks, this is a writing sample I put together in Feb 2013, two weeks before Hugo Chavez died. 

My turn?

Rafael Correa angles for regional leadership in South America

This week, Ecuador’s president Rafael Correa routed divided opposition to win his third presidential election, finishing thirty percentage points ahead of his closest rival. That victory, combined with the return home from Cuba of Venezuela’s ailing president Hugo Chavez, has South America-watchers wondering: could Correa, a Chavez friend an ally, soon become South America’s leftist rabble-rouser-in-chief?

Correa has reason to lay claim to the title. When he first took power in 2007, eleven years had passed since an Ecuadorian leader had finished out a term, and Chavez had begun trumpeting the coming spread of 21st Century Bolivarian Socialism only two years before. Correa fell smartly in line, importing many of Chavez’s tactics: limiting press freedom, purging opposition figures from Ecuador’s diplomatic corps, and railing against American policy. He has worked to raise his international profile by providing asylum to Julian Assange, founder of Wikileaks, and tossing out the American military from its Ecuadorian base in 2009. Within the Alliance for the Peoples of Our America (ALBA), the regional group committed to Chavez’s socialist doctrine, Correa’s clout is growing. He is one of few leaders to see the Venezuelan dictator on his Cuban sickbed and has seen fit publicly to endorse the leadership of Venezuelan Vice President Nicolas Maduro. Correa’s selection of Jorge Glas, a childhood friend, as his own vice president will give the charismatic Ecuadorian leader more freedom to focus on foreign policy in his third term.

But it is unclear whether Correa can step into a Chavez-sized regional leadership gap or whether such a gap will exist after the Venezuelan leader’s demise. Maduro, likely to inherit control of Venezuela’s resources and army if not the personal devotion of its people, will work to maintain leadership of the regional bloc. Outside of ALBA, the economies of more moderate neighbours such as Colombia and Mexico have galloped apace, as has their political clout. Mexico, for its part, has been instrumental in the creation of ALBA alternatives such as the Community of Latin American and Caribbean States (CELAC) and the Pacific Alliance.

If Chavez’s passing does create a gap in South American leadership, Correa faces more local obstacles to assuming the throne. First, Ecuador lacks the deep oil reserves of Venezuela; without the ability to purchase the loyalty of other ALBA members, Correa would struggle to keep them in line. Second, Correa is constitutionally term limited. While changing the constitution has proved no difficulty to date, an attempt to wrestle another term might at last galvanize scattered Ecuadorian opposition and distract the president from his regional ambitions. The colourful Rafael Correa may be Ecuador’s most powerful leader in a quarter-century, but true regional influence will remain out of his reach.

Three Unconventional Lessons For Business School Students

It’s unusual when a successful entrepreneur opens a presentation to a room full of business school students with a photograph of her twin baby boys. But then Jessica Jackley isn’t a typical entrepreneur. As one of the speakers of a three-year series funded by the Pears Foundation at the Saïd Business School at Oxford, entrepreneur and investor Jessica Jackley had a rather unconventional set of recommendations for her audience.

Jackley cofounded Kiva.org, a nonprofit microlending platform that has facilitated nearly $440 million in loans since its inception in 2005. She went on to found ProFounder, a small/medium enteprrises fundraising platform, and is now an advisor to a Silicon Valley venture fund. She offered to her audience three pieces of advice, which she described as “reminders” to her crowd and to herself.

1. Know your mission(s)

During the early days of Kiva, the now-global microlender that Jessica cofounded in 2005, she and her team turned down a $10m offer of funding from a corporate social responsibility office of a large corporation. The funder didn’t want to connect to the borrowers on her platform, cutting against the grain of Kiva’s chief mission, which is to “connect people.” Had she and Kiva not been crystal clear on their mission and the values from which it grew, turning down such an offer might have been difficult. Business students on the job market should similarly be clear on their mission and be willing to turn down great opportunities in favor of “the path that is true to who you are.”

2. Learn to Listen

Jackley cites as her role model and inspiration as Muhammad Yunus, the Nobel prize-winning economist credited with the creation of microfinance, in which tiny loans are typically provided to groups women with self-created income. “Yunus,” says Jackley, “arrived at his insight by listening intently to others. If we listen closely, we may hear something no one else has heard before.”

3. Iterate

In founding Kiva, Jackley didn’t wait until her product or website were perfect to begin collecting loans from her friends and family to distribute to the entrepreneurs she had met during a 2004 trip to East Africa. Such an approach demands transparency and patient supporters who are comfortable focusing on the “how might we” questions instead of the “but what about” questions.

These “what if” questions are the kinds of questions that Jackley’s twins wake up with every morning. If grownups were to approach the world with the same sense of wonder and opportunity, listen carefully to others and remaining true to who they are, how many more Kivas might we create?

Originally posted on Real-Leaders.com

The Case for Catalytic Funding of Latino-focused Startups

[Note: If you’re interested in the updated and much-improved version of this pitch–especially if you’re a Latino-focused entrepreneur–my gmail address is mark.c.hand.]

This year, the Saïd Business School at Oxford launches GOTO, an ambitious project to focus the university’s attention on a particular topic of global import. The first topic is demography, with a focus on aging. In my first post, I argued that discussing the effects of aging demands discussing immigration, too. In my second, I took a look at demographic trends in the US and North America more widely. In this post, classmate Andrea McKinnon and I look at the case for a new source of funding for Latino-focused startups in the US:

An Emerging Opportunity

Latino communities in the US are relatively young populations that represent strong economic power and opportunity for growth. Shifts in migration to the US, alongside sweeping proposed immigration reform, results in significant emerging opportunities within these communities.

The establishment of an angel-stage Latino-focused equity fund signifies an opportunity that will be premised on three goals:

• Investing relatively small amounts of capital ($50-200K) in Latino-focused startups, providing an attractive financial return to investors
• Using that success to draw high net-worth individuals into startup investing
• Contributing the development of a Latino-focused startup community

The aim is to invest in 3-4 startups over the course of the next two years. Given success in those ventures, the hope is to raise a fund in the second half of 2015.

Rationale & Potential for Success

This year the US Congress is likely to pass the most sweeping immigration reform in nearly three decades, granting legal status to eleven million mostly Spanish-speaking undocumented immigrants. An estimated 1.5 million of those call themselves Dreamers: immigrants brought illegally into the country as children and who, despite in some cases having graduated from American universities, remain undocumented and unable to work. At the same time, Latinos’ income levels are rising. A population that has been relegated to the economic sidelines will in this decade have an unprecedented opportunity to contribute to the US economy, leading a wave of entrepreneurship and growth.

If recent history is any indication, however, Latinos will continue to punch below their political and economic weight, thanks to the absence of fundamental financial services and practices. One of those critical building blocks is early-stage, high-risk “angel” capital for untested startup companies: wealthy individuals making big bets on an entrepreneur with an idea and high potential. Such capital empowers an entrepreneur to develop a vision into a successful company.

Of the eleven million immigrants who will benefit from pending comprehensive immigration reform, some will dream of launching tech companies, large-scale product companies, financial services firms, and other high-growth businesses. These are the type of businesses that empower a community to generate wealth and economic influence, and these are the entrepreneurs best placed to offer goods and services to the growing Latino market.

An angel-stage, Latino-focused equity fund will facilitate the process of transitioning these dreams into reality.

Risks

As with any fund there are a number of associated risks. Given the structure of the proposed fund a number of particular risks have been identified:

• Adverse selection of entrepreneurs unable to get funding from mainstream investors
• Bad early bets on companies or geography
• Potential for lack of understanding in critical cultural differences (business practice norms, appetite for risk, loyalty)
• Lack of reputation without big-name backer
• Tension between social mission (building up angel investment in Latino populations) and financial mission
• Not enough homogeneity among Latino populations
• Shakiness of US market relative to high-growth economies in Colombia and Mexico

Next Steps

The next stages of the development process will involve:

• Determining the existing landscape of funding for Latino-focused startups
• Identifying high-potential entrepreneurs
• Building an Advisory Board
• Locating investors
• Determining fund structure
• Finding a co-founder
• Finding institutional partner/backer
• Analyzing the sector-focused v. sector-agnostic approaches
• Determining optimal location(s) within the US

On a broad level the goal is to test the feasibility of the fund’s goals by investing in 3-4 startups over the course of the next two years. Given success in those ventures, the hope is to raise a fund in the second half of 2015.

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Demographics in North America: Not just US

This year, the Saïd Business School at Oxford launches GOTO, an ambitious new project to focus the university’s attention on a particular topic of global import. The first topic is demography, with a focus on aging. In my first post, I argued that discussing the effects of aging demands discussing immigration, too. In my second, I take a look at demographic trends in the US and North America more widely. Reposted: 

With its population of 311 million and GDP of $15 trillion, the US accounts for nearly 60% of North America’s population and over 80% of its economic output. It is tempting, then, for Americans to think of our problems and opportunities at a national, rather than hemispheric, level. Putting US demographic changes in a more regional context, however, isn’t just about being a good neighbor: it helps us understand the changes taking place within our own country and more accurately forecast their effects.

The headlines in the US, of course, are of shock and alarm at our falling birth rates, slackening immigration, and ageing workforce. Thanks to a virility-sapping, multi-year recession, demographers now expect the US population to grow 10% more slowly in the first half of the 21st century. And immigration, the finger in the dike of American demography, is slowing.

What about the rest of the neighborhood? Looking northward, Canada’s has for years added a little over 1% to its population of 35m, for many of the same reasons as the US (e.g. a declining birth rate, later first births). My colleague and classmate Greg FitzGerald argues that ensuring Canada’s ongoing attractiveness to immigrants is a large part of how Canada will mitigate the challenges of an ageing population–no mean feat given competition for brains and labor from emerging economies.

South of the American border, the demographic story of Mexico and Central America is starting to mirror that of their English-speaking, northern neighbors. Whereas Mexican women used to give birth to (and export) astonishing numbers of people, the birth rate among Mexico’s 100m people has dropped to 2.4 children per women, and may fall below the replacement rate of 2.1 within next ten years. That demographic dividend, combined with the fact that net emigration to the US has dropped to zero in light of Mexican growth and tougher conditions for migrants in America, means that Mexico may be headed into the prime years of one the healthiest, best educated, most productive work forces in its history.

Keep moving south, and the story gets less clear. The seven countries that make up Central America are home to some 40m people, but research on their populations’ growth and movements is scarce: front-page Google search results for the query “Central America demography” include papers from as far back as 1986, before the births of over half of the region’s population. One recent study suggests that El Salvador’s population growth mirrors that of Mexico: ageing, growing more slowly, getting slightly more wealthy. Guatemala and Honduras, by contrast, remain stuck in a cycle of low-incomes and high fertility rates.

What does all this mean for the United States? Perhaps not that much: after the 2000 census, the big shock was that the US population was growing much faster than expected, heralding environmental doom. A recovering economy may yet pull immigration numbers back up and inspire more Americans to bet big (biologically speaking) on America’s future.

Even if the American economy recovers, it will be tiny Honduras and Guatemala, rather than Mexico, that will most strongly feel the pull of El Norte. If Mexican growth holds, American companies will have to look elsewhere for cheap labor. That may include the non-Spanish-speaking countries that make up the immigrant base of Canada–which, if it follows Greg’s advice, will fight hard to keep them.