Mar 21, 2023 - World

Latina venture capitalists fear economy woes could stunt gains

Illustration of a pattern of rolled up twenty dollar bills.

Illustration: Aïda Amer/Axios

Latinas have been making inroads in the venture capital world, but they fear economic uncertainty will undo the gains they’ve made in diversifying who gets to decide who and what types of enterprises receive funds.

Why it matters: Latinos have for years started businesses at higher rates than other groups in the U.S., with Latinas especially having an entrepreneurial drive. But less than 1% of money doled out by the biggest VC and private equity firms has gone to Latino-led enterprises.

  • "Every time we pitch we have to defy the odds," Daniela Corrente, Chief Strategy and Business Officer of Latina-led fintech company Suma Wealth.

The big picture: Venture capital has long been dominated by white, non-Hispanic men who usually back those who look like them, Noramay Cadena, managing partner of Supply Change Capital, tells Axios Latino.

  • That means projects or ideas by others, including Latino men and especially Latinas, often don’t get financed or even heard.
  • "There's both money being left on the table as well as great ideas because there's not enough of us," Sarah Kunst, Cleo Capital managing director, says about people of color in the venture capital sphere.

There has been some progress over the last few years.

  • Latina venture capitalists in partner or managerial positions rose from just one in 2010 to about 10 in 2020, according to data compiled by Kunst and Paul Gompers, a Harvard Business professor.
  • There has also been an increase in non-partner and junior-level investors, according to a 2022 report from the nonprofit LatinxVC.

That has led to more capital for entrepreneurs from underrepresented communities.

  • And studies have shown that demographically diverse VC firms can outperform homogenous ones financially.
  • "The way I look at investments is going to be very different than the way most investors who are older, white males with a certain network will … where they might say, 'Oh, this is a niche market,'" Samara Mejia Hernandez, the founding partner of VC firm Chingona Ventures, tells Axios Latino.
  • While Mejia Hernandez says she and similar VCs don't just invest in Latinos or women, they are more likely to know when a company can meet a specific need those communities have.
  • Investing in that company could also translate to growing the wealth of its community through hiring and network-building, she adds.

Yes, but: A lot of the money made available in the past few years to investors and founders who are women of color has come from diversity initiatives by corporations and banks, says Maria Salamanca, a partner at Ulu Ventures, one of the biggest Latina-led firms.

  • With concerns over inflation and recent banking collapses, those funds could dry up.
  • "Will those supporters of divfnoerse founders and entrepreneurs continue to be there … or are we the first ones to go? That is a very real concern," Salamanca says.
  • Mejia Hernandez agrees: "In this environment, it's hard for all types of businesses and fund managers, but especially those that already got the least amount of funding."
2020 venture AUM, by race/ethnicity and gender of managers
Data: Paul Gompers, Sarah Kunst; Chart: Axios Visuals

Those concerns are especially acute because only about 1.2% of assets under management in the U.S. were held by Latinas in 2020, according to the data from Gompers and Kunst. Those include the investments and funds administered on behalf of clients or that can be given out to start-ups.

  • The numbers were similarly low for Black and Asian women. "I wish that it was orders of magnitude higher," Kunst tells Axios Latino.

What to watch: Despite the short-term outlook being grim, Kunst says she hopes data like hers can be used to push investors towards worthwhile projects and funds that may get overlooked.

  • The continued operation of groups like LatinxVC, Latinas in Tech and L'Attitude Ventures that provide mentorships, community support and networking may also help stop the backslide.
  • "We seek to hold industry leaders accountable to the diversity commitments they made in the past several years to ensure those commitments are turned into action," Mariela Salas, executive director of LatinxVC, tells Axios Latino.

Editor’s note: This story has been corrected to reflect that the name of Noramay Cadena’s firm is Supply Change Capital (not Supply Chain Capital).

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