At Stanford, Latino Entrepreneurs Forecast Rapid Growth Amid Systemic Challenges

LATINO COMPANIES AS LIKELY TO BE TECH FOCUSED

According to the SLEI report, there is a widely held belief by the investment community that Latino entrepreneurs are less inclined to start tech businesses. This is not true, the data says.

Marlene Orozco

Marlene Orozco, SLEI associate director

While white-owned businesses outnumber Latino-owned businesses by a factor of 14 (4.8 million to 346,000 respectively), about 19% of Latino-owned businesses work in the development or sale of tech and software products compared to about 14% of white-owned businesses, the report shows.

In terms of technology production, both groups showed similar rates in working in robotics (0.3%), artificial intelligence (0.4%), and cloud-based products (3.2%). Latino businesses outpaced white businesses slightly in both specialized equipment and software. (See chart at top of this page.)

“These findings counter the widely held belief that the Latinx entrepreneurial pipeline in tech doesn’t exist, or that minority entrepreneurs have less of an inclination towards starting tech businesses,” Orozco said.

LATINO BUSINESSES HIRING AT FASTER RATES THAN WHITE COUNTERPOINTS

The SLEI report found that Latinos are starting businesses at a faster pace than all other segments – 50% of net new businesses were created by Latinos.

They are also hiring employees at faster rates. From 2007 to 2019, the number of jobs created by Latino businesses has grown 54%, from 1.9 million to 2.9 million. The jobs growth rate at white businesses was 10% in the same period.

LATINO BUSINESSES OFFER MORE BENEFITS, MIXED PAY

To measure the quality of new jobs created, SLEI looked at pay and benefits of employees as well as career advancement at surveyed businesses.

“(The indices) consider whether employees have opportunities for promotions, training, and pay above minimum wage among other career advancement measures,” Orozco said. “We find that Latino owned businesses provide similar or even greater opportunities to their employees … across a number of employer based benefits, including health insurance, flexible work, paid holidays, retirement and so on.”

And they do this at all revenue categories. (See the two figures below.)

 

 

For both Latino and white businesses, larger revenue generally correlates with a higher Employee Benefit Index (EBI), except at businesses with more than $4 million in revenue which drops for both segments. However, Latino businesses provide more benefits on average in every revenue category except the $980,000 to $4 million category in which both groups provide about the same level of benefits.

However, employee pay results for Latino businesses were mixed.

To measure employee pay, SLEI uses the minimum wage standard to compare compensation across Lationo- and white-owned businesses, though it concedes that minimum wage is not the same as a living wage.

SLEI’s survey asked businesses how many of their employees made above minimum wage. While more white businesses reported that ALL of their employees earn more than minimum wage than Latino businesses (52% to 43%), Latino businesses outperform their white counterparts in all other categories.

 

NEXT PAGE: Financing, revenue growth continues to lag behind

 

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