Hispanics Tapping Capital Markets

Hispanic Business Magazine has an entire section this month on growth industries that have been attracting a lot of interest by investors, namely media (print, radio, television, & advertising). True, many high profile private equity firms have finally discovered this fast growing source of Spanish-speaking purchasing power.

• Hispanics, today, are the largest minority group in the United States representing nearly 40 million people (or 13% of the total population)
• Hispanic purchasing power today is of almost $670 million and is growing so quickly that by the year 2022, it is expected to exceed $2 trillion
• This US Hispanic market is roughly equivalent to the entire Mexican GDP and growing at emerging market speeds without any of the emerging market sovereign risk

What fascinates me on this topic, however, is the lack of focus on US Hispanic SME's on behalf of the PE/VC industry. Much of the influx of capital in the segment (claimed by the Milken Institute to represent only 2% of all PE investments) has been in larger middle market deals and/or divestitures. Palladium (out of New York) recently raised a $300M fund, Yucaipa (in Los Angeles) touts a $500M vehicle, and Nogales Capital (also in LA) over $200M.

But, from everything I've seen (there is desperately little data on the segment), there are only about 200 to 500 US Hispanic companies with annual revenues in excess of $25M. And, unfortunately, many of these are not in segments that are of interest to most PE funds. Other than Hispania Capital (out of Chicago) managing a $75M fund or RGG Capital (in Dallas) with $25M, there appears to be very little SME focused private capital available. So, given that most of the several thousand US Hispanic companies are sub-$25M in annual sales, and that there is a clear trend of increasing household income & purchasing power over the next decades, I might weigh most of my efforts in underfunded Consumer Goods & Food Products, Financial Services & Banking, and Retail, Hospitality, & Distribution businesses. Deal sourcing may be a little more of a challenge, but who said making money was easy.

Carving new informational networks, attitudes, and strategies will be vital for continuing to propel wealth creation in the Hispanic enterprise economy and bridging the gap for rapidly growing, capital-starved mid-size companies seeking to finance thriving businesses.

Shouldn't this be done at the community level, fostering brand loyalty & economies of distribution, and where it matters most or where capital is most needed?

I have been actively involved with a handful of initiatives to address this untapped opportunity, and have plenty of data available if you're interested. Drop me a note if you'd like to chat.