For entrepreneurs seeking cash to grow their companies, the chances of tapping the private markets is slim to none.
That doesn't stop them from asking. An estimated 125,000 companies sought venture capital in 2005, yet fewer than 3,000 firms received funding.
The good news is that venture firms are investing more money today than they have since the dot-com downturn in 2001. The National Venture Capital Association reported that it expects U.S. venture firms to invest $27.6 billion in 2007, about $2 billion more than last year.
And while the Hispanic market is not a niche that professional investors typically target, as the number of Hispanics has grown, so has the number of potential equity investors.
"In the past year we've seen a very significant amount of interest and it's from private equity funds that are interested in companies benefiting from the growth of the Hispanic market," says Alex Ryshawy, a partner at merger-and-acquisition go-between Mission Capital Group LLC, in Miami. "Now you're getting the whole financial community in Wall Street becoming aware of the growing Hispanic market and its purchasing power and growth."
While the growing interest in the Hispanic market is encouraging, the amount of money being invested in minority-owned enterprises is nothing to crow about, say some industry experts.
"In the economic markets you have these inefficiencies where you've got 28 percent of the population which is black and Latino, yet only 1 percent of private equity capital is going to entrepreneurs from these communities," says Duane McKnight, a managing partner at Syncom, Inc., a 30-year-old venture capital fund specializing in minority-owned businesses.
COMPETING FOR FUNDS
Despite the increase in venture capital fundraising over the last five years, private equity investments in minority enterprises hasn't changed.
"Essentially what you have is minorities trying to compete with majority entrepreneurs who have substantially more resources at their leisure," Mr. McKnight says. "So you really have to know your markets and your opportunities, you really have to laser focus on what you're trying to do in order to compete. It's difficult to compete head-to-head with these guys who are going to be much more highly capitalized."
Some Hispanic investors say they are better equipped at dealing with this market than their more conventional counterparts.
"I think the population of Hispanics has a tendency to prefer to deal with fellow Hispanics who understand their business initiatives beyond just being a commercial lender at a bank," says Manuel Henriquez, a managing partner at Hercules Technology Growth Capital, a publicly traded specialty finance company in Palo Alto, California.
Hercules focuses on life sciences and technology. However, it has not invested in any Hispanic-owned or focused businesses.
"We haven't done a pure Hispanic-type investment yet, but we're certainly looking at them somewhere down the road," Mr. Henriquez says. "We have two fluent Hispanic individuals on staff, me being one of them."
New York City's Palladium Equity Partners also says it is uniquely positioned to tap into this market because it understands the communities where the businesses come from and can access the capital markets. The firm works closely with a network of entrepreneurs in the U.S. Hispanic market to help spot investment opportunities.
"We've certainly seen a myriad of Hispanic companies that have strong management teams and networks and tremendous financial plans, such as Promerica (Bank)," says Marcos Rodriguez, Palladium's managing partner.
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