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Sterling – which was named the nation's fastest-growing Hispanic-owned company by Hispanic Business in July 2002, on the basis of revenue growth over five years – is currently searching for an investor to assume an equity stake of as much as 30 percent in exchange for a cash infusion of between $10 million and $12 million.
Finding the right investor is more difficult than it may sound. As Mr. Garcia notes, Sterling's current capital needs are much too small to attract interest from large venture-capital funds. Moreover, the firm is intent on finding a strategic partner that shares Sterling's interest in the U.S. Hispanic community. The company would prefer to find a Latin American bank, but may consider a private equity source or a domestic commercial bank looking to penetrate the Hispanic market.
"It's the quality of the investor that's most important at this juncture," says Mr. Garcia, whose firm employs more than 400 people working out of 62 offices in the United States, Latin America, and Europe. "We want to become the leading Hispanic financial services firm in the United States."
Mr. Garcia readily concedes that Sterling is decidedly unlike most companies, in terms of both its accelerated growth cycle and its capital needs. The firm also enjoys a distinct capital market advantage by virtue of the line of work it's in. Sterling – which provides research in addition to investment banking and asset management and risk management services – has ready access to contacts and expertise that firms in other industries are typically forced to pay for.
"We haven't had the problems of a typical Hispanic entrepreneur because we have people working with us from the financial industry. We're a little bit unusual, but that's what we do for a living," says Mr. Garcia, whose company grossed $17.5 million in 2001 to rank number 227 on last year's Hispanic Business 500. The firm grossed $24 million last year.
Says Ricardo Rivas, head of investment banking at Sterling: "Charles is not your typical Hispanic entrepreneur. He has a lot of contacts both inside and outside the industry."
A former defense intelligence analyst, attorney, and White House fellow (see "Jack of All Trades," May 2001), Mr. Garcia founded Sterling in 1997, initially working out of a converted broom closet with a support staff of two. His startup capital consisted of $800,000 in personal funds and seed money from family and friends.
As the firm grew at a brisk pace, Mr. Garcia turned to his own network of financial firms to fund its expansion. Three years after Sterling's founding, he initiated the first of two rounds of venture-capital funding. CrossBow Ventures, which, like Sterling, is based in Florida's Palm Beach County, was the lead investor in both rounds, which together raised about $8 million. CrossBow still holds a minority equity stake in Sterling.
Today, Sterling isn't seeking expansion capital in the traditional sense – that is, to fund new facilities or infrastructure improvements – but instead is looking to "strengthen its balance sheet" as a means to attract new business.
Until now, the company has on occasion been unable to meet the minimum balance-sheet requirements of prospective corporate partners, and as a result has missed out on some lucrative municipal bond and IPO (initial public offering) deals, according to Mr. Garcia.
"We had to leave a lot of money on the table," he says. All told, he says he has spent roughly $10 million to grow his company over its first five years.
As for the relative ease with which his firm has been able to find capital, Mr. Garcia credits the staff he has assembled.
"We have been very fortunate. We have a very strong management team, and that has given investors a lot of confidence. That's the key, because investors really invest in people," he says.
Introduction and case studies written by Senior Editors Joel Russell and Tim Dougherty. Captains of Capital directory research by Business Economist Juan Solana and HispanTelligence® research staff.