Cesar Madrueno came to the United States in 1980 at the age of 18. Although he spoke little English, he had a strong drive to succeed. Fueled by his grit and entrepreneurial spirit, he developed his passion and expertise in manufacturing electrical harnesses. Electrical harnesses are essential equipment not only for the automotive industry, but also for agriculture, semiconductors, and various other industries.
Currently, he is the founder, president, and CEO of Golden State Assembly Inc. Madrueno's goal is to become an industry leader in its field, and it is well on its way. In 2020, the Golden State House generated more than $125 million in revenue and employed more than 250 people. Last year, the company was acquired by an investment group and Madrueno remained CEO.
Madrueno is one of 5 million U.S. Latino business owners who have founded companies that solve customer problems, create jobs, and generate wealth in both Latino and non-Latino communities. They represent an often overlooked but rapidly growing part of the U.S. economy.
Over the past 15 years, Latinos have started businesses faster than all other demographic groups in the United States. These companies are younger and smaller than the average company. But compared to white-owned businesses, they grow revenues and create jobs at a faster pace for all Americans, not just Latinos. And these jobs come with better benefits and growth opportunities for employees. Our country stands to benefit tremendously from the growth of these businesses founded by inventive and resilient entrepreneurs determined to succeed.
Although Latino entrepreneurs have made significant gains, structural barriers continue to prevent them from reaching their full potential. A new study from the Stanford Latino Entrepreneurship Initiative (SLEI), based on a national survey of more than 10,000 U.S. executives, finds that two of the most alarming obstacles to growth for Latino businesses are access to capital. It shows that it is about securing access and contracts with businesses and governments.
We found that Latinos face significant challenges in obtaining both debt and equity financing. In terms of debt, Latinos do not receive loans as frequently or in the same amounts as white-owned businesses, even if they are as well or better qualified on a broad range of business metrics.
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If US Latinos were a country, they would have the world's fifth largest GDP and grow faster than the US economy.
It would be easy to ask the government to regulate to ensure a level playing field. However, we believe that the banking industry can strengthen and regulate itself as a way to mitigate further involvement by government agencies. Commercial lenders must more transparently publicly report the aggregate results of their lending decision-making processes and agree to undergo regular industry-led audits of their final lending decisions. Given the magnitude of financing opportunities offered by this high-growth sector, publicly leveling the playing field for Latino entrepreneurs will benefit not only them, but also all financial services institutions and the American economy as a whole. It will be very, very useful.
On the capital side, more than 10% of all Latino-owned employer companies are in the technology sector, but less than 1% of VC funding went to Latinos in 2021. Transparency in VC investment decisions should also be required.
A recent SLEI study found that while Latinx businesses receive smaller contracts from businesses and governments than white businesses, they also take significantly longer to close deals. All contracting institutions, public and private, should be required to publicly disclose their performance on these two dimensions and justify any resulting differences. Accountability is fundamental to ensuring fair access to a growing number of corporate and government contracts.
The bottom line is that Latino-owned businesses, on average, have significantly lower annual revenues than white-owned businesses. There's an opportunity here. If the 4.3 million Latino businesses in existence that year had the same average annual revenue as non-Latinx businesses, they would have contributed at least an additional $2.1 trillion to the economy, according to the most recent data available.
To put this into perspective, in 2020, U.S. Latinos generated approximately $2.8 trillion in GDP (13% of U.S. GDP in 2020). If US Latinos were a country, they would have the world's fifth largest GDP and grow faster than the US economy.
Closing the revenue opportunity gap for Latino businesses takes time and effort. Since founding the Latino Business Action Network more than a decade ago, we have worked to accelerate the growth of Latino businesses through education, research, and building an ecosystem that fosters growth and connection. But now is the time to work together to remove barriers and empower Latinx entrepreneurs to reach their full potential. Latino business owners demonstrate a determination to succeed. Supporting their continued growth will be a valuable investment for our economy.
