Diversity and Opportunity within the Latinx Market
By: Angeli Agrawal
Here at Chingona Ventures, we’ve followed the growing influence of the Latinx population for some time — in many ways it’s woven into our origin story: Samara Hernandez, our GP, is Mexican-American, and founded our firm with the goal to invest in overlooked businesses, many of which are companies founded by or serving Hispanics or Latinos.
This year, as we watched the results of the recent presidential election unfold, we reflected on the tremendous diversity that exists within the Latinx community. The Atlantic reported that “again and again, political analysts have underestimated the diversity among American Latinos,” — and we couldn’t agree more. We started Chingona Ventures to invest in overlooked businesses and founders, and we believe the next wave of opportunities for investors and entrepreneurs will be in unpacking the diversity found in the Latinx community, better serving these individuals as they continue shaping the United States.
Latinx Community & Trends
If we start digging into the numbers, we can see the sheer volume of people that we reference under the umbrella term of Latinx. Latinos are the largest minority in the United States, representing over 60M people in 2019, a number that’s grown over 16% since 2010. Over half (54%) of the Latinx population lives in just three states: California, Florida and Texas.
When we look at the breakdown of country representation, the three largest groups have origins from Mexico (36M), Puerto Rico (5.7M) and Cuba (2.3M). Political pundits often refer to the Latino vote as one block of people (specifically a group that has left-leaning preferences), but nuance definitely exists. For example, 58% of Cuban Americans are registered or lean towards Republican ideology, as the party is perceived to be tougher on socialist and communist regimes. Mexican Americans overwhelmingly voted Democrat in the 2016 election. Puerto Ricans typically vote Democrat, but political participation is much higher on the island than it is in the mainland U.S. The issues that Latinos care about are in part based on their country of origin, rather than the categorization they’re grouped under when they arrive in the U.S.
Political tendencies, geographic location and country of origin are just a few ways of sifting through the diversity within the Latinx community. But there are a multitude of other trends that also show both the power and uniqueness of this group as it relates to business:
- Media Consumption — Latinos consume media at disproportionately higher rates to the rest of the population across TV, smartphones and apps, and radio (for example, 96% of consumers tune into the radio at least once a week). They also often prefer programming that blends both Spanish and English, a trend that Chingona Ventures’ portfolio company Suma Wealth has successfully tapped into.
- Buying Power — The buying power of the Latinx population is expected to reach $1.9T by 2023, a huge number but one that fails to capture varying income levels based on geography or country of origin: Argentinian Americans have the highest income level of any Latino community in the United States, but represent less than 1% of the U.S. Latinx population. Their median income is almost $20K higher than the median Mexican American income, a group that represents the lionshare of Latinos in the U.S.
- Educational Attainment — Recent numbers suggest positive upward trends for educational achievements in the Latinx population. Almost 40% of Latinos ages 18–24 were enrolled in college in 2014, compared to 22% in 1993. Nearly half who go to college enroll in a public two-year school or community college, the largest share of any race or ethnicity. Challenges still exist however: 66% of high school students who enter the workforce after high school cite family support as their primary reason for not continuing education. Educational attainment is something this group desires but finding solutions that allow them to pursue higher education while supporting family do not often exist.
Investable Opportunities
We believe the uniqueness and diversity within the Latinx community we see today represents an incredible opportunity for investors and entrepreneurs. While there are plenty more opportunities than can be listed in this article, a few stood out to us based on our research and previous investments:
- Leveraging Language — 71% of Latinos in the United States speak primarily Spanish or a combination of English and Spanish at home. Language might be one of the few ways that companies can reach across the diversity of the Latinx community, and we’ve already seen portfolio company Encantos do with their products. As the number of second and third-generation Latinos increases, we’re also watching to see if language continues to be a connector for later generations.
- Harnessing Specificity for Buying Power — We already noted the tremendous and growing buying power of Latinos, but we have yet to see solutions that are tailored to specific communities based on country of origin and their needs. Price points that reflect the median income of the target customer, or focusing on specific geographies and what their needs might be, are ways we could see companies looking to target in this area.
- Young and Hungry — Many writers (including our friend Ilse Calderon) have written about the Gen Z Latinx consumer. Latinos have the youngest population of any ethnic/ racial group in the U.S. Companies that can find ways of targeting these consumers, who are at the peak of their buying and working years (their median age is 28) will be able to build multi-year customer relationships.
- Social Media Engagement and Shopping — Latinx consumers are extremely social shoppers, leveraging social media to research and see what their friends and communities think about particular products and services. 79% of Latinos shop for groceries with another person, and 33% agree with the idea that they buy things that a friend or neighbors would approve of. Our portfolio company Reel has leveraged this trend — 60% of their customers are Black or Latinx, based on the fact that they target individuals that shop differently, aren’t interested in taking on more debt, and are interested in creative ways to engage with their brand. Companies that take advantage of this highly networked community will find it easier to grow and scale their business.
We believe — and the data shows — that the Latinx market is one of the most overlooked opportunities in business. It’s no longer a “niche” market but rather a thriving and diverse group of people in the United States with increasing influence and unique needs that companies can serve. As we’ve seen from our own portfolio companies, as well as the research that we’ve done, anyone that’s not looking at this market is missing one of the biggest opportunities in 2021 and beyond.
Citations
The Atlantic
Nielsen Report
Pew Research Hispanic Population
Pew Research Facts on Latinos in U.S.
Pew Research Cuban American Voters
Five Thirty Eight Latino Voters
A note on terminology
You’ll notice in this article that we interchange the words Latinx and Latino , and we want to take a moment to explain why and what we understand the meaning of these terms to be.
- Latino/Latina refers to people of Latin American descent living in the United States. This includes Brazil but excludes people from Spain.
- Latinx is a gender-neutral term often used to replace Latino or Latina and is used to refer to a person of Latin American ancestry.
- Hispanic refers to people with ancestry from spanish-speaking countries, including countries in Latin America (but not Brazil) as well as Spain.
