The State of Latino Entrepreneurship: A Discussion

Mark L. Madrid, CEO of the Latino Business Action Network, and Pedro A. Guerrero, CEO of Guerrero Media and Publisher of Hispanic Executive, discuss their experiences as graduates of the Stanford Latino Entrepreneurship Initiative’s Education-Scaling program

Pedro A. Guerrero (left) and Mark L. Madrid (right) discussing their experiences as graduates of the Stanford Latino Entrepreneurship Initiative’s Education-Scaling program. Photo: Gillian Fry

Perhaps the ultimate form of leadership is business ownership, and the Latinx community is rich with entrepreneurs.

As a publication focused on leadership, Hispanic Executive is introducing a new focus area: entrepreneurship.

Hispanic Executive Publisher, Guerrero Media CEO, and entrepreneur Pedro A. Guerrero discusses the state of Latino entrepreneurship with Mark L. Madrid, CEO of the Latino Business Action Network.

Both are graduates of the Stanford Latino Entrepreneurship Initiative’s Education-Scaling program, and in different ways, their work follows a similar mission: elevating the prosperity of the Latino community. Step into the conversation between these two entrepreneurs . . .


Pedro: Mark, kick us off.

Mark: Absolutely.

There’s an iconic leader by the name of Professor Jerry Porras. He’s the only tenured US Latino/a professor in the history of the Stanford Graduate School of Business (GSB). In 2012, he convened Stanford MBA blood, Latino/a blood, high-profile leaders like Victor Arias and Phil Pompa. They came together and they birthed LBAN, the Latino Business Action Network.

Very intentionally, the word “action” was put in our name from the very start, so that we would be positioned as walkers, and not talkers. I couldn’t be more honored to work with LBAN’s cofounders and existing board of directors. Our chairman, Victor Arias, chairman emeritus Jerry Porras, and board members are leading us on a strategic path that will change the course of history for Latinos in the United States.

They approached John Hennessy, the former president of Stanford, who’s now the chair of Alphabet Inc., and he stated, “This is the right thing to do. This is the right time to do it, and Stanford is the place to do it.” That sprung this collaboration.

LBAN is a 501(c)(3) nonprofit organization that collaborates with the Stanford GSB to champion the Stanford Latino Entrepreneurship Initiative (SLEI). LBAN funds research and education impact programs at the Stanford GSB.

The collaborative’s first order of business was a bedrock of research. I believe this group was displeased with the deficiency of solid research on Hispanic businesses locally, regionally, and nationally. They said, “We’re going to disrupt that research deficiency, and it’s not going to be a copy-paste job. It’s going to be something robust, up to the Stanford code of academic rigor and its Tier 1 research institution status.”

So began our research, which later turned into The State of Latino Entrepreneurship report, which SLEI produces annually.

The research started showing that only 2-3 percent of our ecosystem of Latinx entrepreneurs across the country is scaled (earning $1+ million of annual gross revenue). So the nonprofit, LBAN, said, “We’re going to go out and recruit these scaled businesses.” At that time, there were about 4 million Latino-owned US businesses, so take 2-3 percent of that.

So began the executive education side—a scaling program through Stanford GSB Executive Ed. It’s a beautiful manifestation of the collaboration once more.

This is a very prestigious program and our laser focus continues to be targeting the 2-3 percent ecosystem of scaled Latinx firms for participation. That’s where you come in, Pedro—we created partnerships with entrepreneurs like you to be a part of this scaling program.

“The research started showing that only 2-3 percent of our ecosystem of Latinx entrepreneurs across the country is scaled (earning $1+ million of annual gross revenue). So the nonprofit, LBAN, said, ‘We’re going to go out and recruit these scaled businesses.’ . . . This is a very prestigious program and our laser focus continues to be targeting the 2-3 percent ecosystem of scaled Latinx firms for participation.”

Pedro: Yes. A good friend of mine, Lou Nieto, introduced me to SLEI.

And my first memory of the program was the first conversation I had with the mentor I was paired up with, Steve Bernardez. It was great to hear his perspective on certain challenges that I was up against. He was a partner at a venture capital firm in California and very much in the tech space. We’re not a tech company, so it was good to hear his perspective on certain challenges or ideas that I had. It was a different level of experience and voice that I hadn’t experienced. So, that was very helpful.

I also thought the online course was phenomenal—I still talk about it today. Specifically Professor Huggy Rao’s class on how to scale excellence.

I’ll give you one example directly from that online course: Rao was sharing the lessons of a construction company that made a bold declaration around a zero-injuries on the job. It was a statement that defied the realities of the construction industry. But it was a bold statement that was intended to scale behavior, one that did not tolerate injuries on the job. This declaration of “zero injuries” championed by the company’s CEO rallied the culture of the construction company around a mind-set that did not tolerate injuries whatsoever, and the rates of injuries on the workforce started to decline tremendously.

I’m sharing this example because my creative team remembers a similar tactic we employed at Guerrero Media—I wanted to make the statement that we’re going to have “zero errors” in our content. I remember proposing this idea and the pushback was essentially, “Errors happen, boss. There’s no way that we’re going to never have an error.” But I was convinced that this statement would work and replied, “No, we have to put it out there. Zero errors.”

So we made this declaration a year ago and it was reported back to the leadership team that the most recent issues of our magazines were sent to press with zero errors.

I attribute that success directly back to SLEI and what I learned via Professor Huggy Rao’s online course.

I really took away applicable tools on how to scale things. Such as the concept of an ‘air war’ and a ‘ground war’—I talk about that all the time. I give speeches to the company, which is the air war, and I challenge my management team by asking them for their ground-war plans to scale our message—because without one, I tell them, “You’re going to walk out of here, and you’re going to forget about it. So, what’s our ground war to follow the air war? What are we going to do in our day to day? How are we going to coach? How are we going to interact with our people? What subtle cues are we going to put around the office to support our campaign?”

So, I’ve taken a lot from SLEI and applied it hands-on at my company.

Mark L. Madrid and Pedro A. Guerrero talking
Photo: Gillian Fry

Mark: Man, I appreciate what you just said.

The lessons that resonated with you, those are very powerful. . . . I see the growth mind-set awoken.

Over the course of the last three-and-a-half years, we’ve graduated six cohorts: 432 graduates that account for $1.6 billion dollars in annual gross revenue—contributions to the American economy. They employ over 45,000 people across thirty states and Puerto Rico.

I was in the second cohort. I wouldn’t be sitting here today in this national leadership position if I hadn’t graduated from the program myself.

I put everything into it, and I was surrounded by inspiration in action: Latinx entrepreneurs from across the US converging in a classroom at the Stanford GSB. It was unlike anything I had ever experienced!

And when Professor Porras and Huggy Rao assumed their positions as lecturers, we all understood that this was a big deal.

We have the secret sauce. An amazing millennial tech entrepreneur who gets a partnership with Mark Cuban on Shark Tank for his vegan-dog-food business can sit in the classroom with somebody who’s owned a restaurant for twenty-five years. That, to me, is earth-shattering and distinct.

“I was surrounded by inspiration in action: Latinx entrepreneurs from across the US converging in a classroom at the Stanford GSB. It was unlike anything I had ever experienced!”

Pedro: Right! I think on the surface you may think, “Well, what would I learn from someone who has run a restaurant for twenty-five years?” And vice versa, “What am I going to learn from some guy that’s been on Shark Tank?” But there’s so much knowledge in those two different and distinct experiences—both entrepreneurs are also, by the way, Latino. That’s rich.

Mark: I think we’ve provided the ideal forum for those two cases to actually network with each other. It speaks to our priority of national ecosystem development. We’ve focused on research, on scaling Latinx businesses, and now we’re nurturing this ecosystem of scaled Latinx firms and infusing that environment with mentors and capital providers to make it flourish.

Pedro: I think that’s also what’s needed when it comes to scaling—inspiration.

Mark: You’re right about that.

Pedro A. Guerrero and Mark L. Madrid talking
Photo: Gillian Fry

Pedro: Certainly, businesses have to have a model that is scalable. But, do they have that inspiration? And do they have that motivation to truly get after it?

One of my closest friends in Chicago—who is a fellow entrepreneur—is at the helm of a company with a clip of growth that is so inspiring. We started in the same place, and for a variety of reasons his company has become a rocket ship, exponentially growing.

For me, having other business owners to connect with—friends who are entrepreneurs and incredibly successful—is directly impactful to my own company’s growth. It motivates me to see people around me succeed.

I think that’s what one of the interesting dynamics of what you’re doing at LBAN. You are including inspiration from each other into the dynamic that makes up the program, and, more importantly, it’s inspiration that is distinctly Latino.

And that’s a whole other dynamic that I think is incredibly important and one that you and I share: recognizing Latino business success.

Mark: Pedro, you hit the nail on the head. I just spent a weekend with Marnie Forestieri, a program graduate who has early-childhood learning academies. She said, “When we were in the program, Mark, we had six of these academies. Now, we just struck a deal to open fifty over the next ten years.”

Read Marnie Forestieri’s story

Pedro: Incredible! That’s scaling!

Mark: That’s right. She had the right proposition. When people hear about this Latina in Orlando that’s disrupting access to education at the early-childhood level—not even the Einsteins of our country have been able to figure that out. It’s where you’re not worrying about socioeconomic status, or in which neighborhood you reside. She’s literally going to transform that whole thing, and it was a Latina who sat right there, with the fourth cohort of our program.

Multiply that story by the 432 program graduates. We’re really excited about how we’ve stuck to our core purpose, mission, and goal. Our goal is to double the number of $10 million, $100 million, and $1 billion Latino/a-owned companies in the US by 2025. And we do this with the core purpose of strengthening the United States by improving the lives of Latinos.

We feel like scaling our businesses is so critical to a wealth-building proposition. These components contribute toward a better life, increased access and opportunity, and increased prosperity. Many of our businesses are struggling. As Latinos and Latinas, we all know about the family-owned business. Whether it’s our own business, or our tía’s or tío’s, or our cousin’s . . .

I’ll take it to a personal level. My parents were on the cotton fields as migrant farm workers in the sparse area of the southern plains, but then my dad said, “No, that’s not for me.” He was a very industrious fellow—started drawing blueprints, picked up welding, then became the go-to welder in the Texas Panhandle.

Pedro: That’s fantastic.

Mark: But you know what? He’s almost eighty now, and I’ve realized that he didn’t know about becoming a certified minority-owned business, and he didn’t know about franchising and preserving-wealth strategies. I see him selling what he can to earn extra cash, and it breaks my heart.

“My dad was a very industrious fellow … [he] became the go-to welder in the Texas Panhandle. [Now,] I see him selling what he can to earn extra cash, and it breaks my heart.”

Back to our purpose of improving the lives of Latinos through entrepreneurial education . . . if my father, even in the later stages, could’ve learned maybe about franchising, legal structures, preparing for the future . . . I just think about the “what if?” We are in for the long haul to create more prosperity for our Latino entrepreneurs.

And with greater prosperity comes greater access. It’s just the bottom line. You get into better schools. You get better education. You are introduced into more networks. It’s all connected, and we’ve drawn out this roadmap of prosperity. It’s very important to us. And it is an American economic imperative.

Pedro: It very much is.

Mark: Because the better we do, the better this whole society and economy will be. Society needs to get it, that we’re the seventh-largest GDP in the world, that we’re dominating workforce development. Who will be filling the jobs of the future? We will! We’re dominating all spaces. Economic development, workforce development, education enrollment, not only pre-K through 12, but now in community colleges and universities. We feel this lane of entrepreneurship is going to help us shape a narrative of Latinos that is positive.

Pedro: I love that story you just told, because it reminds me of some of the stories I have from my own upbringing. One thing I don’t think we talk about enough—or perhaps value enough as a society—is the immigrant experience. It’s aligned with entrepreneurship.

Being an entrepreneur is stepping into the unknown, because the future ahead isn’t guaranteed— you’ve got to make it happen. Think about the people that get up and leave Durango, or Chihuahua, or El Salvador to take their families away from their home, from the familiar, and step into the unknown.

There is no more of an entrepreneurial experience than the experience of the immigrant.

I have, in my family, two of those types of experiences, one where my grandfather came to the US first as a Brasero and then, once the program ended, as a factory worker at a cannery, in Hayward, California. That’s where he set up shop, brought his family, and it’s where I was subsequently born. On my father’s side, my great-grandfather—my tata—was an entrepreneur, and he was self-taught, like a lot of entrepreneurs then and now.

Mark: Exactly!

Pedro: He started to package and sell tamales, which then became the Rosarita Food Company. He eventually sold the company sometime in the 1970s. He was very industrious and self-taught, and he was able to scale up a food business and then sell it for, apparently, $4 million. He then took those earnings and distributed it amongst the ninety or so people in the extended family. What could have happened if he had, for instance, figured out how to manage that capital so that it could last for generations? Would there have been a different type of family narrative?

That is, I think, one of the critical things that’s going to impact Latinos on the whole. That type of financial education. You have a trailblazer who is able to sell their company and then perhaps put in place known strategies to maintain that wealth and grow it. You now have a Latino family that has more access to personal family wealth using financial insight that has been more common, historically, among other demographic groups.

Mark: That’s right, that’s right. Generational wealth.

Pedro: Generations. Regardless of what you may think of this economic concept, politically—at the end of the day, that is what has propelled certain communities over others. And what Latinos need to be doing in greater frequency than they have historically.

“Generational wealth. Regardless of what you may think of this economic concept, politically—at the end of the day, that is what has propelled certain communities over others. And what Latinos need to be doing in greater frequency than they have historically.”

Mark: That’s right. I revere everything my father’s done. He’s one of the smartest people that I know, and he didn’t get past the eighth grade. I think if he would have had the resources and had access to some of these things that we are discussing, man, we would be set for generations!

It’s important for us to make sure that Latino businesses are in a position to succeed. With the advent of online retail and such—we’ve got to be ahead of that, as well. So, we want our Latino/a businesses to also produce more jobs. The way you do that is with capital.

We’ve relied traditionally on internal sources of funds—checking, savings, and friends and family. But we’ve got to build relationships with capital providers that are really going to help us close the opportunity gap that we have, which is $1.47 trillion. That’s the difference between what Latino-owned businesses earn and what non-Latino-owned businesses earn. In order to close that, we’ve got to get more capital in our Latino entrepreneurs’ hands.

That’s just education and preparation. That’s also, on the other side, asking our capital providers, “Have you shifted your dynamics when it comes to understanding this marketplace?” Not necessarily saying, “Are you going to disrupt all your underwriting criteria?”
I have a fourteen-year banking career that started on Wall Street, so I know the pendulum of underwriting criteria—especially after the Great Recession of 2008—that swings from time to time. But it’s really understanding the needs of the clientele that’s rising at a higher tick than any other group in the country: Latino/a-owned businesses.

Consider this: during the Great Recession just over a decade ago, business formation for non-Latino-owned businesses was -2 percent, while Latino-owned was 47 percent. You can discern why appreciating and cultivating this Hispanic cohort is an American economic imperative.

I think LBAN—through the collaboration with Stanford GSB in championing SLEI—is definitely at the table with lending institutions when it comes to debt. I’m very excited about that.

Then there’s this world of VC and angel investing. It’s very sexy and appealing, right? But, there’s also a chasm—there’s a bridge that needs to be connected here. We need to make sure that our Latino/a entrepreneurs are VC-backable.

Here we go again, where LBAN’s literally at the epicenter, and we’re working on technology and other implementations of having a readiness tool for VC-backability. Anyhow, think about that—we’re going to take that stake in the ground with private equity and crowdsourcing and SBA lending. It’s a giant responsibility, but who else is doing this, at this degree of sophistication? We are!

Mark L. Madrid in discussion with Pedro A. Guerrero
Photo: Gillian Fry

Pedro: You talked about preparation. I talked about inspiration. I think it really comes down to activation.

How do you activate your network in a way that’s going to lend itself to help advance your own personal strategy, your company strategy?

When it comes to raising capital, as an example, I’ve literally asked a friend who had experience raising capital: “How did you do it?”

I had met this one particular friend for coffee and he shared with me an idea: he wanted to build the largest sales consultancy company in the country, and he was looking to raise $40 million. I remember asking him, “How do you do that?” He said, “Just tell people. I just told them what I’m doing, and they’d tell other people. Eventually, that comes back to me.”

And so, he did just that; he raised $40 million and launched his sales consultancy, which became, within three years, a $100 million firm. Mind-blowing, right?

But, it’s just that simple. He’s just talking to people. He’s just letting them know what he’s doing. He had a deep network, but the tactic was that simple.

What’s interesting, and perhaps—at least from my experience—unknown is the question I hear often: “I have this network. Now, what do I do with it?” I think it comes down to talking to people, sharing the vision of your organization, the idea of where you’re headed, what’s unique about it, what’s interesting, what you’re looking for.

I recently met with a friend who leads an investment company—and is Latino, by the way. He said, “I meet with Latinos all the time. They want to meet with me. I sit down with them, and they don’t know what they’re asking for. I ask them, ‘What can I help you with?’ And they don’t know what they want.”

And I think that our Latino business community as a whole needs to practice asking for exactly what they want, and telling people what they need.

I think that it’s something that LBAN can help with, to share best practices and experiences with other owners that are trying to figure out the whole capital game.

Mark: True. That is so true. To activate networks is critical. I think there’s also a correlation to just marketing yourself appropriately. We now have our entrepreneurs submit a one-pager and a pitch deck. That, in and of itself, comes back to what you were saying: “What are you presenting? Who are you?”

Pedro: Yes, “Who are you?”

Mark: And that exercise, as individuals, is difficult.

Pedro: It’s very difficult!

Mark: Right? We have to do that on our own accord—how to distinguish yourself as an individual, how to create your elevator pitch, and all that. So to do it from a business perspective, it’s sometimes a challenging exercise for the entrepreneurs.

Pedro: I would agree with that completely.

“We need to pump our movement with velocity … to mobilize better. We need to take the opportunities we’ve described in this conversation, and do it with vigor.”

Mark: I would just say, we need to pump our movement with velocity. I love when Sol Trujillo talks about velocity. I’m like, “Amen, brother!”

If we don’t have velocity in this whole movement, during this critical time . . . interpret that as you may, but we’ve got to step up and really show ourselves in the space that we have earned the hard way. To assume this position as Latinos, as the seventh-largest GDP in the world, that’s a big deal! That’s a BFD! It really is, and I’m so darn proud of it.

At the same time, we just need to mobilize better. We need to take those opportunities that we’ve described in this conversation, and we need to do it with vigor. I’m overwhelmingly energized and excited about our community, the future of this country.

Pedro: I agree with that. Yes. Velocity. I love that. I think really leveraging these Latino networks, too. That’s something that I would like to see happen more often, whereby there’s just that extra connection that happens because you’re a part of LBAN.

Mark: That’s right. We have a mantra: “Do business with each other and get business for each other.”

Pedro: You want velocity? That has to start happening more.

Mark: Indubitably!


Related Links

SLEI Unveils Its 2018 State of Latino Entrepreneurship Research Report

New Report: The Latino Contribution to US Economic Dynamism