Ilse Calderon is an investor in OVO Fund, where she specializes in pre-seed investments in capital-efficient markets. Prior to OVO, Ilse worked for Silicon Valley Bank for a year, switching between consumer and software teams.
It's not a secret, though Hispanics are unprecedented growth opportunities for the US economy. Most startups do not know that Hispanic youth means an abundance of major spending years (translation: dollars for business). The average age of Hispanics living in the United States is 28 years. Meanwhile, the average age of his white counterpart is 42 years. Almost one in five people in the United States identify themselves as Hispanic.
The few companies that notice Hispanics and their massive purchasing power (~ $ 1.5 trillion) are usually old companies that do below-average work in capturing Hispanic consumers. In addition, they are not aimed at the most valuable member of the Hispanic community – what I call "Hypercultural Latinx. ”There are tons of unspent dollars here.
As an investor and member of the Hispanic community, I am confident that the startups that solve problems for this Hypercultural Latinx member will have the potential to start businesses with high-risk returns.
Who is the hypercultural Latinx?
The Hypercultural Latinx is a second generation Hispanic that is 100% Hispanic and 100% American. And while this can sometimes lead to misunderstandings and conflicts with her white colleagues, it also means that she excels in creating a pseudo-culture in which she can thrive best. It brings its unique properties to this self-created culture – a culture in which its customs, language and values shine through. In addition, this person, who often identifies as Gen Zer or young millennial, is a fanatic of mobile communications. After all that In all socio-economic classes, their disposable income is used disproportionately for screens (of all kinds) and technical toys.
I mean, just go to your Hispanic friend's house: you probably have more TV screens than people who live in that household. A confusing indeed 29% of the US Hispanics were planning to buy a new television just before the Super Bowl (guilty as accused). As a reference by the 30% of all Americans who only wanted to buy a TV in 2017 2.8% bought in the days before the Super Bowl. Heck, when my family moved, we bought TV screens for each room before the living room was set up. Technology – especially newer technology – is much more tempting to Hispanics.
The hypercultural Latinx should be in the foreground for risk investors and founders. She wants to test the untested and is therefore likely to cross the early majority gap. This makes them an ideal customer segment for startups.
Startup founders and VCs are missing equally. As an investor, I am often frustrated by the lack of founders and investors who are committed to exploring target group segments outside of cookie cutters. We may not need another vertical consumer product that resolves a half-hearted pain point for the well-educated white woman with a salary of over $ 100,000 who lives in NYC, SF or LA. However, we need more products for the hypercultural Latinx, which by the way outperform their white colleagues in most categories. In the same way Fifty beauties exists to solve the makeup needs of mainly black women, we need that for the hypercultural Latinx population.
Beyond the numbers, investors should be interested in Hypercultural Latinx as they are technologically advanced trendsetters who use social media more often than their white counterparts. For example, is a Hispanic youth 87% more likely Use WhatsApp. They also produce an exorbitant amount of videos on Tik Tok. Several Hispanics-based hashtags from Tik Tok, such as B. #hispanicmom, are extremely popular and generate more than 44 million views. For reference, the most-followed Tik Tok stars are like Addison Raehave just over 47 million followers. In fact, a Hispanic Tik Tok queen, pinkhas already reached Pop culture climax.
Facebook ad experiment
If you are more interested in quantitative data, you should know that paid spending on this hypercultural Latinx can result in lower click costs and higher engagement. I did a two-week experiment on Facebook to prove this hypothesis. I created a landing page for a fake sun protection brand, Bounce Skin, with a fake first product, an SPF nebula. I created a few ads. Then I ran ads on Facebook that target two audiences: young Hispanic girls (the hypercultural Latinx audience) and white girls. The average click cost for young Hispanic girl audiences was $ 0.06 per click. For white girls, it was $ 0.33 per click. Of course, my experiment was limited, but it showed that the hypercultural Latinx is out there, demanding content that tells the story of her life. (Further information can be found in this medium post Office).
Why was the tech community decades ago in this Hispanic segment?
Three main reasons: fear, the below-average state of Hispanic marketing and white men cannot refer to the hypercultural Latinx.
fear. There is always a risk of offending the same target group that you are trying to captivate. Take a look at the beauty industry and the often related race problem. The world is not white, and beauty brands who believe this is the case have had PR nightmares. Even beyond beauty, tech startups fear that negative press will shorten their company's life. However, it is this gap that creates opportunities.
I encourage the right start-ups to authentically follow the hypercultural Latinx. Even though older companies may have heavier balance sheets, they do not have the power to attract this young, bicultural consumer. Let's just say that no 18-year-old will rush to the world's Walmarts to look for desirable goods. They are even less likely to search Walmart.com for content.
The state of Hispanic marketing in the United States is ridiculous. In fact, there is a cemetery with failed marketing attempts for the Hispanic community. Recently there was a Kmart advertisement for Mother's Day that mixed two Spanish words (Mama + Namaste) to accidentally create a word that was translated into a very vulgar and offensive word. Given the "one size fits all" approach of most Hispanic marketing companies, it's no surprise that they keep doing something wrong. However, when someone is best positioned to take Hispanic marketing out of the 20th century, it's small, nimble startups with no bad marketing or image problems in the past.
Perhaps the biggest reason the tech community is not approaching the hypercultural Latinx is because most venture capital backed investors and investors are white men. These white men cannot possibly relate to the life experiences of young, biracial teenagers and young adults living in white America. Last year, nearly 2% of risk funding went to Hispanic founders – those who are best placed to really catch the eyeballs and purses of this Hispanic youth. On the investor side, it is even worse if only 1% of risk investors identify themselves as Spanish.
The solution is complex and frankly I cannot offer a clear solution. However, we can start building goodwill and non-transactional relationships with the role models that Hypercultural Latinx admires. I've noticed that these models are usually under the radar, such as Glenda. We as investors can also diversify our top-of-funnel deal flow to include more underrepresented founders. Finally, founders with a reach and network of Hispanic youths should consider delving deeply into the pain points of hypercultural Latinx life.
The new darling of the VC world will solve problems for the hypercultural Latinx
To become this new VC darling, founders approaching the hypercultural Latinx should consider two suggestions: a platform game and an army of social leaders.
The platform approach involves creating an organization of brands that later spit out new brands horizontally or vertically. One example is the company behind my overpriced favorite lemon drink. Iris Nova, or glossary team spin-off, Arfa.
The second approach, an army of social guides, is to combine elements of affiliate marketing with a kick-ass referral program to create loyal fans who are financially motivated to sell your products. Sequoia supported Stella & Dot expanded their version of social guides, which ultimately became their most tenable strategy. In addition, in a post-coronavirus world, this strategy is a way for more and more workers to get back on their feet.
Ultimately, hypercultural Latinx demography is only increasing, as are their needs. For founders who are really interested in the Hispanic market in the USA, look out for this hidden generation. Search for investors beyond solutions to your own problems. It's not easy to win the multi-faceted Hypercultural Latinx, but startups that do this successfully attract my attention and investment money.