Go Fund Her
Latina business pioneers Nathalie Molina Niño, Maxeme Tuchman and Ivelyse Andino.
Latina entrepreneurs are using equity crowdfunding to raise millions of dollars and dismantle systemic barriers
Editor’s Note: Systemic barriers have long kept Latinos from gaining financial traction and upward mobility. Now, amid a pandemic, they find themselves disproportionately affected by financial strain and job loss. Yet Latinos remain an important financial force, with buying power of around $2.6 trillion. Our series, “Keep the Change” shines a spotlight on Latinos working to close the wealth gap.
*Read about The Money Coach and how Latinos are taking care of their own financial health.
In recent years, equity crowdfunding has provided a solid new source of startup capital for up-start business owners, especially those launched by women and people of color.
But just what is equity crowdfunding?
It’s a government-regulated investment tool formally called Reg CF -- Regulation Crowdfunding -- and known more commonly as equity crowdfunding. It allows entrepreneurs to raise up to $5 million, once a year, from a larger base of investors in exchange for some form of equity (like ownership shares, convertible notes, or revenue sharing) in the company.
Before May 2016, investment in private companies was limited to accredited wealthy investors. Since the formation of equity crowdfunding, hundreds of thousands of untraditional investors have been able to join in, funding startups and small businesses across the country.
Companies who struggle to gain the attention of venture capitalists or traditional investors, but find they have less trouble explaining their value to colleagues and potential customers, have turned to this crowdfunding.
“There’s a lot of different forms of financing when you break them down,” said Nathalie Molina Niño, a “builder capitalist” at the investment strategy firm O³ and author of “Leapfrog,” a highly praised guide for women entrepreneurs.
“Equity crowdfunding is only one of them, but it’s the one where Latinas have a far higher likelihood of being successful,” said Molina Niño.
In addition to managing her own investments and businesses, Molina Niño advises entrepreneurs from varying industries and backgrounds.
According to data gathered by private capital market database PitchBook, only 2.2% of venture capital funding goes to female-founded teams, and less to female founders of color.
Traditional banking presents an equally discouraging picture.
A 2020 research study from the Stanford Latino Entrepreneurship Initiative, 20% of Latino-owned businesses that applied for national bank loans of over $100,000 obtained funding. For white-owned businesses, it was 50%. For loans of all sizes, Latino applications succeeded 51% of the time; 77% of applications from white-owned businesses were approved.
Molina Niño credits the success that some Latinas have found in equity crowdfunding to their wide circles of influence, especially when compared to their male peers.
“When it comes to Latinas, (equity crowdfunding) is the Holy Grail because our circle of influence and buying power is stronger than any other demographic,” she said.
A “circle of influence,” she said, comes from large family networks and Latinos’ collective buying power, as reported by the Latino Donor Collaborative.
A recent report analyzing more than 700 campaigns on Experiment.com shows women demonstrate higher rates of success at crowdfunding. Women were found to reach funding targets 57% of the time. Men reached crowdfunding goals 43% of the time.
Health care equity in the Bronx
Ivelyse Andino, CEO & founder of Radical Health, built her tech company in 2015 so she could help reshape health care and create a more equitable industry.
Ivelyse Andino is an Afro Latina health equity innovator born and raised in the Bronx. She is the founder and CEO of Radical Health, and a member of the New York City Commission on Gender Equity. Photo by Derek Fahsbender.
Andino is Afro Latina, raised in the South Bronx by her parents, both health care workers. She launched Radical Health after her mother was diagnosed with cancer and was denied coverage by her health insurance provider.
She combined her expertise in health care and her passion as a community organizer to create the first Latina-owned and -operated “benefit corporation” in New York City - a private entity meant to run a public improvement project, in this case in public health: the creation of care spaces, tech tools, and education to make health care more equitable.
During the Covid-19 pandemic, they also hosted virtual events to reflect on how the South Bronx community was impacted. In earlier years, they launched “Radical Relay,” a health app to empower pregnant women to ask questions and ensure equity in their health care.
“We make it easier for people to come together to have conversations that build trust and connections with online indigenous circles,” Andino said. “Letting people know their rights before, during and after health care by connecting clinicians, researchers, service providers and the community.”
Health.gov reports that 77 million people in the United States don’t understand their health care, and only 44% of Blacks trust health care to do right by them - that’s 20% below white people in the survey.
Andino said this lack of health fluency costs the health care system billions.
“When we’re still negotiating health care in a Bronx hospital on emergency Medicaid,” said Andino, “that’s when I decided we needed this business.”
Radical Health began earning revenue early on through contracts with companies and organizations with healthy budgets. They also partnered with the Obama Foundation, and then, in 2018, with the New York City Department of Education. In this run, profits went toward promoting the company’s resources, building a larger user base and developing an app.
Since its launch, Radical Health has grown to reach $500,000 in annual revenue. And the company’s capital raise -- funding secured from investors -- is approaching $1 million through crowdfunding.
“Ivelyse used crowdfunding to replace what the rich white Silicon Valley boys use as their ‘friends and family’ round (of selling company shares),” said Molina Niño, who advises Andino.
“Now she has a large medical corporation venture wing that’s going to be super interested in her because they think she was creative and got some money an alternative way, saying, ‘We love how scrappy she is.’”
“Suddenly investors wanted to talk to us, but what was missing was how my community could get in on it.”
Andino said she felt discouraged by traditional capital investment plans because, as a Latina, it seemed she was fighting an uphill battle.
Then, during the COVID-19 pandemic, something changed.
“For the first time people were talking about health and equity,” Andino said. “And with the racial awakening taking place, we decided as a team the time is now to raise capital and do this work on a larger scale.”
Andino also decided that she did not want capital from just any investor. She sought to ensure that the community that stood to benefit from her work was also able to invest in it.
Andino invited neighbors to her kitchen table. She wanted to hear, firsthand, the voices and opinions of undocumented immigrants, women of color, elderly, young people, LGBTQ people and others who probably never thought they’d have a seat at the table in discussions about their own health care destinies.
“Suddenly investors wanted to talk to us, but what was missing was how my community could get in on it,” Andino said.
She is not the only Latina employing equity crowdfunding to push for greater community involvement in businesses that impact Latino lives.
Crowdfunding and the playtime meetup app
Maxeme “Max” Tuchman is CEO and co-founder of Caribu, an interactive video-calling platform that helps kids enjoy virtual playdates with family and friends when social or physical distance keeps them apart.
The face of video communication changed dramatically in 2020 in the thick of the global pandemic. In the 17 months since most of the world entered some level of lockdown, a number of video communication platforms emerged, catering to almost every need. Caribu, founded in 2016, is among them. The Latina-founded and Miami-based company started with a goal of making video chats a more educational and interactive experience for kids. With so much home-schooling, and families stuck indoors, the platform grew in popularity.
Caribu, named one of Apple’s 15 Best Apps of 2020, is a leading ”educational family entertainment” platform for young children.
In the beginning, and with only $700 in her bank account, co-founder & CEO Maxeme Tuchman entered dozens of business pitch competitions and won more than $100,000 in prizes to formally launch the company.
Tuchman is a former public school teacher in Miami and executive director for Teach for America, an education nonprofit. With Caribu, she set out to design a video chat service that would keep families connected with each other around the world and across generations.
In 2018, Tuchman became the first Latina CEO, and second female chief executive, to raise $1 million in an equity crowdfunding campaign.
Two years later, after an additional round of fundraising, the total stands at $5 million -- so far.
Tuchman said she was especially proud of the latest funding round because the interest came from women, Hispanic and Black investors.
Leah Busque Solivan, founder of online freelance labor marketplace TaskRabbit, has also invested a noteworthy $1 million in Tuchman’s company.
“With Max, she didn't revert to crowdfunding,” said Molina Niño, who has worked with Tuchman. “She temporarily went to crowdfunding and then went back to the VC route because now she has traditional VC investors on her cap table.”
Caribu's customer base has skyrocketed. Its user base grew tenfold in just one 24-hour period in the early months of the pandemic.
No easy path to success
Well before their equity crowdfunding success, both Tuchman and Andino had run into many roadblocks as they followed traditional routes to capital.
“We applied for grants and loans,” Andino said. “We had a government contract pending but didn’t have enough cash to front the money to do the work, so I took out a credit card and asked our board members to loan us cash, though they didn’t have much.”
Want to learn more about equity crowdfunding and how it works? Here are some helpful online resources:
U.S. Securities and Exchange Commission: Regulation Crowdfunding (Reg CF)
Top Equity Crowdfunding sites:
Initially, Andino thought she’d turn to the usual venture capital marketplaces. But, with modest revenue, little traction and no product, she struggled to find buy-in.
She said traditional investors asked her questions like, “Do poor people even use cell phones?” They also advised her to become a nonprofit.
“I was stuck between a chicken and egg situation,” Andino said. “In order to build what they wanted, I needed someone to believe in me.”
She knew the bar was high. This sent Andino on a deeper search for investment help, which led her to crowdfunding. She saw it as a way for her community to reap the benefits of their early support, rather than the usual fundraising efforts she described as “extractive.”
“Imagine people trying to strike a compromise with you by making offers that you just can’t morally accept in exchange for their promise of success.”
Black and Latino entrepreneurs receive just 1% of startup financing, according to the Kauffman Foundation, a nonprofit organization focused on entrepreneurship and education.
The numbers highlight another barrier for founders like Andino: They need financial security in order to take on financial risks.
Tuchman compared her experience to buying a plane ticket and then being told you only have a 2% chance of making it to your destination.
“The negotiation process for that plane ticket is worse,” Tuchman said. “Imagine people trying to strike a compromise with you by making offers that you just can’t accept in exchange for their promise of success.”
Molina Niño added another cautionary note: While equity crowdfunding is good for gaining widespread support from nontraditional business investors, it is vital to vet them to avoid problems down the line.
“The traditional venture capitalist view is that [equity crowdfunding] is messy,” Molina Niño said, adding that traditional investors use this messiness as an excuse to reject some startups.
“But let’s be real, I think Mark Zuckerberg would have gotten money for Facebook,” she added, emphasizing the systemic bias in investing that Latinas are up against.
“It’s a much higher bar for Latinas,” added Radical Health’s Andino. “I’m asked to prove, show, tell and do so much more for a fraction of the slice of pie.”
Although it’s an uphill battle, Andino said it is well worth fighting, especially alongside the right investors.
“If I’m going to raise money, and people are going to own part of this company,” she added, “why can’t Latinos participate in that legacy and not just be the recipients of a product but share in the ownership of it?”
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Brandon Gomez is a segment producer and digital contributor at CNBC. He was named the National Association of Hispanic Journalists’ “Next Generation Journalist of the Year” in 2017. He is a member of NLGJA: The Association of LGBTQ Journalists, and has covered the push for diversity in small businesses, financial literacy, and how business can better serve underrepresented communities.