Firm Publications Header



Latin immigrants drive U.S. entrepreneurship

Friday, July 24, 2015

Yet another study has underscored the importance of immigrants to startup businesses in the United States. A study published in May 2015 shows that immigrants, in particular Latin immigrants are the driving force behind the U.S. startup economy.
According to the Kauffman Index of Startup Activity 2015, commissioned by the nonprofit Kauffman Foundation, immigrant entrepreneurs, and especially Latino immigrants, are increasingly valuable to the nation's economy because of their high rates of entrepreneurship and self-employment. In fact, according to the study, immigrants tended to start new businesses or otherwise be self-employed at twice the rate of native-born Americans.
Census data from 2012 shows that immigrants accounted for 12.9 percent of the U.S. population, yet immigrant entrepreneurs were the driving force behind 28.5 percent of U.S. startups in 2014, an increase from 25.9 percent in 2013 -- and more than double the rate compared to 1996.
Moreover, the share of new businesses created by Latino entrepreneurs in 2014 increased from 20.4 percent in 2013 to 22.1 -- also more than twice the 1996 rate. As of 2013, Latinos made up about 17.1 percent of the U.S. population, up from just over 10 percent in 1996. The rising numbers for immigrant and Latino startup creation is not necessarily all good news for the U.S. economy and for immigrant opportunity.
On one hand, the immigrant startup boom reflects increasing opportunities for entrepreneurs. The Kauffman Foundation notes that such "opportunity entrepreneurs" -- neither unemployed nor looking for a job before starting a new business -- accounted for 79.6 percent of the total number of new entrepreneurs.
However, the trend also reflects the barriers still faced by immigrant groups, in general, and Latinos in particular, when it comes to finding employment beyond what they can create for themselves.  While mom-and-pop businesses may be fueled by entrepreneurial spirit, they don't generally reach the levels of success of other capital-backed startups. Instead, Latino immigrant businesses are more likely to be family-based, and less likely to be funded by outside sources, which is an increasingly crucial need for expanding a startup beyond its initial phases.
Still, even small businesses make an impact on the local scale, and immigrant entrepreneurs are crucial to that part of the economy. Figures from the Fiscal Policy Institute and the Council of the Americas, as cited by Wall Street Journal, show that, over the last three years in most of the country’s 50 largest metropolitan areas, the net growth of new local businesses – such as restaurants, salons, and local retailers – was 100 percent accounted for by immigrant entrepreneurs.

21700 Oxnard Street, Suite 860, Woodland Hills, CA 91367 T 818.435.3500 F 818.435.3535