By Dr. Carolina Hernández, Epidemiologist and Founder and CEO of Colorchain
As a Latina and US-based entrepreneur who successfully grew a B2C (business to consumer) startup through bootstrapping, let’s just say the journey wasn’t easy. I was told by a serial entrepreneur I wouldn’t go anywhere without one million in funding. Venture Capitalists (VCs) thought my startup was interesting but always said they only wanted to invest in tech. And, as a family business, VCs often believed I’d used my parents’ money to fund my venture.
The reality in the US is that Latin American founders receive a disproportionately small share of venture capital funding. For example, in Q3 of 2022, they only received 0.63% of venture funds. Despite this, Latino-owned companies have been thriving without raising institutional funding (like BairesDev and HealthAtom), and Latinas particularly have been breaking barriers across industries.
Bootstrapping a startup is one of the most effective ways to build a self-sustaining and successful business. So, here are some of my learnings, touching also on managing personal finances and building a personal brand.
1. You Won’t Overcome Bias, But You’ll Overcome Expectations
The key to success lies not in erasing prejudices but in challenging and reshaping perceptions. It’s about proving investors and serial entrepreneurs wrong through your actions and dedication. By leading with authenticity and embracing your heritage, each milestone achieved, barrier overcome, and positive feedback received serves as a testament to your ability.
When I was looking for funding, I was a young Latina entrepreneur with a non-tech business. I was also a physician with an MBA, but that was overlooked. So, VCs automatically thought I didn’t have operational experience. That’s why, just by taking the leap to start my business, I overcame people’s preconceived perceptions and worked towards a more inclusive future.
2. VCs Aren’t Very Interested in Retail and Manufacturing
Global VC deal volume has decreased by 37% overall. But it’s also public knowledge that VCs have preferences: They recently shifted focus from solely investing in crypto projects to now placing emphasis on AI.
So, if your startup doesn’t fall into this category, reaching a group of investors is already more difficult, as they are searching for fast returns. What’s more, in October 2022, a report from Hello Alice showed that most Latino businesses are in retail and e-commerce, followed by beauty and wellness, food and beverage, and professional business services. Not quite on a VC’s radar.
Latino entrepreneurs are also increasing their presence in IT consulting, software development, web design, and digital marketing. But, because of the current uncertain funding scene, investors often prefer to return to familiar networks or entrepreneurs who are most like them.
3. Accurate Financial Records Are Key
I immediately set up a strict structure of how money flows to the company, especially with operations in the US and Colombia. I had to distinguish between an investment and a loan, too. So, to help optimize financial operations, I used accounting software like Siigo and Carta.
During negotiations with investors later on down the line, it is important to have everything easily accessible to show what you’ve invested in your company.
Also, you rarely pay yourself when you are bootstrapped. But I had a whole plan mapped out for when we’d be profitable and how I would pay myself. If you’ve forfeited a salary for years, negotiate a fair, market-rate salary to compensate when investments eventually come through. I say this because when founders create projections or cap tables, they often define the shares for investors but dilute themselves.
4. A Strong Personal Brand Shapes Your Journey
From the beginning, I knew my medical apparel fashion company would be a brand, not a product. Because if you start with a product, it can be more difficult to turn it into a brand later on. Obviously, that depends on the industry. So, ask yourself: Does the market you are trying to enter value brands? If you are not sure, get a marketing expert on board ASAP.
The crucial points for building our brand were understanding our niche, finding our true customer pain points, and failing fast. You may not execute everything exactly as planned, but I was able to follow our business plan about 90% because I dedicated time to designing for customers first. The specifics about how and when changes would happen were adaptable, but significant inflection points were never wholly unexpected.
For example, our initial business model recognized that we were a premium and niche brand but didn’t fully acknowledge our potential to be a luxury brand. Before the pandemic, brick-and-mortar stores were disappearing, and many brands moved to e-commerce. But post-pandemic was another story. Being vertically integrated with a quality product in a market with traditionally low-cost items, we decided to open up a series of boutique retail stores—giving medics another reason to want to pay a slight premium.
5. Entrepreneurs Need Partners, Not Just Investors
Bootstrapping makes you realize your worth; therefore, your vision of your business evolves. After bootstrapping for four years and showing I could sustain growth, I realized I needed a real partner to be more actively involved, help us grow, and feel passionate about the project.
To achieve this, I have been taking up every networking opportunity possible and attending events at Cornell University and Babson College, since warm introductions are the way to go. Now, we’re searching for investors with shared values and different skill sets to fill knowledge gaps—and we’ll do thorough due diligence before committing to a partnership.
Instead of looking for VCs investing in female fashion, we are now diving deeper into intersections (for example, between fashion and sustainability) and targeting our messaging.
I also look at VCs who invest in Latinos and funds that specifically offer opportunities for my demographic. To control where capital flows, we also need more Latino LPs contributing to funds that support Latino founders.
Realizing the realities of the funding space, ensuring you are on top of all your financials, and derisking your business by having a network of supporters who also give actionable feedback are all crucial when bootstrapping. And while you work this all out, make sure to celebrate small successes, whether it is lovely customer feedback emails, having retail returns at a record low, or even influencers wanting to represent you.
Dr. Carolina Hernandez is a physician, clinical epidemiologist and holds a master’s degree in business administration. She’s ranked among the top five Colombian doctors for the national medical board exams. She has also managed programs and businesses in large corporations, such as Johnson & Johnson. Hernández is the CEO and founder of Colorchain, a sustainable medical apparel brand that creates medical textiles such as robes and uniforms.
