The Latino Investor Marketplace

By Johanna Hoyos

ALTA Growth Capital Founded in 2006, is a private equity firm comprised of multi-cultural and fully dedicated group of professionals who focus on buyouts and growth stage investments, capitalizing in established companies in Mexico, Latin America (LATAM) and U.S. with growth potential. The objective is to achieve high returns through capital gains by investing in a diversified portfolio and improve margin efficiencies. Scott McDonough and Javier G. Teruel from Alta Growth Capital, explain their mission, investment objectives, fund goals, and distinguishing characteristics, setting them apart from their competitors, when helping the future of Latino-owned businesses based in the U.S.

Scott McDonough is one of the founding cofounders of the private equity firm. His has over 20 years of experience focused in private equity, venture capital, entrepreneurship, Mexico and United States law. Javier G. Teruel, is the chairman at ALTA Growth Capital, with 44 years of experience in business management, private equity investing and impact investing in various countries throughout the world. He made significant contributions during his tenure at Colgate Palmolive’s worldwide strategy, restructuring and business program, and business development group in Mexico, the Dominican Republic, the Caribbean, Central America, and New York. Currently, both Scott and Javier serve actively on Boards of several different organizations utilizing their extensive experience in Mexico and Latin America in private equity investments and extensive transactional experience in the United Sates, including venture capital investing.

The purpose of ALTA Growth is to share the collective knowledge, strategies and solutions in order to help Latino-owned businesses take informed action to help accelerate the pace at which they grow and scale. According to the State of Latino Entrepreneurship, “Latinos are starting business at a faster rate than the national average across several industries, growing 34% over the last 10 years compared to just 1% for all other small businesses.”

This statistic supports that Latino-owned businesses in the United States are growing yet the scaling of these businesses is not scaling effectively in the near future. They are growing in quantity, not in quality because they do not have additional revenue and financing to get to the next level of growth. This is where a private equity firm like ALTA Growth Capital comes in, to change that by helping Latino businesses with higher level of performance, higher growth, better futures for their businesses and family.

The Added Value EquationALTA Growth Capital aims for significant added value from their investors to their companies who they invest in, all aligned with theinterest of helping underserved Latino-owned U.S. businesses. A relationship with an investor(s), the company and ALTA Growth Capital must be a relationship of real added value. The private equity firm not only gives the company access to capital but also can help them grow their business by helping develop a strategy for growth and bring them best practices to expand their business. For instance, sharing best practices in sales, such as how to approach their customers, how to disseminate information to stakeholders, how to best present themselves to customers and investors.

ALTA Growth focuses on opportunities in sectors that are benefiting from growing middle class Latinos in the U.S. such as, retail, healthcare, financial services, education, industrial and manufacturing. Their first funds started in Mexico because of its tremendous platform for manufacturing. Part of the attractiveness of Mexico is the macro situation, with a large, stable economy and large population, strong trade relationships with the primary being with the U.S. Scott believes it’s one of the largest trade relationships in the world, and in the macro standpoint, there is limited capital in Mexico which provides an interesting opportunity for investment. Most of ALTA Growth Capital’s investors come from the U.S. who have invested in Mexico in the past and some who have also invested in Europe.

In the process of investing in their first and second funds (in fourteen companies) they had now raised a third fund. While exploring and venturing in new geographies and new products to grow the business, they found a business need to invest in the U.S. Latino market. It was a natural expansion for them to use what they were doing from the investments with Mexico and apply them into the U.S. with the Latino/a market. It’s a tremendous opportunity with the fastest demographic in the U.S. Also, Hispanic businesses in the U.S. are a segment of the market, that is underserved. This opportunity would benefit this segment for additional resources of capital, to help finance their growth and expand their future. The U.S. Hispanic consumers, industrials and manufacturing markets are other tremendous investment opportunities where they foresee high returns and where they have most experience in. Retail, healthcare, education and financial services are other areas of interest. Another category is cross border opportunities because of the dynamic commercial relationships of Mexico and other parts of Latin America, which are quite robust for expansion of companies in LATAM, Mexico and the U.S.

The main sources of capital for their third fund are similar to the sources coming from their previous funds in Mexico and Latin America, which tend to be large institutions that manage various assets such as pension funds, family offices (wealthy family groups), foundations, endowments, funds of funds, typically, large institutions deploying capital from various fund strategies. Once ALTA Growth Capital analyzes particular businesses, they go out and talk to potential investors who are interested in investing in private equity. Once they reach a certain amount of capital from investors, they then are responsible to decide on how to administer that money and where to deploy those assets.

Challenges, Standstills and Gaps ALTA Growth Capital’s focus is to invest in established businesses who are operating for a long period of time, who have been able to generate profitability - to accelerate their growth. They do not invest in start-ups and new businesses. The firm looks for investments from a minimum threshold of $10 million and above, the sweet spot is $10-$30 million range. There are many types of investments, they could either do a buyout investment, where they buy the entire company or where they invest capital for growth initiatives where a minority or majority stake of the business is taken, also called growth equity.

Given the recent thriving growth in the number of Latino-owned businesses, it follows generational change, the ability to pass down ownership (family histories of entrepreneurship) and equity across generations, is an important cultural consideration. The business owners are at a standstill, where they have grown their business, they have found their market though they don’t know what direction to take to reach higher lengths. Perhaps this is due to not having access to capital and/or simply do not have the competencies in their management team to take it to the next level of growth. That is where a private equity firm like ALTA Growth Capital comes in, they seek and guide companies to grow faster so that the full benefits of their businesses can be realized. Leveraging their understanding of Latino family businesses (by seeing immediate clear gaps and needs) and having strong ties with capital providers, provides opportunities to build the relationships needed to facilitate funding and capture profit.

One of the distinguishing characteristics that stands out from ALTA Growth Capital compared to other firms is, they do not require a majority stake to invest in a company. They are aware that some business owners are hesitant to pursue this type of capital because they fear losing equity in their business. For that reason, they are very comfortable with minority investments, allowing flexibility for the current owner(s) of the company to continue to have control of their interests, if that is what is important to them.

Strategies As private equity investors, they are long term investors, when investing in a company it’s for a period of several years. They bring to the company an effort to develop the vision while thinking about where the company is today and how they envision the company being in 4-5 years. Deciding what steps to take to get to their long-term vision. It’s a process which provides long term thinking, a benefit when working with a firm like ALTA Growth Capital, versus worrying about what to do the next month or next quarter. Teruel says, “There are no specific size fits all, our strategies are adapted for each of our clients.” Strategies are adapted for each of their clients, its dependent upon company size, capital needs, distinct business and sales needs, as well as levels of performance and awareness. ALTA Growth Capital enjoys working with business owners who have a certain level of ambition, who are not satisfied continuing with the way they are currently doing things, rather would like to take it to the next level. “It takes a certain level of ambition to reach the next level of business growth potential,” says McDonough.

The FutureThere is no doubt the challenges of the COVID-19 pandemic have dramatically changed the way many companies do business. The world changes so quickly resulting in fluidity with the economic market, resulting in attractiveness, riskiness and danger with investing trends. The key question here, is how does a company adapt and stay up at top of these developments, to take a step ahead on opportunities correlated to positive funding outcomes. The benefits of partnering with a private equity firm is to be able to receive advice about macro trends, to see how those trends affect your own business and other different businesses to then know how to adapt accordingly. Certain business models have changed dramatically as well. Take shopping malls, due to this pandemic, they have found a need to change by embracing innovative ways to keep customers to come back by rethinking the role of the store. Teruel believes there are currently huge business opportunities in logistics, tourism, and service areas. Unquestionably, a business to succeed, must adapt to meet the marketing needs, have a clear business model, access to appropriate capital, strong cash flow management, and a clear direction/long term vision of where their growing business is heading.

For more information on Alta Growth Capital, visit https://altagc.com.

LLMMarch 31, 2022Comment