What it's like to be a Latino entrepreneur in Silicon Valley

SAN JOSE, Calif.—Alex Murillo leans forward in his seat, sipping coffee from a shot glass and waving his hands as he talks. He points to the screen of his MacBook Pro, explaining the genius behind Audive, the mobile application he is developing that allows users to record cover songs and mix tracks with music enthusiasts around the world.

“This is the secret sauce,” says Murillo, hitting a key on his computer that fills the air with the sound of a man singing in Italian. “You can bring in vocals from a guy in Italy or you can bring in the flamenco guitar from Spain.”

Murillo has made this pitch about three times to potential investors in Silicon Valley since launching his start-up this summer. He came up with the idea and polished his pitch with the help of Manos Accelerator, a tech incubator focused on growing Latino-owned start-ups in America’s high-tech capital. He was one of six entrepreneurs chosen from a pool of 83 applicants to take part in Manos’s second accelerator program, which ended in August.

Murillo moved to San Jose from Mexico with his wife nearly three years ago to take his chances in Silicon Valley. He had tried to launch a real-estate listings application back home, he said, but the business culture there was too resistant to change. Now Murillo and his five-person team are looking for an angel investor to give them enough money to get Audive started. He is also studying to get his CPA license, just in case the start-up plan doesn’t pan out.

“That’s the backup plan,” says Murillo, 32, who worked in corporate finance for Siemens in Mexico. “It’s a dream for an entrepreneur to come here to Silicon Valley.”

The odds are against him. Less than 1 percent of venture-backed start-ups have a Latino cofounder, according to numbers from venture capital clearinghouse CB Insights. The lack of diversity at these investment firms and high-tech company has earned Silicon Valley nicknames such as the “white boys club.”

“It’s very hard to tap into those circles,” says Edward Avila, CEO and cofounder of Manos Accelerator. “If you’re a Latino who didn’t go to Stanford University or the Ivy League schools, it’s a challenge. And Latinos don’t typically have wealthy friends and family to get them started.”

Avila, 45, knows this firsthand. The San Jose native comes from a working-class family: His Costa Rican mother worked the assembly line at a fruit cannery, and his Mexican father was a shoe cobbler. Avila was the first in his family to go to college and has since worked for two decades in Silicon Valley as a human-resources executive for high-tech companies such as Western Digital and Phillips Semiconductors.

Avila, who launched his own start-up in 2011, says he remembers feeling like the only Latino entrepreneur in the room at networking events. His start-up never took off, and Avila decided to focus on supporting other Latino entrepreneurs.

“Many people thought I was crazy,” he says. “To me it was a gut feeling. With all the Latinos we have in the U.S., you can’t tell me there aren’t entrepreneurs doing creative and innovative things.”

Avila started Manos in 2013 with two cofounders: Sylvia Flores, a chemical engineer, and David Lopez, a computer technician (and Jennifer Lopez’s father). The group chose the name “Manos,”—the Spanish word for “hands”—to spread the message that Latinos can do more than manual labor.

Their mission caught the attention of Google, which has partnered with Manos by providing mentors, resources, and some operating funds. Last fall, Manos brought its first group of entrepreneurs from seven start-ups to its shared office space in downtown San Jose. Participants developed business plans, marketing strategies, and elevator pitches. The 12-week program ended with a Demo Day at Yahoo’s headquarters in Sunnyvale.

“I would really like to see a Juan Fernandez up there with Steve Jobs and Mark Zuckerberg,” says Avila.

The lack of diversity in Silicon Valley gained national attention this summer when high-tech companies such as Apple and Yahoo released their workforce demographics for the first time. Their hiring reports show that Latinos and African-Americans make up less than 5 percent of their employees. The companies disclosed the numbers in response to mounting pressure from media and civil-rights groups.

DEMOGRAPHICS AT TOP TECH COMPANIES, BY SHARE OF OVERALL WORKFORCE

Tech companies’ most recent employee data shows that white and Asian employees make up the lion’s share of the Silicon Valley workforce. White employees represent more than half of the workforce for each company shown here and up to 60 percent in some cases. But other than Apple and Amazon, which offer more low-wage jobs in their stores and warehouses, representation for black, Hispanic and multiracial employees at other companies rarely hits 5 percent.  (Source: Compiled from company equal opportunity reports)

Alejandro Quintero worked for years as one of the few Latino engineers at Silicon Valley companies such as Cisco and Logitech. In 2012, he decided to quit his job and work full time on getting his own company off the ground. Last year, he and his partner launched Cuestioname, a social platform that allows people to pose questions to government officials and other leaders. Social-media users can then vote on questions they would like answered, giving government agencies an idea of which questions they should respond to first.

Quintero, 40, participated in the second accelerator program at Manos, which ended in August. The Venezuelan native said Manos has helped him make connections and get exposure in the competitive Silicon Valley tech world.

“The way it works in the valley is, it’s all about building trust,” says Quintero, a telecommunications engineer. “We have a bigger ladder to climb because we are a minority that hasn’t had a big impact here the way Asians and Indians have.”

The next step for Manos is developing a network of angel investors willing to take a chance on their entrepreneurs. Getting that initial investment of $50,000 to $100,000 is crucial for the start-ups to succeed, Avila says.

This month, Manos held its first three-day boot camp for prospective investors as part of the Manos Angel Network. The group of seven investors learned the basics of investing in early-stage ventures and heard pitches from 11 entrepreneurs, including Quintero and Murillo. At the end of program, they all voted on which start-up would get their $50,000 investment.

The winner was Silicon Valley-based Survmetrics, which allows businesses to create customer surveys designed for smartphone users.

“We were very impressed,” says Alejandro Estrada, a Visa executive who is looking to become a full-time angel investor. “It seemed like a good strategy for a market that already exists.”

Two other Manos start-ups are also negotiating contracts with angel investors, Avila says.

Though Audive or Cuestioname didn’t attract support from these investors, Murillo and Quintero didn’t seem too upset. Launching a start-up in America’s innovation capital is not supposed to be easy, Quintero says.

“The job is not glamorous at all,” he says. “You have to go and pitch and pitch again, because you never know if an investor will be calling you tomorrow. You just have to keep going.”

National Journal recently visited Silicon Valley to see how immigration and technology have transformed the San Jose area. In the coming weeks, Next America will publish a series of stories about the people who are finding their place in America’s wealthiest region.

Janie Boschma contributed to this article.

Republished with permission from National Journal, whose Next America project explores the political, economic and social impacts of profound racial and cultural change facing our nation.