Mexico City — Just as streaming services were about to see a surge in popularity as a result of the Covid-19 pandemic in 2020, Mexican citizen Isabel Rafferty launched CanelaTV, a streaming service of Spanish-language and Latino content for the Spanish-speaking audience in the United States.
A platform with Latino content was lacking in the US, says the Mexican entrepreneur, who has more than a decade of experience in the media and digital industry, and she is seeking to exploit the potential of the Latino audience, composed of 62.6 million Spanish speakers, according to the 2021 US census, but faces competition from well-positioned streaming platforms such as Netflix, Prime Video and Disney Plus.
Building CanelaTV required a lot of capital, Rafferty told Bloomberg Línea , explaining that the OTT and streaming business is very expensive, and she resorted to financing from venture capital, approaching 138 investment funds, all of which turned her down.
“They were white men investing in white men, and I was a Latina woman with a thick accent”
Isabel Rafferty, CEO of CanelaTV
According to a 2021 Bain & Company study, Latino-owned companies receive less than 1% of funding from leading venture capital and private equity investors.
“Raising funds was a very difficult thing for me and was extremely key to growth,” Rafferty says. “They say that, in general in the US, less than 2% of all capital goes to women or people of color, and then if you focus on Latina women it’s almost nothing, it’s impossible to raise funds.”
Rafferty had to shift her search to venture capital funds investing in minorities or women, and she began to receive capital. In total, along with its seed round, CanelaTV has raised $35 million.
In February 2022 CanelaTV closed a Series A round for $32 million, the largest ever received by a Latino startup in the United States. The round was led by Acrew Capital and Angeles Investors, with participation from Link Ventures, TEGNA Ventures and Samsung NEXT.
BBG Ventures, Mighty Capital, Reinventure Capital, Portfolia’s Rising America Fund, Alumni Ventures, Powerhouse Capital and BMO have also invested in the company, and which helped it grow tenfold from round to round, Rafferty says.
Prior to her incursion into entrepreneurship, Rafferty founded Mobvious Media, a company now owned by Spanish media conglomerate Grupo Prisa, and which targets Hispanic audiences in the United States, a project that gave her the experience and knowhow to create Canela Media.
Rafferty says the name came about because “Latinos have cinnamon, we have an extra touch, and our skin is cinnamon colored”.
Historically, Univision and Telemundo have been the leaders in Latino content in the United States, so Hispanics had no other options, a business opportunity that Televisa and Univision sought to exploit in 2020 with their content alliance.
In this regard, Rafferty said that “the market is very large and does not have to have a monopoly, besides, the flexibility that a startup has is interesting because it can innovate more quickly than a large company”.
Taking into account the overall US audience in 2022, 34.8% prefer to consume streaming content, but if only the Latino population is taken into account, 43.6% prefer it. And Latinos significantly outpace the streaming appetite of all other ethnic groups, according to market research firm Nielsen.
Latinos represent 18.9% of the total US population, and who are hungry for a supply of Latino series, telenovelas, movies and other productions.
CanelaTV, Rafferty explains, is not limited to entertainment content, but also offers a daily newscast, the first Spanish-language newscast outside cable TV, and which costs an average of $370 per month.
CanelaTV added a sports newscast to its news offering during the Qatar 2022 FIFA World Cup, and over the last year its programming has grown to original productions, such as a morning magazine program, its own series and a children’s channel, Canela Kids, which launched a few days ago in the United States, Mexico and Colombia, the three markets where the streaming service currently operates.
In the fourth quarter of 2022, Canela produced more than 500 hours of original content.
OTT and the power of the Latino audience
The Mexican-born entrepreneur reached an audience of eight million users in the company’s first year, due to its differentiator in the US market, and the goal is to reach the Latino migrant audience, as well as Latinos who were born in the United States.
So far, the Canela app has been downloaded by 42 million people.
However, the important thing is that the audience is involved with the content so that advertisers invest in advertising, Rafferty explains, with a monthly captive audience of eight million viewers.
Rafferty explains that CanelaTV’s growth is due to the streaming boom, and which has resulted in investments moving from broadcast television to OTT (over-the-top content), and away from traditional media.
The entrepreneur says that the moment when she launched CanelaTV, at the beginning of the pandemic, “was very stressful, but now that I think about it, it was the perfect moment to launch a streaming company, because in the United States many Latinos had cut cable and did not have access to quality content in Spanish”., and which helped CanelaTV to grow its audience quickly.
However, CanelaTV still has a way to go, as top-ranked streaming services such as Netflix and YouTube are among the most popular among US Hispanics, with this audience spending 24% and 57% more time on such platforms in the last year, according to Nielsen.
In Mexico, in its first week of launch in 2021, CanelaTV reached an audience of four million viewers.
CanelaTV’s catalog is totally free, with a business model similar to that of broadcast television, as it is supported by advertising from brands in different sectors, such as Coca-Cola and McDonald’s, Toyota and Hyundai, Amazon, Microsoft and Target.
The service is similar to Pluto TV or Tubi, which have been well received by the US public.
And although Mexico is an important market for CanelaTV, advertisers are still not as committed to OTT services as they are in the United States, Rafferty says.
“If not this year, from next year onwards I feel that many of these investments will go to the OTT side”, she says, and adds that she is waiting for the moment when the OTT market matures in Latin America to expand to more countries besides Mexico and Colombia.