Latin America is fast becoming a hotspot for tech startup activities in recent years, attracting huge investments from top Silicon Valley firms. And Brazil, Argentina, Mexico, Chile and Colombia are some of the most preferred destinations.
Since making an initial investment debut in Brazil in 2011, Silicon Valley firms have continually deployed funds into Latin American startups. In 2015 alone, VCs have invested $2.1 billion in over 667 deals with $594 million invested across 182 deals. Information Technology (IT) has emerged as the largest recipient of venture funds amongst all industries in the region, with $500 million invested over 126 transactions in 2015. FinTech accounted for almost 30 percent of the sector’s investment in 2015 and 40 percent in the first half of 2016.
LatAm has its own version of Upwork which is focused on the Hispanic market, called Workana, and it recently got $2 million funding from Australia’s number one job site SEEK. They have their own version of eBay called MercadoLibre, which is the region’s most visited e-commerce website now valued at around $6.5 billion and the region’s only internet company listed on Nasdaq.
Home to a burgeoning population of internet users, the Hispanic region currently has 50 percent of its population on the Internet, but it makes up for 20 percent of Facebook users and 38 percent of WhatsApp users. The region is also the fastest in the world in terms of smartphone adoption – thanks to affordable Android phones.
FinTech Opportunity – About Half of Latin Americans Don’t Have Bank Accounts
With about half of LatAm’s population currently without a bank account, the region presents huge opportunities for Fintech startups. It is however important to note that all these developments are coming on the heels of some of the most severe episodes of economic and political crisis that have plagued the countries in the region in recent times.
But economic and political instabilities don’t deter VCs who love risks. They have poured millions of dollars in funding rounds into Latin America’s innovative Fintech startups. For instance, Nubank, a leading Fintech company headquartered in São Paulo, Brazil, has raised a total of $178.3 million in five rounds from nine investors with $80 million raised recently in a series D funding round led by VC firm DST Global. Its previous funding rounds have also been led by top VC firms such as Sequoia Capital, Tiger Global Management, Founders Fund, and Goldman Sachs. Founded by David Velez in 2013, Nubank has evolved into a global player in the Fintech space servicing over 170 countries today.
Kueski, an online lending platform serving Latin America’s middle class also raised a total of $15.11 million in equity in 4 rounds from 11 investors led by investors such as CrunchFund and Variv Capital. Agricultural technology (AgTech) is a niche in the Latin American tech industry that has remained unexplored over the years. For instance, while Brazil ranks as the second largest market for agricultural products in the world, AgTech is yet to take off in the region as it attracted less than 1 percent of venture funding that came into the region since 2011.
With that as backdrop, whether you are an innovative entrepreneur seeking to explore new business, angel investor, or venture capitalist seeking new investment opportunities outside Silicon Valley, the tech ecosystem in Latin America presents vast opportunities waiting to be explored. What more, the region boasts a large pool of talented and skilled entrepreneurs, a low cost of living and an enabling environment created by government programs and initiatives aimed at promoting venture capital for startups in the region.
Latin America is fast becoming the next emerging market frontier for tech startup activity. You can’t afford to be left behind in this ongoing trend that has seen top Silicon Valley firms investing heavily into startups, and innovative entrepreneurs pitching their tents in the region.
Here are some tips if you’re planning to enter or expand your business in LatAm:
Know the Promising Industries
Aside from Technology, IoT, and Fintech, you might want to take a look at other promising industries like creative industries and fashion – since there is a thriving market for high-class clothing. You can also enter the education and training industry since there is growing demand for English language courses and programs across both academic and professional levels. The healthcare and medical devices industry is also burgeoning in the region.
Protect Your Trademark
Protecting your trademark in international waters should be one of your topmost priority. There are widespread cases of corruption and fraudulent activities in the region as with many parts of the world. Aside from doing your due diligence with regards to the country and tech niche of your choice, it is good practice to register your trademark in international waters and to register for an international domain name. To register your domain, you can use companies like Marcaria which provide domain registration all over the region. By having a country-specific domain in the LatAm region, you can easily do e-commerce or generate a clientele for your products.
An international domain name can quickly open up doors for you in the tech space as search engines are more inclined to return locally relevant searches. But each country has its own sets of rules – sometimes a local presence or address is needed or a local. But a key tip is that the domain registrar or provider should be ICANN-registered or else you risk losing your domain when the registrar closes its doors for business.
Know the Time Required to Start a Business
Knowing the number of days it takes to start a business should form the core of your considerations when deciding your country of destination in the region. This is because it will affect your ability to have a “first mover advantage” in any burgeoning industry. The time required to start a business is different for each country. According to the World Bank, it takes on average 6 days to launch a business in Chile, 8 days in Mexico, 9 days in Colombia, 25 days in Argentina, but a staggering 80 days in Brazil. As such, you should be prepared to use the time spent waiting for the completion of the registration process to familiarize with the local business landscape and put other relevant structures in place.
By Kendrick Mendiola