Latin America’s days behind the curve when it comes to startup private investment are now in the rear view mirror. We are currently seeing an unprecedented amount of VC funding flood in to the region at a rapid pace. Similar to the tech giants of Silicon Valley we have here in the States, along with China’s tech hub, Shenzhen, Latin American cities are in the process of transforming into hosts for life changing technologies and innovations. If you take a look at the pure dollar volume of VC funding in to countries like Colombia and their poster child Rappi delivery service, which has recently obtained the coveted “unicorn” status ($1B+ valuation), or Brazil, with their NuBank (raised $400m in one investment round), it is clear to see that investors have been getting more optimistic every day about this region and the opportunities that it presents.
Rise in Latin American VC Funding
There are numerous factors that lead the substantial uptick in Latin American VC funding. Arguably the largest factor is the growing rate of smartphone adoption across the continent, coupled with higher internet connectivity rates overall. There is also a new wave of talent potentially staying in the region to work remotely in wake of this year’s pandemic. Retaining talent for Latin American tech firms has been an uphill battle in the past, due to wages for jobs in software engineering and similar roles being up to ten times higher on average in the United States, compared to what Latin American firms have been able to offer. With talent staying local, it gives Latin American firms more of a chance to poach employees away from North American tech firms down the line, along with significantly reducing human capital flight, great news for the region. The growing popularity of online learning platforms such as Colombia’s Platzi, founded in 2014, has also been able to help local people develop relevant skills in order to contribute to the growth of local start-ups, and maybe even start their own Rappi or MercadoLibre someday.
How Smartphones Affect VC in Latin America
A major contributing factor to VC expansion in the region, as touched on earlier, is based on the advancing adoption of smartphones by residents of these countries. People within these areas have become more “regionally connected” than ever before. According to a report from Statista, “In 2018, smartphones accounted for 66 percent of all mobile connections in Latin America and the share is expected to increase to 79 percent by 2025. In the same time period, the share of population in the region who has access to a mobile phone will increase from 67 to 73 percent.”
Smartphones and the technological capabilities that come along with them really open up the door to a world of opportunity for tech firms in this digital age. Not only do these devices enable social media platforms, online banking, and e-commerce to flourish, but the information mining that startups would be able to conduct could add immense value to these economies as well.
Attracting Top Latin Entrepreneur Talent
As we’ve seen with North American corporations like Google and Amazon, although controversial at times, their access to our personal information and preferences as consumers has allowed them to target us with relevant ads, resulting in much more efficient marketing efforts. Once there is a clear picture for what type of niche consumer you are, it is rather simple for firms to target you as part of a market segment. Once consumer data is out there, it negates a major hurdle in customer reach, which is something that quite often holds back young companies from being able to scale up in size and profitability. This growth looks to be attainable, backed by data provided by private equity firm CB Insights “Last year marked a record year for the region, with tech companies raising a record $5B+ across more than 360 deals.”
There have been many regions that have transformed in to sprawling modern communities with roaring economies providing ample opportunity for work. The common theme throughout is the adaptation of technology and firms who enable such innovations to prosper. This has a rippling effect as once these firms scale up, they attract top talent whose taxes are filed locally, they spend their sizable salaries at local shops and restaurants, as well as buying homes in the area driving up the local real estate markets, the list goes on. It is clear to see that successful startups are the fuel that powers economies out of “developing” status, so it’s safe to say that the future of not only entrepreneurship in Latin America, but in turn the prosperity of the region overall, is bright.
What do you think of the rise of tech startups in Latin America? Let us know down in the comments.
This article originally published on GREY Journal.