The Emergence of South American Startups
The South American entrepreneurial community is no longer a small band of companies vying for attention. Instead, it is a full-fledged movement with an ecosystem that is creating new connections for the economies of Argentina, Brazil, Chile, and the rest of the world.
These entrepreneurs represent a movement now. They are the “TechnoLatinas,” and their growing strength became readily apparent this past week at Disrupt San Francisco 2012.
Ignacio Peña is a Buenos Aires entrepreneur who coined the TechnoLatinas term to help define a movement whose growth plays off a combination of factors:
- A growing number of angel investors are starting to invest in South American startups and the venture capital community is growing. Accel Partner Andrew Braccia said late last year to the New York Times that there has been “an acceleration of high-quality opportunities” in Brazil and no shortage of ambition. Accel has made several investments, includingKekanto, a Brazilian review site.
- As Peña observes, entrepreneurship is becoming the preferred career option for a sizeable share of the top talent emerging from business and engineering universities in the region. This is partly because of the tremendous opportunity for upside, but it is also more in the image of a younger generation that identifies with the Internet and a connected world.
- A growing pool of talent is emerging who are helping companies from South America and the rest of the world create a new generation of startups. Start-Up Chile’s success inattracting startups from other parts of the globe can be attributed in part to Chile’s educated workforce. Entrepreneurs say that they pay engineers $1,500 to $2,500 per month. That’s compared to the $6,000 and up startups pay engineers in the Silicon Valley and San Francisco. The low cost of development is helping Start-Up Chile attract startups from the United States and such distant countries as New Zealand, Singapore, and the United Kingdom. In addition, the talent pool’s growth is illustrative of macro trends in Latin America. According to Boston Consulting, population growth has risen 1.5% in Latin America over the past 10 years with 57% of the population under 30 years old.
- Increased broadband availability and the emergence of cloud services has broken down the costs to set up and run an online business.
- The information gap is narrowing. More people have Internet access. The world is flatter than ever before with less friction in the distribution of services to billions of people.
- Governments are getting more actively involved in developing startup ecosystems. The Chilean government perceive startups as a vital force for the development of the information economy and are supporting them with capital, grants, improved business environments, and special tax protection.
GROWING INTEREST FROM VENTURE CAPITALISTS
Mercado Libre is Argentina’s biggest success story. The eBay-style company is now trading on the NASDAQ. Its founder, Hernan Kazah, started the Buenos-Aires based Kaszek Ventures, which is now the biggest fund in South America. Kaszek made its most recent investment in Restorando.com, an online reservation site for Latin America.
Buenos-Aires based Mariano Suárez Battán sold his gaming company, Three Meolons to Playdom in 2010. Walt Disney acquired Playdom for $763 million four months later. He has a new startup called mural.ly, which he described to me as a cross between Pinterest and Prezzi.
In an interview at Disrupt, Battán said he credits Argentina’s success of late to the first and second generation of startups who are now mentoring a younger group of entrepreneurs.
Battán said one of the biggest struggles is acceptance by Silicon Valley investors who are still skeptical about the stability of the Argentinian startup ecosystem. Battán said he incorporated in Delaware to help boost confidence in his startup. Mural.ly launched at TechCrunch Disrupt. It has raised $775,000 in seed funding from Intel Capital, Alta Ventures, 500 Startups and angel investors.
“This will change once we have more talent,” Battán said.
As a signal of its support, the Buenos-Aires government brought 32 companies to Disrupt San Francisco. Peñasays the city promotes development through the creation of incubators, conferences, a dedicated tech district, and tax exemptions.
“We don’t give money to entrepreneurs,” said Enrique Avogardo of the Buenos-Aires city government in an interview at Disrupt. “We give them space to work, soft credit lines and grants.”
BRAZIL SHOWS ITS MUSCLE
Diego Remus is considered Brazil’s top tech blogger. He is co-founder of the blog: startupsi,r.com.
In an interview also at Disrupt, he said he views Argentina as a great place to hire developers but Brazil has the ecosystem.
After the dot-com bubble burst in 2002, Brazil’s tech scene focused on IT. The shift to startups started to show its first trickles in 2006. In 2008, the first angel investors arrives from the United States. The first accelerator opened its doors to entrepreneurs. And Microsoft Biz Sparks opened a number of innovation centers to connect developers with businesses.
And the infrastructure is emerging. Amazon Web Services opened a data center in Sao Paulo last December. Google is now building a data center in Chile.
As for Chile? They are the underdogs who have captured the world’s attention with Start-Up Chile. Companies like Suede Lane from Toronto have moved to an entirely new part of the world to be a part of the entrepreneurial community that Start-Up Chile has developed. Peña says Chile is leveraging its open, stable and low friction economy to become the tech hub for Latin America and put in place a host of measures to materialize this vision, including financial support programs, grants, competitions, mentor networks, and improved legal and procedural frameworks that make it easier to launch and run a startup.
The South American startup scene is representative of a global startup culture that had its start in San Francisco and the Silicon Valley. A culture that has its roots in free thinking about what the world can be is not something that is just solely the enjoyment of tight community in California. It’s something people across the globe embrace.
The challenge for the region is not about getting people excited about startups. It’s more so in the development of the ecosystem and the infrastructure. That’s the challenge of any developing country. But more so than ever before, it’s a chance for South America to take a leapfrog ahead and establish itself as a leader on the world startup stage.