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Development of startups in Latin America and how they solve key problems

Large companies in Latin America are not innovating enough and are lagging behind compared to those of the rest of the world, and Startups are taking a hard field.

Companies in the region are 20% less likely to introduce a new product compared to those operating in other developing countries in Central Asia and Eastern Europe.

In addition, Latin America remains the region with the most economic inequality in the world.

According to the World Bank, more than 20 million young people in the region (1 in 5) do not have a job and do not go to school. The region needs to create more and better opportunities.

Startups can be the solution, since they are focused on innovation. The governments of the region have been driving growth in this sector together with several organizations and universities.

In Peru, the Ministry of Production launched the Startup Peru initiative to support the growth of startups and the innovation that it entails.

To date, the government has allocated US $ 10 million, and entrepreneurs generated more than 3,000 jobs with an average salary above S /. 2,000 (US $ 600).

These ventures have attracted until 2017 close to S /. 77 million private capital, both local and international.

Startups will shape the future of Latin America

The World Economic Forum surveyed young people between 15 and 29 years of age in the region. They discovered that one of the most important factors in the empowerment of young people was entrepreneurship and the startup ecosystem.

They also identified what young people felt were the most serious problems in their respective countries: corruption in government, lack of education, insecurity and lack of economic opportunities.

Many of the startups that are founded in the region are covering these problems based on innovation and the frustration of their governments.

Regarding insecurity, the young Peruvian Moisés Salazar has created Reach, an App that reports reported criminal incidents around where one is standing.

This has been operating since the end of 2017 and, to date, has 20 thousand users, which are concentrated in Peru, Mexico and Costa Rica.

There is also Base Operations, a social enterprise that helps its users to navigate safely in their cities using data that comes from different sources, including government data, news, user contributions and partner organizations.

To combat the lack of education, several startups have proposed some alternatives.

Laboratorio, a Peruvian startup, works for thousands of women in Latin America to develop careers in technology that change their future and make the industry more diverse.

Through their bootcamp, women who did not have access to quality education can become web developers and designers of user experience.

Laboratorio has been very successful and has expanded to Mexico and Chile, in addition to having more than 800 graduates with more than 80% job placement.

There are also startups like Lab4U in Chile. This is an App that uses sensors built into smartphones and tablets turning them into laboratory instruments and also helps teachers with pre-designed curricula and experiments.

In Brazil there is also eduK, an online course platform aimed at small entrepreneurs.

The growth of investments in Latin America

We are currently going through the advanced phase of the Internet technologies revolution.

According to the work of Carlota Perez, this is the moment when central markets become saturated and financial capital moves towards developing countries.

In recent years, investment in technology in Latin America did not exceed US $ 500 million, but in 2017 it reached US $ 1.1 billion and the trend seems to be positive; In the first quarter of 2018 alone, more than US $ 600 million has already been invested.

This has also been boosted thanks to the fact that between 2010 and 2015, internet access was increased from 7% to 58% through telephones in the Latin American population.

The increase in investment from China in the region

Chinese venture capital invested in Latin America has reached US $ 1 billion since the beginning of 2017, compared to only US $ 30 million in 2015.

Two years ago, Tang Xin had never been to Mexico, and now he has built Eagle News, one of the most popular Apps in the country.

This app already has more than 20 million users. The most surprising thing is that Tang and its development team continue to operate from Shenzhen, one of the many cities in China focused on technology.

” The competition in China is so strong that small businesses feel it makes more sense to look for opportunities elsewhere” – Tang Xin.

There are several other Chinese startups that are entering the region. Tian Ge Interactive Holdings wants to build a fintech platform in Mexico. Ofo, a platform for sharing bicycles based in Beijing also wants to expand to Mexico and then the rest of the region.

Just a week ago, the Chinese multinational company Tencent invested US $ 180 million in Nubank, a fintech startup in Brazil that has 20 million applications for its cards.

The need to connect entrepreneurs and founders in Latin America

One of the problems for startups in the region is that their local markets are not large enough to grow, with the exception of Brazil.

The startup environment tends to focus around successful entrepreneurs and small closed groups in specific countries.

There is still no consolidated network for startups and entrepreneurs in the region that allows them to connect and build prosperous relationships with partners in other countries and potential investors.

As much as the investment in the region continues to increase in conjunction with the support of the government and several institutions, support among entrepreneurs in the region is one of the last missing pieces for Latin America to grow and compete with the rest of the world.

Also published on Medium.

Published inStartups
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