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Why innovation in Startups is hard to achieve in Latin America?

Large companies in Latin America are not innovating enough and are lagging behind compared to the rest of the world, and Startups are embedding themselves in a tough 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 of each 5) they do not have a job and they do not go to school either.

The region needs to create more and better opportunities

Startups can be a solution since they are focused on innovation. The governments of the region have been promoting growth in this sector 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. Up to now, The government has allocated US $ 10 million, and the entrepreneurs generated more than 3,000 jobs with an average salary above S /. 2,000 (US $ 600). These ventures have attracted up to 2017 close to S /. 77 million private capital, both local and international. The World Economic Forum surveyed young people between the ages of 15 and 29 in the region. They discovered that one of the most important factors in the empowerment of young people was entrepreneurship and the ecosystem of startups. 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 embracing these problems based on innovation and the frustration of their governments.

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 driven by the fact that between 2010 and 2015, Internet access increased from 7% to 58%. phones in the Latin American population.The 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 Noticias Águila, 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 his development team are still operating from Shenzhen, one of the many cities in China focused on technology. “Competition in China is so strong that small companies feel it makes more sense to look elsewhere for opportunities. ” – 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 bicycle sharing platform 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 their cards. One of the problems for startups in the region is that their local markets are not big enough to grow, with the exception of Brazil. The startup environment tends to focus on successful and small entrepreneurs 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. Even though investment in the region continues to increase in conjunction with the With support from the government and various institutions, support among entrepreneurs in the region is one of the last more missing pieces so that Latin America can grow and compete with the rest of the world.

Photo by Aaron Burden on Unsplash

Also published on Medium.

Published inStartups

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