Venturing South: tech startups in Latin America

Written by Lisa Mercer

Dateline: Atlantida, Uruguay

There was a time when using the words entrepreneurial society and Latin America would be considered an oxymoron. Times have changed.

Decidedly anti-capitalist countries have produced a new generation of tech-savvy, enterprising men and women.  As such, technology in Latin America is not just an industry. It’s an emerging movement, which Buenos Aires entrepreneur Ignacio Peña calls the “TechnoLatinas.”

How did this happen?

The Growth of Technology in Latin America

The folks at the Grow VC Group  explain the evolution of the technology movement in Latin America:

Internet access: In the past, only the Latin American elite had Internet access. Fortunately, an increase in affordable and available broadband has reduced the costs of starting and running a tech business, while increasing the number of potential clients.

Education: When professors noticed that their students were living in a connected world, business schools encouraged this enthusiasm by introducing pitch contests for new tech ideas and hosting hackathons. Talented students emerged from these programs with the desire to develop new, disruptive technologies.

Government support: Caught up in the enthusiasm, Latin American governments initiated new support programs for tech startups.

Inexpensive workforce: Many of these business school graduates hoped to land tech jobs in the US or Europe, but these jobs are few and far between. As such, the Latin American countries have a well-trained workforce.

However, while Silicon Valley techies demand monthly salaries of $6,000 or higher, their colleagues in Latin America earn between $1,500 and $2,500 each month.

Some of these countries are offering financial incentives for expat entrepreneurs interested in tech startups, and many of these offers are enticing.

Some are so appealing that idealistic entrepreneurs fail to weigh the pros and cons. Startup Chile is an example.

Santiago, Chilecon Valley

Chile is one of the most economically developed and business-friendly countries in South America.

Better yet, it has an easy to navigate tax system and the second-lowest government corruption rating in South America.  

Thanks to a program called Start-Up Chile, Santiago, its capital city, is often called “Chilecon Valley.”  The project, which began in 2010, is a sector of Corfo, Chile’s economic development agency.

Its 2010  pilot program brought 22 startups from 14 countries to Chile, and provided them with US $40,000 of equity-free seed capital, along with a six-month visa to develop their businesses. Startup Chile also provides co-working space, with unlimited coffee and wifi access.

Of course, this does not include the cost of getting to Santiago or your monthly living expenses. Two frugal entrepreneurs sharing living expenses can get by on $1,500 a month.

But if you need to hire employees, you’ll use up a significant portion of your $40,000.

While Startup Chile certainly has its merits, many entrepreneurs feel that six months doesn’t allow ample time to get their business off the ground.

You should also factor in Santiago’s air pollution. It’s often so bad that the government warns citizens to stay indoors.

Many newcomers end up with bronchial infections when they first arrive. That could have an adverse effect on productivity.

All these issues might apply to tech startups in any Latin American city.

But on a more positive note, Startup Chile has inspired similar programs in Latin America.

Lima, Peru’s startup ecosystem

In June 2012, Startup Chile’s executive director, Sebastian Vidal, attended the First International Congress of Information Technology in Lima, Peru.

During the event, Vidal met with representatives from Peru’s Science and Technology Program, and from their Innovation Program.  As a result of these interactions, the Ministry of Economy of Peru approved USD $20 million for a Startup Peru program.

Startup Peru provides grants of up to $20,000 for individuals with tech-based startup ideas.

Established tech startups that have been in business for less than five years are eligible for grants of up to $50,000. But they’re not the only game in town. Telefónica’s Wayra Peru is looking “for talented entrepreneurs to change the future of the digital businesses.” They offer “up to $50,000, a workspace in our academy Peru, access to a global network of business partners, mentors, and experts, plus the opportunity to work with Telefónica businesses around the world.”

Wayra is also active in Bogota, Columbia. They work with an organization called HubBOG.

Tech-Savvy in Colombia

Bogota, Colombia is home HubBOG. This self-proclaimed “Campus For Startups” integrates an Acceleration Academy with co-working space and investment.

Its mission: promoting startup enterprises based on Information Technology.

Ambitious tech entrepreneurs can rent workspace, take courses and develop their ideas.

Members also have the opportunity to pitch their ideas to venture capitalists and accelerator programs. This could be ideal if you’d rather not enter a contest or commit to a six-month contract.

You can come to Bogota, try out your ideas, and decide whether you want to stay.

Meanwhile, in Medellin, Colombia, a recent startups meeting drew 1,500 people, of which 164 were investors.

Medellin is also home to Ruta N, an innovation and business center that supports new tech-related businesses in Colombia.

At the same time, the Colombian government is helping investors alleviate some risk, by pumping millions of dollars into innovation over the next couple of years.

The government has initiated an investment match program. If a private investor provides half of the amount of capital a company needs for a startup, the government matches that amount, thereby reducing risk for the investors, and allowing the innovators to focus on innovation.

Tech Hub, Montevideo

The Chamber of Uruguayan IT companies, called CUTI, notes that:

  • The government defines IT as a priority sector which it constantly promotes and develops.
  • Uruguayan IT companies export to 52 different markets.
  • In Uruguay,  software produced for export isn’t subject to profit tax or VAT.
  • A Harvard University study identifies Uruguay as one of the most advanced software development centers in Latin America.
  • 700 IT companies currently operate in Uruguay.

As such, many ambitious tech entrepreneurs are flocking to “Tech Hub Montevideo.”

Consider the success of Alvara Azofra, one of the founders of Ironhide Games.  Thanks to Uruguayan universities like ORT, which offer degrees in video game design,   gaming technology might become “a thing” in Uruguay.

ORT students also created a software system to analyze football matches. The system, called Kizanaro Sport Technology,  allows coaches to analyze all of their players’ movements. Their first customer was Oscar Tabarez, coach of La Celeste, Uruguay’s beloved soccer team.

Some US expats have been quite successful in Uruguay.

Evan Henshaw Path arrived in 2008. He funded Cubox SA, the first Latin American agile Ruby on Rails consultancy.

He was the lead developer and architect for Odeo’s Ruby on Rails web application platform. Odeo went on to create Twitter.

Plath eventually sold Cubox to New Context, a subsidiary of Digital Garage, the Japanese media company that was an early investor in Twitter.  He now owns Crafted, a Montevideo company that performs lean validation and agile development for new businesses.

These are just a few Latin American cities with emerging tech industries. Follow the Nomad Capitalist blog for updated stories about Latin America and other relocation destinations.

Lisa Mercer
Last updated: Jan 13, 2020 at 2:49PM

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