According to the Vice President for Finance and World Bank Controller Jorge Familiar, “We should adopt and promote technology and innovation to boost economic growth, poverty reduction and increase opportunities for all, rather than planning barriers.” In recent years, Latin America has followed Familiar’s advice as it has seen a dramatic rise in access to technology and a sense of entrepreneurship. Below are seven facts about tech startups in Latin America.
7 Facts About Tech Startups in Latin America
- Latin America is more connected than it has ever been, a necessity for the success of tech startups. More than 70 percent of South Americans had access to the internet as of January 2020, up from 55 percent in 2017. There are about 500 million smartphone subscriptions across the region. Brazil and Mexico rank fourth and fifth in the number of Facebook users with 120 million and 84 million users respectively. Additionally, Latin America has been one of the top growing markets for Spotify and Netflix.
- E-commerce sales in the region reached $53.2 billion in 2018, up 18 percent from 2017. This is attracting attention from international e-commerce businesses such as Amazon, which opened its first distribution center in Brazil in 2019.
- Venture capital investments in Latin America surpassed $1 billion at the end of 2017. There were 25 new global investors that year. These investors include Softbank, Telstra Ventures and Rethink Education.
- Three tech startups surpassed $1 billion valuations at the beginning of 2018. These startups include Nubank, an online banking service, and PagSeguro, an e-commerce service for commercial operations.
- Strong institutional support in the region has facilitated the expansion of startups. Startup Chile and Mexico’s Fund of Funds are government-initiated investment firms that act as accelerators to provide capital to small and medium enterprises to get them off the ground. Similar organizations exist in Argentina, Peru and Columbia. Brazil’s development bank has played a critical role in the provision of capital to small businesses as well.
- The share of female participation in creating startups is higher in Latin America than in Europe. The failure rate of startups is higher than ever in many Latin American countries. However, this is due to a growing sense of entrepreneurship amongst men and women alike.
- The Tech Growth Coalition began in 2018 to facilitate investment in the region’s startups. One of the issues Latin American startups face is the small domestic markets the countries have. However, by working together as a region, countries can overcome this problem. The Tech Growth Coalition, which consists of large investors such as Google and Facebook, emerged to help with this cross-border collaboration. The parent organization, the Latin American Venture Capital Association, which originated in 2002 and consists of more than 190 firms of all types and sizes, has built up $65 billion worth of assets “directed at capitalizing and growing Latin American businesses.”
The growth in the number and size of tech startups in Latin America is key for several reasons. One key reason is the opening of foreign markets and the attraction of foreign investment and businesses. This not only leads to increased “investible resources and capital formation” but “a means of transferring production technology, skills, innovative capacity and organizational and managerial practices between locations, as well as of accessing international marketing networks.”
– Scott Boyce