2 Reasons Investors, Entrepreneurs Should Set Sights on Latam

Latam startups

What's the first thing that comes to mind when you think about Latin America? Whatever the answer, and the options are countless, I'm pretty sure the words tech, startups or entrepreneurship won't be at the top of the list. Though still lagging compared to most of the developed world, in the last decade, Latin America has taken considerable leaps toward becoming one of the world’s most important economic regions. In 2017, Global Network Perspectives found that Latin America was the second-most enterprising region in the world, and in 2019, all records were shattered with US$4.6 billion of venture capital investment.

What are the factors contributing to last decade’s 32-times increase (from US$7 billion to US$221 billion) in the region's startup ecosystem value?

Changing Population

Latin America's composition is changing rapidly. Countries are becoming more urbanized; the middle class is expanding (and so is its spending power) and internet access and usage are finally reaching their true potential. A new generation of digital-native leaders is emerging, and the ecosystem is ripe for disruption, all of which highlights the region's potential to become the next big startup hub.

Young, Hungry and Prepared

A quarter of Latin America's population is between the ages of 15 and 29 (about 163 million) and in the last 10 years, the gross enrollment rate in higher education in the region increased from 23% to 52%, the second-best performance worldwide. These point to a generational relay that is seeing millennials rise to executive positions, bringing innovative ideas and an eagerness to use the technology they have grown up with to optimize processes and propel their companies into the future.

Digitally Savvy

Latin Americans have craved connectivity for a long time and governments are finally providing the right opportunities for a more widespread digital culture. Some examples include the "Plan Solidario" in Chile and the "Programa Nacional de Alfabetización Digital" in Costa Rica, both aimed at making digital tools more available to underprivileged populations. Though still lacking in infrastructure, the potential is huge with internet penetration in the region at around 70%, surpassing the likes of China and India. And, it doesn't stop there, engagement rates are also incredibly high, with Latin Americans averaging greater than nine hours per day of internet usage, even more than the US.

However, beyond composition, the last 10 years have made a real difference in people's mentality and aspirations. Inspired by the success of companies like Rappi and Nubank, more local talent, once lured away by opportunities in New York and Silicon Valley, are now looking inward and rolling up their sleeves to bring change to their home countries. As I read David Velez's story in a recent article by Sequoia Capital, I thought about my own personal journey and how it reflects in many ways the current shift. Latinxs are moving from a reactive "why try, when so much is broken?" mentality to a "can-do" attitude, in which no challenge is too big, to solve some of the biggest issues in the region through technology. I was raised in Ecuador by Indian parents and moved to the US in 2010 to pursue a degree in economics and finance. As early as six years ago, 15 of my closest friends and I were bankers, most away from home. Today, 13 of us are in startups, many with headquarters or business ties to Latin America. Oh, how times have changed ... and how far we still have to go.

Untapped Opportunities

"Our mission at Sequoia is to help the daring build legendary companies. Now more than ever, we see that opportunity in Latin America." Reading these lines from Sonya Huang and Doug Leone at Sequoia Capital really hit home. It is not enough to have a good idea; to succeed in Latin America, one must be brave and think not only about making a profit but about solving issues with the potential to improve the lives of millions of people. That's what David Velez did when he decided to take on the big banks in Brazil, and what we at Nuvocargo are working to achieve by modernizing global trade, starting with the biggest trade lane in the world, US- Mexico.

Latin America's size (600 million people) and economic activity (US$6 trillion in GDP) makes it one of the largest economies in the world. The opportunity is immense, and some sectors are already feeling the impact of tech investment. Fintech and e-commerce represent 72 percent of the ecosystem value in Latin America, which has also been historically concentrated in two countries: Brazil and Argentina. However, momentum in the region has seen more countries like Mexico, Uruguay and Colombia increase their footprint by producing their first set of unicorns, and most in record time: Kavak, Dlocal, and Rappi.

We've seen this trend particularly close-up in Mexico and the logistics industry. During the last year, 4 percent of all tech investment in Latin America went to logistics, making it the fifth-biggest sector in the region. This number is bound to increase in the near future, not only because of what the data shows — 2,500 percent growth in supply chain tech investments in the last decade — but because of considerable macro shifts in the industry: Mexico has become the US’ largest trading partner, US-China trade relationships have weakened, the USMCA (United States-Mexico-Canada Agreement) has been signed and nearshoring has exploded, all of which uncover even more growth opportunities.

At Nuvocargo, we believe that logistics is in many ways the backbone of our society and our economy. Every single thing that we come in contact with has gone through the supply chain process, most likely starting thousands of miles away, before reaching our local stores, offices and homes. Now, just imagine the impact that a more efficient supply chain could have on the millions of people who are part of this process, from the manufacturers and all the way back to us.

Just the Beginning

In 2020, venture capitalists invested over US$4 billion in Latam-based projects for a record-breaking 488 deals. In the last 12 months alone, six new unicorns were born in the region. The winds of change are at our backs and opportunities are there for the taking. Now, it's up to us brave Latinxs to reach out and grab them. The best is yet to come.

Originally published in Mexico Business Week.

Tagged:
Business
Tech
Nuvo Newsletter

Want to stay up-to-date on all things freight?

Subscribe to our monthly newsletter and get the latest insights and updates in cross-border freight- delivered right to your inbox.