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Argentina’s tech startups push forward despite the country’s inefficiency

Argentina’s tech startups push forward despite the country’s inefficiency

Posted by Juan Gavasa on March 16, 2015

What the world knows about Argentina isn’t pretty. The country has been in the news lately for most of the wrong reasons. It sees some of the worst levels of corruption at the top levels of the government, has high inflation, has defaulted on its external debt, has an economy rife with market inefficiencies, and has a president who makes bad jokes on Twitter insulting the Chinese.

But under that toxic surface, a new culture of technology innovation is emerging and spreading fast across the country.

This situation is quite unique for a developing economy with a long history of economic and political instability. It appears Argentina’s move to innovation is partly due to the fact that it’s at the epicentre of one of the biggest economic regions in the world, with Brazil’s strong tech sector closeby, and it is being fostered by the past success of entrepreneurs who have disrupted the Latin American region.

Last month, Argentina’s captial, Buenos Aires, won the Cities Challenge of the Global Entrepreneurship Congress, organized by the Kauffman Foundation, from among more than 50 cities around the world. And in the last few years a number of accelerators and company builders have emerged in Argentina, including Nextp labs, Incutex, Wayra, IcuBA, ITBAF, Emprear, Baitec, Fide, Incucen, Incubatec, Doinglabs, and Incubadora UNC. A serious Rocket-like company builder, Quasar Ventures, founded by well connected and serious entrepreneurs is also creating a new wave of prominent startups in the country.

Universities all around the country are creating their own incubators, and the government is pushing the movement with new incentives: There are numerous types of grants, like Fonsoft, Fontar, Fonancyc, Fonsanrtec, and many other Fs, with the goal of providing money to help tech projects get off the ground.

Even Buenos Aires City, backed by its mayor Macri — one of the favorites for the upcoming presidential elections — launched a matching fund program for accelerators inspired by the Israeli success. A full committee traveled to Israel and met with implementers to create the same incentives, and it seems that the implementation has been perfect.

Startup weekends around the country have become famous weekends for geeks or wannabe entrepreneurs, and the entrepreneurial community is always talking about hackathons and pitch clubs. Silicon Valley-based Singularity University is in fashion among most entrepreneurs in the country and is inspirational for most wannabe disruptors. Some of the top entrepreneurs in the country are alumni, and they have spread the word about what they call “the university of the future.” Tedx speaker and founder of Quasar Ventures studied at SU and spread the word about how fascinating his experience was there. Emiliano Kargieman, founder of Satellogic, is another SU alumnus and came up with the idea of launching nano satellites into the space during his time there. The Buenos Aires government even invited Singularity University’s founder to speak about his vision of the future.

NGOs like Endeavor, are also investing in the community by educating entrepreneurs about what high impact entrepreneurship means and the path to success. (In fact, Endeavor CEO Linda Rottenberg maintains she created the company out of a taxi in Buenos Aires.)

Clearly, the investor community in Argentina is also starting to take shape as the country’s new accelerators churn out large numbers of companies, company builders emerge, and the angel investor network starts to grow. NXTP Labs, the most active investor and the “Y Combinator of Argentina” has already built a portfolio of over 150 regional and global startups from eight countries, and it has invested over $5 million dollars in seed money in the last year, according to Fundacity. Furthermore, it is the most active private accelerator in the region.

Some venture capital funds are also starting to look at Argentina as a starting-off point to attack the region, most prominently Kaszek Ventures, founded by MercadoLibre veterans, which has raised over US $200 million in the last three years and today is a leading VC firm in Latin America. Still, VC funds are an area where faster and bigger improvement needs to be made in order to achieve the full potential of the ecosystem, since at the moment, despite healthy seed rounds, A-rounds are called “the valley of dead” in Argentina and all around Latin America.

Nonetheless, there is good reason for the current hype and optimism surrounding tech entrepreneurship in Argentina. Argentina is the birthplace of three of the most prominent Internet companies in Latin America worth over a billion dollars: MercadoLibre, OLX, and Despegar. And local entrepreneurs and wannabe entrepreneurs are inspired by the stories of predecessors like Marcos Galperín (of MercadoLibre), Alec Oxenford (of OLX), and Roby Souviron (of Despegar) to name a few. These startup veterans donate time to give speeches at different events and to inspire up-and-coming disruptors. And they serve as role models in a society that just a few years ago saw “empresarios” as corrupt employers that were aligned with governments to profit from populism.

MercadoLibre is the only Internet company from Latin America listed on the NASDAQ. With over 100 million users and a valuation of US $6 billion, it is the leading “eBay” of the region. OLX, a clone of Craigslist for emerging markets, is serving over 100 countries in more than 30 languages, publishing more classifieds in India than all the local printed media and newspapers., an Expedia-type business, is the biggest online travel player in the region. It has operations in 21 countries, more than 4,000 employees, served 25 million travellers in 2013, and seems to be the next big IPO in Latin America.

Moreover, we’re seeing a new wave of companies that are clones of market leaders in other regions: Restaurando, Avenida, Aivo, Satellogic, Jampp, and my own company, Comparaencasa, which have raised over $60 million in the last year alone. Top technology companies are also emerging from the country. Recently, Globant, a local technology service provider, was listed on the NYSE and is servicing customers like Google, Linkedin, Fox, and Coca-Cola.

Zona Wi-FiArgentina’s national and local governments are recognizing the importance of science, technology, and innovation. Many of the new programs they are pushing are related to increasing connectivity by giving poor children in rural areas laptops with Internet access. It can certainly feel like a different world to see “Wi-Fi” being advertised in a small square in a secluded town of the country. Such initiatives are showing how uncoordinated efforts from governments seem to be helping not only to grow Internet penetration and e-commerce but also to include new generations in the virtual economy and, by default, help the entrepreneurial ecosystem to gain a foothold in remote areas.

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