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Latin America Startup Scene: Chile and Colombia Stand Out

Latin America Startup Scene: Chile and Colombia Stand Out

Posted by PanamericanWorld on July 29, 2015

Mini-Silicon Valleys are sprouting in Latin America, especially in Chili and Colombia, where a combination of government initiatives, investment, and homegrown entrepreneurs are beginning to foment an economic transformation. Here's why Chili and Colombia are beginning to stand out in Latin American tech entrepreneurship.

Consumer Tech Hits Latin America

Technology has been taking root all across Latin America for a few years now.

For example, by the end of 2013, Gartner found that Latin America was the strongest growth market for smartphone sales, peaking at 96.1 percent growth. Yes, China's sheer size and potential market may be enough to sway Apple to produce gold-plated iPhones and Watches -- and don't expect Tim Cook to make major product decisions based on LatAm preferences.

But high consumer demand for modern tech products in South America helped lay the groundwork over the last few years for budding tech entrepreneurship, and continues to spur development of 21st century infrastructure in the region.

This year, more than nine out of 10 Latin Americans use a mobile device on a regular basis, and 60 percent of mobile consumers are using Twitter, LinkedIn and other connective services every day, as a study by Latin America/Miami-based Internet Media Services (IMS via CMSWire) found this year.

As IMS put it, the new LatAm consumer is "hyper-connected, dominates technology and is highly influenced by social media."

Sounds like the average Silicon Valley denizen, doesn't it?

Lack of Investment Culture a Roadblock

Fertile ground does not automatically mean growth though, and in Latin America, homegrown startups time and again face big challenges in finding funding.

Andres Moreno, Founder and CEO of $350 million-valued Open English, saw his first attempt building the company in his native Venezuela fail because the idea of making risky, high-payoff venture capital investments simply wasn't a big part of the culture.

The LatAm entrepreneurs at TechCrunch DisruptNY told Latin Post it's still a problem this year. Like Arthur Luiz of the startup nerd culture-news app Hypefy who comes from Brazil, which is often seen as the standout in development and technology in the region: "We are from Brazil, [and] the government doesn't help us... we don't have funding right now. We're trying to grow (Hypefy), but we don't have any help."

How Chile and Colombia Are Different

Why did Facebook CEO Mark Zuckerberg host his first overseas town hall meeting in Bogata, rather than Beijing or Bangalore? Why is Santiago nicknamed "Chilecon Valley" by global investors, as Inc. reported earlier this year?

Both countries are especially primed to become big entrepreneurial scenes, and both countries' governments have undertaken initiatives to make sure that happens -- and along with it, foreign investment.

Colombia's most recent gambit, as TechCrunch reported, comes from a financial services firm called Bancoldex, which used to be the state-owned bank of Colombia. The firm is raising $500 million for a megafund to prime the pump for foreign investments from private equity and VC within Colombia. Or as TechCrunch put it, "to build out the architecture of investment" in the country.

Colombia already has a startup program called Innpulsa, and according to International Policy Digest, the government's work on technology infrastructure continues, hoping to bring 63 percent of the population online by 2018. Colombia already has a smartphone adoption rate of 69 percent for its over 50 million population. For comparison, the U.S. smartphone penetration this year was 75.8 percent this year, according to ComScore.

Chile, meanwhile, has a successful startup program of its own, Start-Up Chile, which offers entrepreneurs the equivalent of about $40,000 US dollars in seed capital for their startups.

The program also attracts foreign business opportunities, as it's not restricted to Chilean citizens, with more than 1,000 startups from 75 countries being selected for the program.

To capitalize on the foreign money, talent, and investment, part of the cost of Chile's capital infusion is a requirement that entrepreneurs organize workshops and conferences to help potential entrepreneurs get their ideas off the ground.

To its core, the program is give-and-take, and as we previously reported, Start-Up Chile has had a "matriculation" problem: about 80 percent of graduates leave the country after the program.

But Chile's generally open-door policy, as with Colombia's, has attracted more attention and activity than other LatAm countries with more restrictive policies.

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