Where to Next for Startups in Latin America?

Amy Mathews  |

Not only are they enjoying thriving economies and a growing middle class, but they’re benefiting from an influx of foreign investment, and startup companies such as 99 Taxis, which was acquired by Chinese ride-hailing giant Didi Chuxing for more than $1 billion earlier this year, is just one of the territory’s success stories. But as businesses continue to thrive, where do they go next?

Today, we speak exclusively to Craig Dempsey, who is the founder of Biz Latin Hub. Working on the Biz Latin Hub expansion, which will take the company into markets such as Australia and the United Kingdom offering services such as recruitment and company registration, Craig knows first-hand how to launch and scale a business in Latin America. Below, he shares his tips on how to take your business to the next level and ensure it’s a success, whatever your niche.

Craig! Where do you see Latin American businesses go next?

“If you’re a growing business and you’re enjoying success in your native market, then the next logical step is international expansion. Not only does an expansion allow you to take advantage of new markets and entering growing economies, but it diversifies your business and places less risk on a single market. If a country was to go through an economic downturn or recession, for example, then you would at least know that other countries will cushion your fall and give you some legroom whilst you work on a plan to maintain your market share and sales. Startups in Latin America will no doubt also benefit from the fact that, when expanding into other countries, whether that be Peru, Brazil, or Mexico, they’ll be able to access more top talent and labour.”

“Entering into new markets also gives you a competitive advantage, as you’ll be the ‘first mover’ and will be able to grow your market share and brand awareness before other players have a chance of entering the territory. What’s more, you’ll be able to access technology, ecosystems, acquire other companies and form partnerships, and get ahead of those rivals. Finally, an expansion into other LATAM markets offers foreign investment opportunities. If you have a presence in a country that has a lot of foreign investment, for example, your startup business is more likely to be seen and funded by a venture capitalist, allowing you to reach your potential.”

“Of course, there are risks involved with expanding into a new Latin American market. Although languages and cultures are very similar, competitors and buying attitudes can vary greatly. Latin America’s poorest country, Bolivia, for example, has a per capita income of $7,190, whereas, in Chile, the average GDP per capita is much higher at $24,588. Startup businesses offering products or services that appeal to a more affluent or middle-class consumer base, for example, may thrive in Chile, but struggle in countries like Guyana and Paraguay, and so assessing these economies before you get started is the best way to guarantee an expansion will be a success.”

What about investments?

“As I’ve already mentioned, Latin American startups are seeing a huge increase in international investment. As well as startup accelerators and incubators, such as Start-Up Chile, Startup Peru, Parallel 18, IncuBAte, Startup Mexico, Ruta N and 21212, are fueling a huge increase in the FinTech in Latin America and allowing talented developers and entrepreneurs create products and services that are suitable for use around the world. And that’s not all - investments are also helping to assist in social change, with some attempting to bring women into the startup world. Female-focused Empoderando Mujeres, Capital Abeja, The S Factor and WIN Lab are four programs for female founders in Latin America, designed to close the gender gap and aid equality. According to Launchway Media, closing that gap would add $12 trillion to the economy, so it’s going to be a really exciting couple of years - I’m following these accelerators closely!”

Do you think Latin American businesses will work with Western companies?

“Absolutely! As Western entrepreneurs, capitalists and banks begin to see the huge potential in Latin American markets, they’re working hard to forge relationships with businesses and grab a slice of the action. Indeed, in the United States, rising political tensions and a potential Chinese trade war are making businesses look further afield for their investments, and in the UK, Brexit is changing the way Britons think about trade, with them taking a global attitude to their future.”

“The United States dominated trade in Latin America in the 80s and 90s, and whilst it has taken a backseat in recent years, businesses are beginning to expand into the territory once more, in both launching their own businesses and acquiring or partnering with existing Latin American businesses. In the startup world, that’s incredibly exciting - if a Latin American entrepreneur can build a business and claw some market share, and then sell a portion of their business to a Western brand, they could make millions of dollars and be “set for life”, so to speak.”

Finally, what advice would you give to Latin American entrepreneurs?

“The truth is that the Latin American startup world is just too big and too diverse to generalise. A solution that works for one business owner may not be the right decision for another, so taking your time and calculating your opportunity costs is the most sensible decision. And rather than accepting the first international investment or bid for your company, you should think long-term, accept that there’s a whole world outside of Latin America, and work hard to take your business to the next level. Not every business will be a success, but with the right strategy and some hard work, yours can be. Focus on product development, boosting brand awareness, and you’ll soon find success. I wish you the best of luck with your venture - it’ll be hard work, but you can do it!”

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DISCLOSURE: ​Startup businesses in Latin America

The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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