By Patrick Haller
There is little doubt that the flow of capital and mindshare between Latin America and Silicon Valley is gaining real momentum.
Constanza Nieto, Founder and CEO of Global Tech Bridge based in Silicon Valley, has been driving partnerships between Latin and North America for nearly a decade and is very active in trying to help startups build a realistic vision to sell services internationally. She talked with Nearshore Americas about the opportunities buried in the minefields, and why this is the right moment for the two worlds to build bridges.
NSAM: What do US companies need to know about the Latin American market?
Nieto: We are the real neighbors of the US, and because we present ourselves as small countries, Americans are not that enthusiastic about going to the region. They don’t understand much about the uniqueness of each country. That perception is changing. The US market has been in China for a long time, and know now that China has many regions with differences, the same in India. Many Latin Americans have studied in the US for a long time. It is not the same culture, but similar. The small differences between countries are mainly legislative and our job is to help the US company enter the Latin American market smoothly. I see more partnerships in the Nearshore frame. This is very good timing for Latin America.
NSAM: Are they working on projects together?
Nieto: Many are – right now we are working on several partnerships. The US companies can take advantage of resources in Latin America and create small teams to solve problems like software development, outsourcing and BPO. They are working closely together with companies in Mexico, Argentina and Colombia.
NSAM: What are some of the problems they encounter?
Nieto: The first one is deciding which country to work with. Brazil presents great opportunities. Another question is if the country has clear rules of doing business and Intellectual Property protection. Latin Americans are generally very serious and we have been taking a lot of rules to enforce IP protection. It is much better than in some Asian countries, like India, and US companies are more confident in Latin America. Payroll taxes are another concern, and hiring and firing in Latin America is a little more difficult than in the US. But the types of contracts used can protect a company. They can learn about a country by using contractors to start, then maybe start a company or acquire a company when they know more about the country.
NSAM: How do you advise companies about the political risk?
Nieto: A lot of US companies have been doing business in Argentina for a long time and I don’t think the Argentine government will close foreign companies. If the current Argentine president (Cristina Fernández de Kirchner) stays in office, I don’t think they will take big measures against investors. They are very eager to do business with the US, and are coming every six months to create a bridge with the US. I don’t see a hostile environment with foreign countries, especially with the US. They are smart enough to realize that is good for Argentina to open the country to investors. People think that the climate is not very friendly for Americans, but I don’t see a special threat even if this government continues. It is the same in other countries, they are open and want to protect foreign investors. I am not sure about governments like in Venezuela.
Think globally when starting a business in Latin America. Research what is happening in the rest of the world and try to create something new. Differentiation and innovation are essential.
NSAM: What countries are more inviting to foreign investors?
Nieto: Colombia is the most positive at this moment. They are getting better and better, and are always inviting investors, giving a lot of guarantees and incentives. Peru was like this but I am not sure about the change of government. Mexico is a good country, but the problem is with security, we have to wait, but it is always welcoming to investors, it is like an extension of the US. Brazil is getting better but it is not very open or easy to do business in Brazil, foreign investors need an insider to help them. Panama is another country that is very open. It is a little small, but it could be the head of the Central American region. Panama is pushing a lot about technology and inviting technology companies there. The Dominican Republic is taking good steps.
What they have done is BPO, call centers, but President Leonel Fernández is a private industry person who is more into technology. He is working very hard to create a nice investment environment by partnering with US companies. There aren’t many resources, but they are working very hard. In two or three years there will be more resources and opportunities in the Caribbean region.
NSAM: How do startups break into the international market?
Nieto: Startups don’t have resources and the angel investment process is too slow in Latin America. There are a few groups, but they are not that experienced in doing investment in technology, they usually invest in real estate or something else that they can see and touch. We are trying to partner investors from Silicon Valley with investors in Latin America to create an environment of confidence and trust. We can teach the Latin American investors about the products.
If we can identify the startups that the local investors invest in, then investors in Silicon Valley will be more positive about investing in a second round. I took one VC to Colombia and they visited many companies, and they saw that there are many opportunities in investing in a country like Colombia. They want to invest, but with local partners. Many organizations, like Founders Space, are promoting innovation and entrepreneurship in Latin America. If we can convince a local investor to give them some money, we can receive them here in Silicon Valley and help them grow in global market. This is the right moment.
Money is a problem, but it is not the only thing. Think globally when starting a business in Latin America. If they do market research and see what is going on in the rest of the world, they will create interesting companies that can compete internationally. Most of the companies are thinking about their local region and almost copy products they see in the US for a local environment, this makes it very hard to compete internationally. Research what is happening in the rest of the world and try to create something new. Differentiation and innovation are essential. The founders need to have open minds. The owner is usually the CEO, and they are the owner for the life of the company. It is not easy for them to open up to other investors, other CEOs. They need to change that mentality – if they want to grow and need money and partners, and want to grow their team, the team needs to be part owners and shareholders. It is not that easy but little by little they will do it. I tell them that Bill Gates only owns 10% of Microsoft and he is the richest man in the world. Don’t be 100% owner of nothing, but 5% owner of a big company.
NSAM: What do you think of programs like TechBa (the Mexican startup boot camp in Silicon Valley)?
Nieto: I think it is a very good idea. It is good for a company to have a friendly place to land, and to have those spaces and the ecosystem to land in. Other countries are looking into that model. Having immersion programs like TechBA is very good for innovation and the opening of minds. There needs to be more immersion programs. I think Chile is doing something similar where they send young entrepreneurs to stay in Silicon Valley for one or two months. If we create these opportunities they will come and create new companies, and new investment opportunities. However, that is just one part of the program. They (the organizers) need to continue helping them (the startup) to become a legitimate company, to help them build the company, to get their first customers and funding. TechBA has that platform in place.
NSAM: Where do you see the most innovation coming from?
Nieto: Chile in the biotechnology industry, and Argentina in social media and gaming. In general the rest of the countries are doing more resource-oriented companies like BPO and Nearshore software development. Recently the government of Buenos Aires introduced companies into Silicon Valley, and they got very positive comments that the companies were at the same level as Silicon Valley companies. It is great to see that Latin America has something to sell to the international market. Colombia is making good progress with enterprise software and cloud computing. Every week we are seeing groups of Colombians in Silicon Valley. Colombia is moving very fast and we will see good progress soon.