It’s no secret that over the past decade Latin America has gained worldwide recognition for its budding startup culture – and for good reason. Today the region represents one of the most enterprising and dynamic startup ecosystems on the globe with 59% of the population identifying as aspiring entrepreneurs, according to the 2016 GEM Report.
Too often, however, we look at Latin America as a sum of its parts rather than a whole.
Brazil has remained at center stage with Argentina, Colombia, Chile, and Mexico following closely behind. However, from Montevideo to Medellin, cities across the Americas have become powerhouses for entrepreneurial activity and innovation.
With comparatively low cost of living and no shortage of standout coworking spaces and accelerator programs, it’s no wonder founders and investors alike are giving the region a closer look. But there’s much more potential to be tapped. If Latin America is to build a world-leading startup ecosystem, regional hubs must collaborate towards long-term growth.
So how can we replicate the existing models to increase regional cooperation and build a stronger, more unified startup ecosystem? Here are a few ways.
The Case for Cooperation
Increased regional cooperation would promote a more effective way for Latin America’s startup hubs to share information and learn from each other’s successes and failures. While the opportunities are many, the potential to accelerate change is particularly strong in the following four areas.
Latin America prides itself on its diversity, which is arguably one of the most critical elements of any startup ecosystem. There’s no question that access to a diverse and qualified talent pool is essential to fostering entrepreneurship and innovation. That being said, one of the most commonly-cited struggles for startups in Latin America is a lack of specialized talent.
Luckily, with the rise of online learning platforms and a growing number of public and private educational initiatives, that trend appears to be shifting. By building upon programs like Startup Chile’s S Factory or Medellin’s EAFIT University, we could see an even greater impact in facilitating knowledge transfer and developing a specialized workforce regardless of location.
If we look at the factors behind the growth of Latin America’s startup hubs, one thing is clear: they all share a common goal of cultivating a culture of innovation. The OECD reports that risk aversion is high in Latin America, and relatively few people view entrepreneurs as key contributors to national development. Without the support of communities, both local and regional, that 59% of potential entrepreneurs may never have the courage to take the next step.
One effective way of diffusing an entrepreneurial mindset is by organizing meetups and community groups to inspire those active in the startup space. For example, Startups of Puerto Rico connects startups with local mentors and resources, and hosts a podcast to promote Puerto Rican entrepreneurs. In Costa Rica, ChepeTech organizes a wide range of networking sessions, hackathons, and workshops in the San José capital. Further south, Perú Tech has become the country’s largest meetup group with monthly events in a variety of cities – and the list goes on.
With all their energy and enthusiasm, these local groups are well-positioned to serve as a launchpad for more cross-border collaboration.
Collaboration among investors is equally as important. Regardless of location, limited funding sources have been one of the greatest inhibitors to Latin American startup growth. While exit momentum has taken off in recent years, there is significant room for improvement.
TechStars recently highlighted the efforts of the Guadalajara Angel Investor Network (GAIN) and the Venture Club Panamá that bring together angel investors to promote opportunities in early-stage ventures. Public and private funds, moreover, have been a consistent source of VC investment, but a regional fund has yet to emerge despite a push from leading VC firms.
Increased cooperation between investors at all stages could help close funding gaps and attract larger levels of investment, which have historically been difficult to come by.
Finally, governments have a responsibility to support the region’s startup community across all of these areas. Legislative initiatives to attract investors and encourage new business fuel the growth of ecosystems, both directly and indirectly.
Many governments have already taken great strides in this direction – for example, you can open a business in a single day in Chile and Mexico. We’ve also seen the emergence of innovative new initiatives like the creation startup incubators and specialized government agencies in countries such as Chile, Colombia, Mexico, and Peru. These programs have been transformative in raising the countries’ profiles on the global startup stage.
Despite all of the advances, many Latin American countries still have major regulatory burdens and insufficient support for innovative businesses. To increase the impact of pro-startup policies across the region, government organizations should continue to promote regional integration like the Pacific Alliance to increase cooperation and work toward a shared regulatory framework.
Even with all of their quirks and unique strengths, startups are inherently collaborative. Latin America too shares this identity and it’s time to start capitalizing on it. A more unified, regional startup ecosystem will be essential for sustainable future growth.