Historically, the technology sector in Latin American countries had progressed at a much slower rate than other regions in the world. Recently, however, we have seen this trend change in some Latin American nations. Omar Téllez, who has been involved in the development and expansion of numerous technology companies, explains the factors driving this technological growth and how businesses can take advantage of it.
The Cipher Brief: How would you assess the growth in technology and innovation in Latin American countries? What factors have led to this change and what challenges will the industry face moving forward?
Omar Téllez: There was a time, not very long ago, when Latinos living in the U.S. could only point to two successful Internet/software startups in their countries of origin: Mercado Libre and Despegar/Decolar.
Today, Latin America can claim close to 20 pure Internet/software companies with valuations north of US$250 million. Half of these companies were founded after the new millennium. Clearly, we are seeing an uptick in the creation and acceleration of these companies.
There are four factors that have driven this:
1. Governments Enabled Large Investments in Fiber Optic Cable Deployments at Home and Abroad. In Brazil, for example, over 40 percent of the country’s households have broadband connectivity today—about a seven percent increase from the year prior—with an average of 2.6Mbps.
2. Lower Priced Smartphone Technology Enabled Market Adoption. Today Latin America has one of the highest wireless penetrations in the world. Similarly, smartphone penetration is expected to cross 50 percent by 2018.
3. Latinos Consumed Social Media Like There Was No Tomorrow. Brazilians spend, on average 3.8 hours on social media each day, compared with 2.7 hours in the United States. It’s no wonder the Wall Street Journal called Brazil “The Social Media Capital of the Universe.”
4, New Smart Capital Arrived. Specifically in 2014, venture capitalists invested US$525.6 million through 186 transactions in Latin America, an 8.3X growth since 2010.
TCB: You have been involved in many startups. What role do Latin America governments play in facilitating entrepreneurship and innovation? What more could they do to promote this?
OT: My experiences at both Moovit and SoLoMoTo have confirmed that working with Latin American municipal governments can significantly accelerate your traction and development.
Local governments are keenly aware of the impact that technology can have on their citizens and, if they are able to improve their situation—for example, by improving the public transportation information and route selection, or enabling small medium businesses with access to online tools that will bridge the digital divide—they will do it.
TCB: Silicon Valley has shown interest in the Latin American technology industry. Do you foresee partnerships growing there? What are the benefits to businesses in creating such partnerships?
OT: It’s pretty telling that Mark Zuckerberg didn’t choose Beijing, London, or Dubai to have the first Facebook overseas town-hall meeting. He chose a place that, 10 years ago, few people in Silicon Valley knew much about, and much less regarded as a player in technology: Latin America.
Foreign companies, like Facebook, Moovit, and WhatsApp, are clear examples of partnerships growing between the two, and they have profited from it. For example, with well over 200 million users, Latin America represents close to 20 percent of Facebook’s user base.
TCB: What advice would you give to U.S. businesses looking to enter the Latin American technology sector?
OT: I have five recommendations for U.S. startups entering Latin America:
1. Address the wireless carriers early. Companies like Facebook, Uber, Moovit, and WhatsApp are better for having partnered with local carriers for distribution to understand local economic conditions and demand patterns.
2. Partner with media and local governments. They need technology to advance the socioeconomic situations of their constituents.
3. Leverage the enormous infatuation with sports. In Latin America, it's like there is a Super Bowl every week.
4. Channel the social aspects of the Latinos. After all, it is no wonder the Wall Street Journal called it the "Social Media Capital of the World.”
5. Don’t think of LATAM as one single region. Every country, and even city, has its unique conditions. It is important to do due diligence to understand the local conditions before doing business there.
