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Top five cities to startup in Latin America

by Nitin Dahad

Latin America img_continent_big courtesy Impaktu

Image courtesy of Impaktu

In March 2011, on my first ever visit to Latin America, I discovered that there was an emerging startup scene in Brazil, in places like Sao Paulo, Recife, Porto Alegre, Rio de Janeiro and Florianopolis. And of course there is Campinas, which is sometimes cited as Brazil’s Silicon Valley. But as I continued to work there and understand the challenges faced by businesses trying to sell into Brazil, I also discovered that it would be some time before the innovation and entrepreneurship ecosystem flourishes like in some cities in the USA, UK or India.

The challenge in Brazil is a whole system that is geared up to encouraging people to go into public sector jobs, and the aversion to risk, or starting your own company, is significant, as one Silicon Valley based entrepreneur I once met trying to establish himself in Brazil had told me – his wife was running a technology business accelerator in Florianopolis. Also the bureaucracy, employment law and taxes make it difficult for an entrepreneur – but despite this, there are startups that succeed, but they would have done so with huge hurdles to cross.

On the other hand, Chile was at that time running an aggressive marketing campaign to show how easy it was to start up and grow a business in the country.

So it is with curiosity that I read the latest press release entitled ‘Top 5 cities to launch a company in Latin America’, issued by Dafiti Group, a Sao Paulo based e-commerce site for apparel, shoes, accessories, beauty, home and décor, with operations in Brazil, Argentina, Colombia and Mexico. This list looks similar to the four cities highlighted as the best cities to launch a startup in Latin America by GigaOm in September 2014.

So here is Dafiti’s list:

Buenos Aires, Argentina

As well as being the political, financial and commercial centre of Argentina, Buenos Aires is one of the most cosmopolitan cities in South America and subsequently the region’s most dynamic startup hotspot.

Funding and support: the local seed fund accelerator NXTP Labs provides upcoming startups with a seed investment of US $25,000. Local government recently announced an initiative to invest US $3.5 million to support local startup accelerators.

Trump card: the workforce is both highly skilled and cost efficient: 35.2 percent of the working population hold a certificate in tertiary education, whilst the minimum wage stands at a reasonable US $548 per month (2015).

Success story: Mercadolibre is the Argentinian eBay and the most successful startup in the country. Its service is now available in 13 countries and eBay is a listed shareholder.

Medellín, Colombia

The startup flow in Colombia is growing exceptionally fast. The most recent Colombia Startups meeting, an annual event for entrepreneurs and investors, hosted 1500 attendees of whom 164 were investors – an increase on the previous year’s attendees by 25 percent.

Funding and support: programs like Ruta N, an innovation and business centre created by local government, aim to boost new businesses which promote and strengthen the scientific, technological and innovative development in Colombia.

Trump card: Medellin runs on a similar time zone to the west coast of the United States. In 2013 Medellin was named the most innovative city of the year by the Urban Land Institute due to its progress and potential.

Success story: PagosOnline started with just US $5000 in 2002. Thirteen years, a rebrand and an investment of US $10 million later, PagosOnline by PayU is now is the biggest platform for online payments in Latin America.

São Paulo, Brazil

The Brazilian economy is expanding rapidly and is subsequently a good landscape for both foreign and local businesses.

Funding and support: the national startup initiative, Startup Brazil, supports companies less than four years old. This program provides support for startups in the form of investment, physical infrastructure, legal advice and training. The Brazilian government is also promoting initiatives for startups through its Tech Sampa program, which aims to create and attract innovative technology ventures.

Trump card: as the largest economy in the southern hemisphere, Sao Paulo is a great environment for building contacts and expanding operations.

Success story: worth more than US $250 million, Dafiti, Brazil’s largest online fashion retailer is one of the most interesting startups in Latin America. Available in six countries, Dafiti is helping reshape the future of e-commerce in Latin America through its use of iBeacon technology.

Monterrey, Mexico

As México’s richest city, Monterrey is considered to be one of the best places to do business in the country and stands as a symbol of progress in Latin America.

Funding and support: Startup Studio Monterrey, a Mexican startup incubator, recently launched a program to provide entrepreneurs with projects in the IT sector with specialized mentoring and workplaces. Entrepreneurs don’t have to pay to be part of the program but the incubator takes 6 percent of each project’s profits.

Trump card: the tech industry in Monterrey has grown three times faster than the global average in the last 15 years. This rapid growth is generally attributed to the support and funding available in the city.

Success story: Huichol Vertical Gardens has grown from a hobby to a thriving startup. Since growing the niche market in Monterrey, they have extended their operations all over Mexico and plan to expand from residential to corporate projects this year.

Santiago, Chile

Santiago is the economic, cultural and now the financial centre of the country. Its increasing appeal to international entrepreneurs is one reason why the startup scene here is quickly becoming known as the ‘Chilecon Valley’.

Funding and support: the Chilean government’s program Startup Chile aims to attract world-class entrepreneurs to the country. If accepted onto the program, participants receive an initial US $40,000 grant, a year-long resident visa and support from entrepreneurs in the relevant sector.

Trump card: due to Chile’s reduced regulatory complexity, businesses are fully registered within an average of 5.5 days – a drastic difference to the continent’s average of 30.1 days (World Bank Group).

Success story: Motion Displays is an app which optimizes client – sales team contact for businesses. The startup currently has a partnership with Falabella, the largest department store in South America, and plans to expand into larger foreign markets in the coming year.

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