Ruta N

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Colombia: using technology and innovation to lift people out of poverty

by Nitin Dahad

Colombia vive digital image 2In a country of about 46 million, more than a third of the people in Colombia live below the poverty line. In an interview with The Next Silicon Valley, Colombian Minister for Information and Communications Technologies (MinTIC), Diego Molano Vega, spoke about how the ‘Vive Digital’ initiative is utilizing technology, innovation and entrepreneurship to reduce poverty.

Colombia has 26 million unique mobile subscribers and 51 million mobile connections, making it one of the fastest growing mobile markets in Latin America. It has been rolling out internet connectivity across the country too, enabling even villages to be connected so that they can have the same opportunities to participate in the digital economy as cities. The minister commented, “It is essential to take advantage of mobile technology to help improve the lives of Colombians. Our focus is on reducing poverty – we don’t want to be the Silicon Valley of Latin America, we just want to use technology to give the same opportunities to poor schools and kids that the children in Bogota or London have.”

Diego Molano Vega was at Mobile World Congress as GSMA, the mobile industry association, together with the Colombian mobile operators Claro, Telefónica Movistar and Tigo and trade association Asomóvil, announced a series of joint initiatives to enhance mobile users’ experiences throughout the country. These initiatives are supported by MinTIC and the Ministry of Environment and Sustainable Development, and are part of the GSMA’s wider “We Care” campaign in Latin America, focusing on tackling the key challenges of improving network coverage, managing electronic waste, reducing handset theft, as well as the use of mobile for disaster response in Colombia.

According to the minister, 96 percent of the country is already connected by fiber, and the remaining four percent would be connected by high speed microwave links. “Any location in rural areas with more than 100 inhabitants must have internet,” he added.

In order to achieve their objective, the ministry has been implementing its ‘Vive Digital’ program over the last four years – an initiative intended to give the country a ‘technological leap’ by providing internet connectivity throughout the country and developing the national digital ecosystem. It is part of the government plan to achieve democratic prosperity through the appropriation and use of technology.

There is a direct correlation between internet penetration, the rollout of information, communications and technology (ICT), employment generation and poverty reduction. Based on this Vive Digital was developed to enable significant social and economic benefits in Colombia. According to studies by Raul Katz from Columbia University, in the Chilean case a 10 percent increase in internet penetration led to a reduction in unemployment of two percent. And according to the UNCTAD Information Economy Report 2010, in developing countries such as the Philippines and India, for each job created in the ICT industry, between 2 and 3.5 additional jobs in the economy were generated.

There was also supporting data from the World Bank and the World Economic Forum report, The Global Information Technology Report 2010, demonstrating a direct correlation between the Network Readiness Index, which measures the use and development of ICT, and international competitiveness. Colombia therefore looked at using its plan to overcome several barriers in order to enable widespread internet penetration as a priority.

Lowest cost ICT in Latin America

At the infrastructure level, the minister said, “We first encouraged competition among carriers – from three operators, there are now 10 operators. We changed the rules of the game so competition is allowed. We have the lowest prices for handsets in Latin America, and subscribers are not locked to any one operator as they are in some parts of the developed world. We eliminated taxes for handsets and computers. This way, we are empowering the consumer, and making life easier for the consumer.”

At the applications layer, things are different though – the minister commented on this, “For us the digital ecosystem is different to the developed world, and comprises infrastructure, services, applications and users. The bottleneck is in the application layer.” He illustrated with an example, “Many small businesses in Colombia operate in an informal economy – small family businesses which operate on a daily cash flow business. We therefore had to focus on how we help these small businesses use technology and the internet to help them make more money.”

The minister was keen to emphasize this focus on the base of the pyramid, with applications for the majority of small businesses and poor farmers, making it different from the developed world. “We’re focused completely on developing applications for the base of the pyramid.  As a result we have gone from seven percent of small companies connected to the internet four years ago, to 72 percent now being connected. This was possible because we focused on showing them the value of technology. We showed them how moving from the informal cash economy to a connected business could help them make more money.”

‘Silicon Valley startup ecosystem has no clue what poverty is’

He said that this focus on the base of the pyramid gives a completely different meaning to raising capital, unlike the developed world venture capital ecosystem. “Silicon Valley has no clue what poverty is,” he commented. He explains this by saying that the Colombian programs are focused on using technology to help small time farmers and businesses to raise small amounts of capital that help them make a difference and lift their families out of poverty – unlike in Silicon Valley, where large amounts of cash are invested into startups and businesses focused on applications addressing the top of the pyramid.

The minister explains further, “We are focused on ICT for farmers, ICT for local government, and access to health. For example we have poor kids being able to sell onions on the internet, and generating capital – that’s our venture capital ecosystem.  Our version of innovation is a local innovation ecosystem to solve local problems – for example, by understanding the entire value chain of the onion.”

He said there are many programs now in place to encourage entrepreneurship and innovation – for example, there are 70,000 people on the apps.co program.  The latter is a (MinTIC) initiative to promote and enhance business creation through the use of ICT, with particular interest in the development of mobile applications, software and content.  In addition, there is also the iNNpulsa Colombia program, established to stimulate business ‘hyper-growth’, and Ruta N, a corporation created in the city of Medellín, to promote the development of innovative technology-based businesses.

Colombia is certainly beginning to make its mark in its own way as an innovation and entrepreneurship ecosystem – as TechCrunch said in a recent article, poverty, extreme poverty, and unemployment are all down thanks in part to tech-based programs designed to address inequality, and labor formalization is up; and in comparison to the other emerging Latin American tech hubs — Buenos Aires, Sao Paolo, Santiago — Colombia not only has competitive public incentives, but also the general structural growth that attracts immigration.

Minister Diego Molano Vega concludes, “Our goal is to expand the exposure of the poor to technology to give them the same opportunities as people in other parts of the world. In five years, Colombia will be the leading country developing applications for the base of the pyramid, with a whole innovation ecosystem around solving local problems.”

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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