For decades, the largest companies in Latin America have remained the same in “traditional” industries such as oil, banking, cement, retail and telecommunications that we all know, however, disruption is beginning in the region.
To this change, technology is being integrated, completely improving the customer’s shopping experience and consumption habits, solving problems regarding access to financing, health, education, energy, digitization, mobility, among others, taking as an example regions such as Europe, Asia or the United States, where today approximately 70% of the largest companies are technology companies.
It’s not uncommon for unicorn companies to be so hard to find that they almost belong in mythology, valued by the market or private equity funds at more than $ 1 billion. These companies have transformed the industry through technology and some have begun to change the entire world.
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The first unicorn companies in Latin America started between 2005 and 2013, the great reference is Mercado Libre, it was born in 1999 and has managed to overcome difficult moments such as the dot com or the financial crisis of 2008, becoming the leading company in eCommerce from Mexico to Argentina, which at the beginning of 2021 reached the status of Hectacornio (a company valued at more than USD 100,000 million).
This technological awakening in the region is being promoted by leaders such as Brian Requarth, serial entrepreneur, founder of Latitud and author of the book Viva the Entrepreneur, who seeks to promote entrepreneurs through his experience, creating a community that helps close the information gap and knowledge to continue creating and growing high-impact technology companies and future unicorns.
One of the most important keys to this was the great talent created by the first startups, who bet more than ten years ago on eCommerce, investing hundreds of millions of dollars to create an era of transactionality (paying for the internet), resulting in the birth of the first technology mafias in LATAM, as happened in the United States in the last century.
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These hotbeds of talent are a pillar for the technological development and creation of unicorns, people who in a few years have gone from almost zero to leading teams of hundreds of people and budgets of millions of dollars, being able to experiment, make mistakes and learn. They have also become the place where these large teams meet and later together create solutions to big problems.
These founders are not outliers who came out of “nothing”, most are former entrepreneurs or managers of large StartUps where they learned with the money of others what is necessary to create companies that generate great value, backed by another important pillar that is the “Venture Capital”, who in the last five years have invested more than USD 20,000 million in technology companies.
The biggest challenges these unicorns have faced are culture, public policy, talent, and capital. Historically, Latino cultures have been characterized by creating entrenched family businesses that have remained for decades as leaders in their industries, doing very little M&A (purchase of other companies), innovation and even less, with IPOs as Brian points out. . Venture capital funds have pushed technological innovation by betting and injecting money into startups willing to provide solutions to major problems.
On the public policy side, they have not promoted and generated the environment to accelerate an innovation ecosystem, there are very few incentives that seek to generate greater dynamism in the industry and M&A, or that encourage the support and collaboration of large corporations together with new Business. Reform attempts such as the Fintech Law in Mexico, which seeks to make way for startups can help close the gap that exists in banking, where less than 25% of the population have debit cards and less than 15% credit cards.
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On the other hand, the change of mindset is another fundamental key in this transformation, learning from other ecosystems that are ahead is important, giving value first and then receiving is what all ecosystem actors must learn. By achieving this change in mentality, we will see how the “power” that investors seem to have over investment decisions today changes at the hands of entrepreneurs, or large and traditional corporations that try to stop innovation in their industries, could benefit from collaborating.
The timing was a decisive factor for the growth of capital funds, companies in different sectors were validating their business hypotheses and scaling, today it is normal to see that with a difference of five years, startups in the same sector they are raising ten times more capital in the same round.
Undoubtedly there is a before and after for SoftBank, who in 2019 entered LATAM with the firm intention of investing USD 10 billion until today; In just two years we have seen more than 12 unicorns born in the region, backed by local funds and international capital funds that co-invest, practically every week several investment rounds of millions of dollars are announced for startups of LATAM.
All this revolution coming to the region makes me ask a question, is there any chance of seeing a crash like the one that was lived in Dot Com 2000? We certainly agree that unlike at that time, these unicorns and startups that are receiving hundreds or billions of dollars of investment, have strong fundamentals in their business models, unlike the companies of the dot com they are solving big problems in huge markets and where they exist today:
- Low levels of customer satisfaction (NPS)
- Large traditional companies dominating these sectors for decades
- A tech DNA mindset is missing.
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It is interesting to understand the forceful changes that have occurred in Latin America in terms of innovation and high-impact technology in recent years, giving way to the birth of unicorns:
- Closing an information and knowledge gap
- Go from entrepreneurs with great background academic to entrepreneurs with success stories climbing teams of disruptive companies.
- Best angel investors who are key to generating value and guiding
- Increase in international capital investment never before seen in history
The internet has the potential to be the equalizer that creates a more equitable field for all, in this decade we will see how Latin America takes a lead by local technological teams, solving the difficult problems of the third world, but the next big bet will be to build companies of stature that dominate industries and change global consumption habits, where the next hectacorn (a company of more than USD 100 billion) can be born.
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Contact:
Oscar Jiménez Rodríguez, was Co-founder and CEO of Epiq, and Country Manager and Chairman of the Board of ThePowerMBA Latin America. *
Twitter: https://twitter.com/OshcarJR
LinkedIn: https://www.linkedin.com/in/oscar-jr/
Brian Requarth – Co-Founder of Viva Real and CEO of ZAP, Co-founder of Latitud and writer of the best seller Viva the Entrepreneur, https://www.linkedin.com/in/brianrequarth/
The opinions expressed are solely the responsibility of their authors and are completely independent of the position and editorial line of Forbes Mexico.