Latin American countries experienced massive growth in venture capital in 2021. Tech growth investors poured $19.5B into companies bringing the entrepreneurial mindset home. Among the industries at the forefront of this boom is the software sector in Colombia, the fourth-largest economy in Latin America.
According to a report by the Colombian Ministry of Information and Communications Technology (MinTIC), the software industry in Colombia generated over $2.4 billion in revenue in 2020, a 9.7% increase over the previous year. Today, these companies employ over 150,000 people, with an average annual salary of $20K.
This article will examine critical factors that have made Colombia an ideal destination for software-focused startups, founders, and investors. We dive into Colombia’s favorable business climate, highly skilled workforce, and strong economic growth.
A Thriving Economy
Colombia has experienced remarkable economic growth since the early 2000s. Today, startups lead a digital revolution to boost the country’s economic development. This has turned the country into the second fastest-growing major economy in the world, only behind China.
Internet and Mobile Adoption
Colombia’s impressive growth in internet and mobile adoption rates has played a pivotal role in its digital transformation. As of January 2021, 68% of the population were active Internet users.
The COVID-19 pandemic further accelerated Colombia’s e-commerce adoption. The leading e-commerce company, Mercado Libre, reports that 4 out of 10 Colombians shifted their purchasing habits, resulting in a 47% increase in online sales.
This widespread connectivity provides a vast market for software companies to reach and engage with a tech-savvy population.
A large, talented pool
The country’s tech talent pool has over 150,000 IT professionals across major cities such as Medellin, Bogota, and Cali. These skilled professionals have contributed to the rise of disruptive startups and established companies in Colombia’s tech ecosystem.
55% of the country’s population is in the working age category, presenting an opportunity to expand the country’s talent pool. This youthful population is tech-savvy, with a high adoption rate of mobile devices and internet connectivity.
Colombia, as a startup haven
Before the COVID-19 health crisis, Colombia received over $1.1B in startup investment, leading to the development of a thriving startup scene that nurtured two successful unicorn companies: Rappi, a consumer tech company specializing in online delivery services valued at $5.25B; and LifeMiles, a frequent flier program for Colombian airlines valued at USD 1.15 billion.
Amongst the most popular industries in Colombia, we can find:
- Distribution apps
- E-commerce
- Healthtech
- Fintech
Moreover, Colombia is the only country in Latin America with a Ministry of e-commerce. Demonstrating the country’s commitment to promoting digital commerce as an essential part of the economy.
Political Reforms
The Colombian government has recently implemented measures to attract foreign investment and promote entrepreneurship. These measures include trade-free zones that encourage job creation and the “Registro Único Empresarial y Social” (RUES), which simplifies the registration process for new businesses. Additionally, various investment incentives such as tax breaks, grants, and subsidies are available for companies investing in technology industries.
In conclusion
Colombia’s emergence as a digital powerhouse stems from factors that place its software sector in the limelight of investment opportunities and growth. The impressive internet and mobile adoption rates and e-commerce boom resulting from the pandemic come from a population eager to embrace digital solutions.
With a stable economy, favorable business environment, and culture of innovation, Colombia provides a nurturing ecosystem for software companies to flourish. Plus, its strategic location and strong economy make it the ideal gateway to other countries in Latin America.
Colombia’s thriving economy, business climate, highly skilled workforce, and growing consumer base make it an ideal destination for entrepreneurs looking to establish, develop, and increase their chances of success in Latin America.