Ask any entrepreneur in Latin America what the most significant barrier to the region’s growth was ten years ago, and the number one answer would likely be access to capital. Fortunately, angel investors, venture capital firms, corporate VCs, and other funding sources have stepped up to fill the region’s capital gap over the past few years. Before the COVID-19 crisis hit, venture capital funding in Latin America reached a record high, more than doubling in 2019 compared to 2018. While some investors have pulled back on their activities during COVID-19, there is emerging evidence that a decline in deals may not hinder Latin America’s growth, and that momentum can be sustained on the strength of the region’s tech talent.
A critical component of any thriving startup hub is access to talent. This includes not only the ability for existing tech companies to find and retain talent, but how they foster the next generation of entrepreneurs. Unlike ten years ago, when most talent remained in the US or Europe after studying abroad or fled the region when local resources could no longer support their growth, there are now many incentives for talented professionals to stay in Latin America. Here’s a look at a few of the factors enabling more startup founders in Latin America and signs that this tech talent will be a major force in pushing the region forward.
Maturing tech companies
The ‘startup mafia’ effect, which occurs when a group of successful entrepreneurs and investors emerge from one company, such as PayPal in Silicon Valley, has spread worldwide. The existence of these companies has also become a strong driver of Latin America’s tech emergence. Local success stories can have a multiplier effect on a region’s startup hub and cultivate a culture of innovation as employees go on to start their own companies or reinvest in the community. As TechCrunch journalist Alex Wilhelm said in a Mattermark interview, “The flowering of mafias in Silicon Valley is perhaps another natural, but notable evolutionary step for startup hubs; aka this sort of reinvestment is how regions improve.”
There are a few clear examples of ‘startup mafias’ in Latin America, among them Groupon Latin America and Mexico’s Linio. A number of startups have emerged from Groupon Latin America’s base of 700+ employees, including Babytuto, Admetricks, Pulpomatic, Kosleeping, and Cornershop. Meanwhile, other members of Groupon Latin America have become investors. One example is Felipe Henríquez Meyer, the CFO of Groupon Latin America from June 2010 to June 2013 and now managing partner at Mountain Nazca Latin America, an early-stage venture capital fund that invests in the region.
From Linio, 66 companies have been identified as being started by the company’s employees in Latin America, forming an ever-expanding web of success stories. Petsy.com, Kavak, Envioclick, Juntoz, and Luuna are just a few examples in the e-commerce space, and Apli, Covela, and Worky.mx are all platforms that help improve business processes.
Groupon and Linio are not the only sources of tech talent in the region. Startup entrepreneurs Courtney McColgan, Carlos Lau, and Gonzalo Begazo, are just a few founders who all left tech companies and subsequently built regional startups. Prior to founding Runa, McColgan was Chief Marketing Officer at Cabify. Lau had stints at both Uber and Amazon before launching Kurios, and Begazo worked at Google before launching Chazki.
As more tech companies mature in Latin America, they are equipping employees with the practical skills relevant for starting their own companies. In an interview with Contxto, Pierpaolo Barbieri, founder of one of the region’s fastest-growing fintechs, Ualá, said, “I hope that many of the people who train in Ualá and work in Ualá, continue on their way, found new startups in Latin America. I want to create an “Ualá mafia.” And that will be very positive for the entire ecosystem.”
Startups serving as talent connectors
New data shows that an estimated 40% of US-based tech roles will be relocated outside the country within five years. The COVID-19-induced shift to remote work is disrupting tech ecosystems worldwide, and could play in Latin America’s favor.
As more global tech companies open up to hiring remote workers, there will be more opportunities for tech talent in Latin America to secure these roles given the advantages the region provides to US companies over hiring tech workers in other parts of the world. For example, Latin American team members can work during US business hours given the time zone similarities, and English proficiency in the region is high. Cultural similarities and lower costs of living also make the region an attractive place to hire tech talent.
Yet on the ground, an average of four out of 10 firms claim it’s challenging to find the right candidate. As a result, there’s been a surge in HR tech in Latin America to help match qualified workers with companies seeking specific skills. Job search portals and recruitment platforms such as GetonBoard, Talently and Quantum Talent, all help firms tap into the growing local talent pool.
There are also more organizations working on ways to prepare the region for the digital economy. From public-private partnerships such as Ruta N in Colombia to education platforms like Platzi and Crehana, there is a nascent movement of organizations working towards this shared goal.
Efforts to broaden the talent base
In Latin America, 91.7% of board seats are still occupied by men. Latin America still has a long way to go when it comes to gender equality and diversity in the workplace. However, there are reasons to be hopeful. Positive signs of a culture shift are emerging, with more organizations and companies focusing on gender and diversity issues in order to retain talent and help the region reach its full potential. Programs such as Laboratoria, Women Leaders in STEAM, and WeXchange are bringing together female entrepreneurs and leaders from across the region to broaden educational efforts and increase female participation in the tech industry.
One positive outcome of these efforts is more women in Latin America are showing interest in starting their own companies. And in some industries, such as fintech, women in Latin America are now founding more companies and raising more venture funding than the global average.
Setting the stage for tech talent to thrive
Latin America can still be a tough sell for anyone with an entrepreneurial spirit and foreign tech talent looking for new opportunities. However, with more global companies shifting to remote work, Latin America’s maturing tech sector, lower costs of living, and improving mindsets on diversity and work-life balance are all making the region an increasingly appealing place to work and do business. Economic growth depends on a constant inflow of talent playing an active role and sharing knowledge. With the recent COVID-19 crisis, Latin America is poised to meet the challenge by serving as a source of tech talent and startup founders. When it’s no longer necessary to leave the region or live in high-cost locations for a decent career in tech, Latin America will see its appeal as a tech hub grow in years to come.
Disclosure: Angel Ventures is an investor in Get on Board and Quantum Talent.