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Why You Should Consider Launching Your Tech Startup In Latin America

First Posted: Jun 21, 2019 03:35 PM EDT
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Latin America makes up quite a bit of the Americas, but companies have grossly overlooked it because of a lack of shared history and a consistent language barrier. In 2016, Deloitte noted that Latin America's technology sector was growing in production and innovation at a rapid rate. While it may never be as massive a market like India or China, Latin America offers a lot of potential for new tech companies trying to gain a foothold in a competitive market.

It doesn't matter whether the company offering the service is a website design agency or a financially backed app developer, Latin American markets provide good developing infrastructure, and a ready market that is almost untouched by most western companies. LAVCA mentions that venture capital investments in the region surpassed $1bn for the very first time in the year 2017, foreshadowing even more growth for the area. Aside from the undeniable draw of new capital injection, what makes the Latin American region such a good one for launching a tech startup?

1. Talented Locals with Low Competition

Finding a skilled developer that will work for an affordable rate in the US or Canada is virtually nil. However, in Latin American countries, thanks to the slow adoption rate of new technologies and lack of tech startups, a skilled technical worker might not even be able to find a job. One of the primary reasons for this is the lack of available jobs, but another is how expensive developers are to hire compared to other types of workers.

Stack Overflow mentions that in the Latin American region, a developer might make as much as five to ten times as much as an average salaried worker. Even so, hiring a developer that earns that much is far less expensive than hiring a mediocre graduate from a more developed economy. The low competition makes it much easier to find consistent talent, and the reputation of developers from countries like Peru, Colombia, Chile, etc. make useful case studies for startups who want great talent, but only have limited funding to get it.

2. Huge, Receptive Audiences

There are a lot of people in Latin America that are only now coming to realize the technological revolution that the US, EU, and others take for granted. In some places, less than five years ago, people were still using CDs and diskettes. Now, thanks to the proliferation of mobile data technology and expanded local telecommunication networks, the region is experiencing an explosion in interest in new applications.

North American markets are not nearly that receptive. Tech Crunch reports, that Comcast discovered half of their users (51%) didn't download any new apps per month. However, the opposite is true of the Latin America region. According to IDG Connect, Latin America is expected to have as much as a billion people connected to a mobile network by 2020. Innovators in the region already try to solve local, specific problems, and because of this familiarity with new applications, users are receptive to brand new creations entering the app store.

Massive Local Investment

Both public and private startup funds are available in the Latin America region to innovators trying to bring new tech products to market. Because of the nature of these companies, it's more likely for public-private partnerships to form. Accelerator programs have historically been the base funding for startup companies, and the emerging tech market is no different here. International finance usually supplements local sources, but local funds are typically more available and require fewer pre-requisites to access.

Challenges for a Startup in Latin America

The two biggest problems that a new company will need to overcome in the region is the language barrier and the administrative control of the free market. For the time being, most entrepreneurs in Latin America don't have to worry about government meddling in their affairs for the more developed areas. For less developed countries, governments like having strict control over what is distributed and sold to their populace. A company looking to set up in Latin America should do its research to ensure that they don't run afoul of the local authorities.

The second problem that companies are likely to face is the language barrier. The barrier isn't just between English-speakers and Spanish speakers but exists even in countries that officially speak English. Quite often the "English" being spoken is an unrecognizable local patois that is only majority English. Overcoming this barrier is an essential step in finding the personnel they need to grow.

Is Latin America Worth it?

For a new startup, setting up in the right location can make or break the business. Latin America is impressive because of its pool of talent, its rapt audience, and its available financial help. However, startups that come in expecting a third-world version of Silicon Valley will be sorely disappointed. Setting up in regions like this requires a bit of forethought, research, and understanding of what the company's getting itself into. The potential for explosive growth exists, but without proper planning, it may take much longer to realize.

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