Venture capitalists should not brush LatAm aside

With high-profile startups around the region and political stability on the rise, perhaps LatAm has nothing left to prove to investors.

The Latin American tech sector is growing at an unprecedented rate, the reality is, it could not have kept up its impressive growth figures without the help of investors. Startups in the region have been raising substantial investments. Nubank, a Brazilian banking and finance tech service raised $50 million in a single investment round led by Tiger Management. Brazilian food delivery app iFood managed to raise $30 million and Mexican shopping app Cornershop received $6.7 million.

All of this is the work of venture capitalists who see in LatAm huge potential for growth and innovation. In fact, venture capitalist investments have been on the rise at the staggering rate of 46% per year and only in the first half of 2016, they made 104 transactions worth $218 million in total.

It could be argued that the only reason why these numbers are not higher is because of the myths surrounding the LatAm business climate, which are still discouraging potential investors.

Some ghosts of the past still seem to scare away big capital, political and economic instability are still common reasons to keep investments away from LatAm. The truth is however, that political and economic instability is more commonly the exception than it is the rule. Bar Venezuela, all countries have been posting yearly growth, that although modest, should serve to prove the point of economic stability in the region.

Additionally, this sort of stable economic growth is sustainable, it has endured a commodities recession, and that should signal a diversified economy that does not exclusively relies on extraction.

The myth of political instability is still not debunked however, recent turmoil in Venezuela has sky-rocketed inflation and a corruption scandal u Brazil has shaken up the country’s political elite and left an impeached president.

Still, a rather smooth turn away from populist left leaning governments can only be considered friendly, it brought about moves towards trade liberalization and greater initiatives to sign trade agreements, paving an easier way for investments to reach LatAm.

Besides the increasingly comfortable business conditions, startups are stepping up their execution. No longer can LatAm be considered a land of copy cats, as investors regarded it before.

Ariel Arrieta, founding partner at NXTP Labs, agrees things are different now: “Latin American entrepreneurs know that from day one (and even day zero) they are competing globally, and so they concentrate primarily on leading the region, at least initially. Companies such as Satellogic and iBillionaire are evidence of a moment where research and development have matured to such an extent that it is no longer strange to hear ‘the next Facebook’ could come from Latin America.”

It is still hard to make the argument that LatAm could host ‘the next Silicon Valley’, the startup business in the region is too young to make reasonable assumptions on the issue. What is true and undeniable, is that startups in LatAm are becoming increasingly innovative and trustworthy, and they are not to be easily dismissed by investors.

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