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Matthew Ellis is a well-respected freelance journalist who has made a name for himself within the tech industry. When he’s not busy writing poignant articles, you can find him reviewing sales companies like Acquirent.

How Startups in Latin America Are Rivaling American Tech Companies

It used to be that when people talked about tech companies, you immediately thought about Silicon Valley. That’s where the big boys lived, and if you hoped to compete with them, that’s where you had to go too. But an increasing number of investors are starting to shift their money away from the tried-and-true Silicon Valley and bet on an area of the world most would probably never expect: Latin America.

(Image credit: juliandowling.com)

From Chile to Mexico, there is a grassroots revolution quietly going on that aims to change the face of tech as the world knows it. Rather than shying away from startups as they have for generations, graduates from the top universities in Latin America are moving towards them in a mass migration. Investors from around the world – including Silicon Valley – are infusing them with cash and reaping the rewards. Most importantly, the industry in this area of the world has started to make the shift from fledgling startup hopefuls to self-sustaining behemoths.

More than an emerging industry, it has become a movement, and the companies leading the charge have been dubbed “TechnoLatinas.” It’s a term that was coined by Buenos Aires entrepreneur Ignacio Peña as a way to encapsulate this developing ecosystem that seeks to strengthen and bind together not only the economies of Chile, Brazil, Columbia, Argentina, Mexico, and others in Latin America, but the entire world.

How is this possible when only a generation ago it was tough to get startups to succeed in this area of the world? As much as this is a grassroots effort, it has taken a combination of bottom-up and top-down thinking to really get the industry to blossom. And it all starts with…

Availability. A generation ago, things like internet access – let alone broadband or services on the cloud – were reserved for the monied elite in Latin America. But over the last decade, the increase in cheap and available broadband has both lowered the costs involved in starting and running tech businesses and vastly increased the number of potential customers. Simply put, starting up an online company is easier – and more lucrative – than ever before. But smart and creative people are still needed, which brings us to…

Education. No one went to university in Latin American countries to become an entrepreneur and start their own company. Startups just weren’t good business. Then came the internet, smartphones, and the social media explosion.

Campuses noticed that their students were excited at the prospect of living in a connected world, and more in tune with the possibilities and opportunities digital technologies provided. Business schools began encouraging this interest in the tech economy and pushing the envelope by holding pitch contests for new tech ideas and hosting hackathons. More and more talented people emerged from their studies ready and willing to create something. Governments recognized the tremendous potential upside and offered…

Federal support and opportunity. What does this mean? How about grants, capital, tax protection, and much-improved business environments? And that’s only the beginning.

Start-up Chile encourages entrepreneurs from outside the country to bring their great new startup ideas to Chile and base their operations there. Buenos-Aires recently showed their support by bringing 32 of their tech startups to the world-renowned tech conference TechCrunch Disrupt San Francisco. And President Juan Manuel Santos of Colombia has announced that he plans to spend more than $2 billion on communications and information technologies, $30 million of which is earmarked for investing in technology companies.

Beyond this, many governments have courted existing tech giants for support, and invested in accelerator programs for their own tech startups. Two of the most well-known – 21212.com of Brazil and NXTP Labs of Argentina – recently set up meetings with U.S. investors, something that would have been unheard of a decade ago. And if that’s not enough to prove that the business world is taking notice…

Commercial investments. The community of venture capitalists and angel investors willing to pour money into Latin American tech companies is growing by leaps and bounds. Brazil now has several innovation centers from Microsoft Biz Sparks and a data center from Amazon Web Services. Chile will soon have a data center from Google.
But that’s just the tip of the iceberg. The U.S.-based booster organization Startup Weekend now has more chapters in Mexico (13) than anywhere but the United States. Silicon Valley venture capital firm 500 Startups has quietly been acquiring companies in the region, and has said they have plans for even more investments there. It makes sense, because Latin America has…

A ready, willing, and inexpensive workforce. Latin American universities have graduated scads of engineers and other technologically skilled workers. In the past, many of these students chose their studies in the hopes of landing jobs at American or European companies, but unfortunately those positions are few and far between. What this means, though, is that many Latin American countries have a well-trained workforce just waiting for the right jobs.

Even better for international investors, in comparison to costs in the U.S. and other developed countries, Latin America is a bargain. Where Silicon Valley engineers might be making $6,000 per month, colleagues in Chile, for example, earn anywhere from $1,500 to $2,500. And that’s just the beginning of the savings with all the government subsidies offered.

Due to all of this, Latin American startups are finding ways to really push the envelope of what tech can do, even surpassing many of the established big boys with things like:

  • Developing a clear and easy way to encourage people to recommend products they like to their friends through Facebook so that companies get real leads.
  • A free app that lets users find and connect to Wi-Fi networks on their mobile phones no matter where they are, and whether or not they even know there are networks available.
  • Creating a program that taps into taxicabs current payment and communication systems so that users can locate nearby cabs and reserve them.

And those are just a few of the amazing ideas coming from the “other” Americas. With all of these factors weighing in, TechnoLatinas might just displace Silicon Valley sooner than later.

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This entry was posted on Monday, December 17th, 2012 at 4:38 pm and is filed under Entrepreneur Inspiration. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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