Here’s how start-ups will shape Latin America’s future

An Uber driver cleans his car as his cell phone shows the queue to pick up passengers departing Guarulhos International Airport in Sao Paulo, Brazil, February 13, 2017. To match Insight UBER TECH-BRAZIL/  Picture taken February 13, 2017.   REUTERS/Nacho Doce - RC1C6F8B0150

Uber is popular in Latin America but homegrown companies are developing apps to address local needs. Image: REUTERS/Nacho Doce

John Hewko
General Secretary and Chief Executive Officer, Rotary International
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Latin America

This article is part of: World Economic Forum on Latin America

What do the 163 million young people in Latin America and the Caribbean (LAC) think about their future? According to a recent World Economic Forum survey, the region’s 15-29 year-olds – who represent one quarter of its total population – are worried about climate change, ranking it as the most serious global challenge they face.

At a regional level, they also identified the following significant issues in their own countries:

Image: World Economic Forum

However, they are optimistic about the power of business and technology to change their countries for the better. For example, 46% ranked a “startup ecosystem and entrepreneurship” as the most important factor contributing to youth empowerment in a country.

So can a start-up ecosystem really take on the most serious challenges identified by LAC’s youth today, such as lack of transparency or education?

One useful indicator is the 50 “outstanding startups” selected by the World Economic Forum and the International Finance Corporation. By comparing the issues identified in the survey mentioned above with the focus of these start-ups, we can extrapolate insights into what entrepreneurs see as future areas of growth, and how they are taking on regional challenges using innovative technology and entrepreneurship.

Transparency and security in the palm of your hand

Let’s begin with the issues of transparency and security, ranked as the first and third most important issues by youth in LAC.

Inspired by on-demand ridesharing companies or navigation apps developed in the US, such as Lyft or Uber, young Latin American entrepreneurs are creating new services with features tailored to their environment.

While Uber is popular in Latin America, with an even greater reach among mobile users in Brazil and Mexico than in the US (see chart below), homegrown companies are developing unique capabilities to address local needs.

 Uber % reach among mobile users (with selected competitors).
Uber % reach among mobile users (with selected competitors). Image: Comscore, August 2017

Whereas the American rideshare companies primarily focused on convenient and affordable mobility, their Latin American counterparts are grappling with distinct transparency and security issues which affect everyone, from residents wanting to navigate their city safely at night, to businesses requiring a secure supply chain.

In the 50 start-ups featured in the Forum’s list and beyond, innovators are responding to the need for localized and transparent information to plan their daily journeys.

For example, Base Operations aggregates information from several sources, including “government statistics, crowdsourced reports, and social media” to provide users with real-time, actionable information to help them stay safe. It is to crime awareness what Waze is to navigation, but with enhanced functionality, offering routing, tailored alerts, and group location sharing.

In some cases, environmental sustainability and social impact are integrated into the business model.

Take, for example, the Brazilian start-up Zumpy, created to reduce the number of vehicles on the road and improve air quality. Users can apply safety filters to plan rides with Facebook friends, or specially moderated groups for their universities or companies. At the end of a journey in a car full of passengers travelling along a compatible route, the app produces an estimate of reduced CO² emissions.

Infrastructure for education

More users will benefit from these innovations in mobility, transparency and security if mobile broadband access continues to grow in LAC. This growth can also drive changes in the second most serious issue identified by the survey: education.

Internet access is crucial not just for access to educational resources, but also for youth empowerment, as the survey shows:

Image: World Economic Forum

The important point here is not just internet penetration in LAC (now around 66%), but also access to mobile broadband connections, which soared from 7% to 58% of the population between 2010 and 2015.

As many learners use educational technology through their phones, and many budding entrepreneurs seek access to capital via e-banking services, the region must overcome geographic and socioeconomic disparities in mobile broadband provision.

If these disparities can be reduced, the possibilities for educational enhancement are exciting.

The dynamic growth of Latin America’s educational start-ups has been apparent even in the short time since 2015, when I wrote about the increasing demand for online learning resources. At that time, courses were still predominantly anglo-centric, and quality was variable.

Similar to the pattern we see in Latin American mobility apps, regional variations on US models are heralding major advances for educational technology. While Latin America is the fastest growing region for an American company like Coursera, it is not the leading company in this space.

Today, LAC’s largest open online course provider – MiríadaX – is tailored for Ibero-American learners, and now provides over 300 courses from 90 university partners in Spanish or Portuguese.

As such, it’s no surprise to see new, more specialized educational technology start-ups on the Forum’s list, such as Lab4U in Chile (an app for science education to aid teachers and engage students) and EduK in Brazil (a provider of online courses, especially for small business entrepreneurs).

However, to foster the next generation of entrepreneurs, access to secondary education should also be a priority, particularly outside major cities. Progress has been made in secondary education completion in rural areas, yet “close to 60% of both young men and women in rural areas do not complete secondary school”.

Economic opportunity and gender equality

Finally, how are Latin American entrepreneurs addressing the fourth most serious issue – a lack of employment and economic opportunity, through efforts to achieve gender equality?

We know that firms with greater gender equality are more innovative and successful. However, female entrepreneurs in LAC tend to have “lower confidence in their own abilities, coupled with higher fear of failure rates” according to the Global Entrepreneurship Monitor.

As such, it’s encouraging to see that five of the Forum’s selected start-ups are participants of WeXchange, the platform which connects LAC women entrepreneurs with investors and mentors.

While supporting a start-up ecosystem, we should not be overly reliant on technological solutions to inequalities in economic opportunity.

In Brazil, civil society projects like that in Varzea Nova – which attempt a holistic approach to educational and internet access, health services and vocational training – ensure that communities are not dependent on technology alone as a tool for sustainable growth.

In conclusion, the range of challenges addressed by new start-ups offers us a glimpse of Latin America’s future. This vision will be defined by local innovation in mobility, clean energy, education, online lending, banking and logistics.

It’s clear that innovation, transparency, gender equality and equitable access to a high quality education all impact the competitiveness of the region’s economies, and homegrown start-ups are starting to address those issues directly.

A strong start-up ecosystem, which is what young people want, has the opportunity to flourish if governments, private enterprise and civil society all attend to these underlying structural and social challenges identified by Latin America’s new crop of innovators.

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