Latin America is on the verge of a big transformation. This is a decisive time for our region, as we see the economies of key countries showing signs of recovery. More importantly, efforts to combat corruption are starting to deliver tangible results and driving a sense of change and hope. With this backdrop of a vastly improved zeitgeist, it’s motivating to watch and work closely with the emerging start-up movement in the region.
With the Fourth Industrial Revolution and the growing impact of technology in our lives, it's no surprise that tech start-ups are driving this movement. International investment in Latin American tech start-ups has more than doubled in the past five years, notably in 2017, when the likes of SoftBank, Didi Chuxing and TPG invested in companies in Mexico, Brazil, Argentina, Peru, and Colombia. The high point of this renaissance in Latin innovation was the creation of the region's first unicorn, when Brazil's ride-hailing app 99 was acquired by Chinese company Didi Chuxing with an estimated valuation of $1 billion.
As the World Economic Forum on Latin America 2018 kicks off in São Paulo – a mega-city that represents the challenges and opportunities of the region – this is an exciting time to ask, how do we scale this start-up movement, and how do we take advantage of technology to advance our economies?
First off, we need to applaud the success of these ventures. Our policymakers and governments need to do a much better job of limiting the bureaucratic nightmare of opening and running a business in Latin America. That includes the improved use of technology, in citizen self-service for example, but also enhancing labour legislation, and providing start-ups with more flexibility.
Take Brazil – our host country – as an example, where, according to research by Endeavor, 86% of companies say they cannot meet all the existing legislation. According to the World Bank report "Doing Business", Brazil is one of the 15 worst countries in the world to open a new company.
This actually creates an area of opportunity for entrepreneurs. Much of what's going on – and succeeding – in the start-up scene is about the customer experience. A survey of recent successes in our region uncovers technologies that are simplifying financial services, expediting logistics and transportation, and matching resources with those who need them. So, when thinking about launching your next venture, try hard to identify customer experience gaps in existing industries and how to explore them. Think also about citizen experience gaps in healthcare and education and how technology can address those.
Second, don't overthink the product. Be agile, concentrate on customer success and iterate. We see that successful companies in the region, which are on the path to becoming unicorns, are achieving these goals with one core focus: customer success. Bear in mind that a fair number of tech start-ups fail because they lack customers, not funding.
A great example is Canal da Peça, a marketplace based in Brazil and operating across Latin America. Their value proposition is to reduce friction in the economy by matching people and companies looking for and selling car parts. They built their business on the premise that customer success is paramount, even more important than the technology itself. This focus has helped them expand business at a rate of 16% on a monthly basis.
Third, create a strategy for developing new talent. The International Labour Organisation (ILO) reported 26 million unemployed in Latin America and the Caribbean in 2017. Again, there is an opportunity out there for start-ups to fill this gap and be competitive. According to IDC's Salesforce Economy report, advances in technology, coupled with a workforce that acquires new skills, will help drive 3.3 million new jobs and more than $859 billion in new business revenues worldwide by 2022.
This revenue has a direct impact on local economies. In Brazil, it is thought that more than 195,000 direct jobs will be created by 2022; in Mexico, there is scope for more than 81,000 new jobs. To harness these gains, our region needs online and free education platforms that enable massive, self-paced and scalable education.
We are excited about the prospects for our region. Now is the perfect time to join the World Economic Forum on Latin America to continue these discussions and motivate the region’s entrepreneurs to be bold and lead the way.