Analysts say Colombia and Chile are both vibrant markets for Latin America’s startup scene, and both countries have made some progress in achieving a business environment that allows these companies to grow and develop. He says he is facing similar challenges.
As in other Latin American markets, while fintechs rule the roost in both countries, startups in both countries, especially small ones, also face challenges in building their businesses and diversifying their sources of funding.
In the 2023 KPMG report on startups in Colombia, based on 2022 data, the consultancy maps 1,327 startups active within the Colombian ecosystem, with a 19.5% increase in the number of startups operating in the country. It points out that it did.
Of this, around 59% focuses on the B2B market, which spans 31 segments, but six major sectors dominate the market. Fintech (15% of the total), retail tech, health tech, deep tech, martech, and business management are slightly behind. general.
“Despite general funding problems, Colombia has seen a large number of startups emerge in recent years. Bogota remains the epicenter, but Medellin and other cities are already emerging as hubs. The possibility of a ‘bancalization’ of the population explains this fintech environment,” Juan Diego Mendez, Colombia private sector leader at KPMG, told BNamericas.
According to the latest report from the TTR data platform, Colombia ranked third in Latin America for private equity, venture capital, M&A and asset acquisition deal value in the first quarter of 2024, with 61 deals, most of which were It was startup related.
However, based on the 26 deals disclosing such figures, the total amount of deals increased by 309% to US$2 billion.
Lavca, the Latin American venture capital and private equity association, reported that Colombian venture capital investments targeting technology-based startups reached USD 373 million in 82 deals in 2023. This is a 63% decrease compared to his US$1.2 billion investment seen so far. In 2022, he had 124 transactions.
About three years ago, KPMG created a special division to serve Colombia’s startup sector. This consulting and auditing firm supports companies with financial planning, business building, and even connecting with investors.
This effort also includes preparing for international expansion, with many of these companies ultimately expanding into nearby Spanish-speaking markets to achieve scale, while others are turning to outsourcing or nearshoring models. Mendez said the company exports services to the United States based on the .
Colombian unicorn Lappi, for example, is receiving help from KPMG with its expansion plans, the executive said.
Mendez believes Colombia has a relatively adequate regulatory framework for early-stage technology companies, making the country one of the most important countries in the region for investing in startups, along with Brazil, Mexico and Chile. It is said that it is one of the
Nevertheless, he says one of the major challenges for startups in Colombia is the low level of English among entrepreneurs and startup leaders.
Other obstacles include the country’s current macroeconomic and political environment and increased vigilance on the part of venture capitalists regarding financing startups, a trend that will continue in the post-pandemic era. It affects most start-ups around the world.
“The current administration continues to be a somewhat turbulent environment, not only for start-ups but also for the capital, production, construction and commercial markets in general… but the long-term outlook is positive,” Mendez said.
Chile
In Chile, startups consulted by KPMG in recent years include Osoji, considered one of the largest suppliers of household robotic equipment, and Betterfly, a unicorn focused on the personal wellbeing of employees. It will be done.
At the moment, there is a relative balance between advantages and disadvantages for startups in the country.
“It’s a difficult country to launch entrepreneurship, with permitting issues at first, but people are achieving it. There’s services, there’s manufacturing, and generally what we’re seeing is… The thing is, a lot of innovation is coming from startups,” Enrique Margotta, KPMG partner in Chile, told BNamericas.
Chile was one of the first countries in Latin America to create Startup Chile, a government program to support startups. Chile’s model eventually became a benchmark for other programs across Latin America.
Margotta said the government will continue to financially support startups as long as the project is strategic and viable, and through Startup Chile.
“But the current economic climate has made it even more difficult to start a business,” the executive said, referring to the startup boom during the coronavirus pandemic. We are in an economic period.”
Margotta said obstacles for local early-stage innovation companies include cash flow struggles, persistently high interest rates and the strength of the dollar against the peso.
Margotta emphasized that the main advantages for the country include legal security, transparency and a mature financial market, in addition to the recently concluded bilateral tax agreement with the United States.
However, from a macro perspective, he says the country’s political and economic situation, with elections for local mayors and regional governors coming up later this year, is muddying the waters for innovation.
“Start-up companies are moving and growth is happening in different areas,” he said. “But it’s not as big as we expected. Companies are maturing and growing, but it hasn’t been easy.”
As in Colombia, Chile’s startup scene is generally dominated by fintechs and companies focused on financial services and payments.
According to TTR data, Chile ranked fourth in the region for the number of private equity, venture capital, M&A, and asset acquisition deals in the first quarter of 2024, with a total of 61 deals, a 40% decrease year-on-year. . The 29 deals with public value were worth US$511 million, down 79% year-on-year.
