As Latin America’s fourth-largest economy, Colombia’s startup ecosystem is gaining the interest of investors – and Bogota and Medellin are leading the charge.
Bogota hosts the largest entrepreneurial community in Colombia, but business communities tend to be relatively well-established and segmented by industry, whereas Medellin’s newer startup ecosystem has contributed to a smaller, cohesive group of entrepreneurs in the city.
The Colombian government wants to make one thing clear: Colombia is open for business. Although there has been a bevy of local and federal initiatives in both Medellin and Bogota, the capital was the first to receive government aid for entrepreneurship, and its community has had a lot more time to grow as a result.
As recently as the mid-2000s, the Colombian government began to create tax incentives in Bogota to encourage founders to launch their businesses. In addition to Tax-Free Zones (FTZ) in the city, the government has provided up to 175% tax deduction for companies that are researching innovation, science, or technology. In zones affected by last decade’s armed conflict, SMEs are exempt from all taxes until 2021.
Furthermore, programs like Innpulsa, an accelerator funded by the Ministry of Commerce, Industry, and Tourism, were founded in Bogota first before expanding to Medellin. Innpulsa tracks and analyzes entrepreneurship across the country, creating in-depth investigative reports and helpful resources. Its interactive map of startups in Colombia shows Bogota as the center of entrepreneurship in Colombia, with 1,181 startups, while Medellin follows behind with 875 startups.
Meanwhile, the government of Antioquia has pushed Medellin to compete with the capital through initiatives like Ruta N and Parque del Emprendimiento, both government-funded startup accelerators in downtown Medellin. These two spaces provide workspaces for entrepreneurs, host educational events, and give mentorship to aspiring entrepreneurs from nearby universities.
The Municipality of Antioquia is working hard to transform Medellin into an innovation-based economy by 2021, and its results are beginning to show. However, Medellin still trails behind Bogota, having started almost a decade later and having only received a fraction of the federal funding that the capital does.
Investment and Venture Capital
As the herald of Colombia’s tech scene, Bogota was also the first city in Colombia to gain the attention of investors. Many of the major names in venture capital in Colombia got started in Bogota, whose tech scene began to stir in the early 2000s, then expanded their network to the newer hub, Medellin, by the next decade.
Although Bogota still leads the country regarding access to venture capital, investment in Medellin is rapidly growing to meet the needs of the startup community.
Major names like Wayra Colombia and HubBog got their start in Bogota and were joined by smaller venture capital funds like Torrenegra Labs and Firstrock Capital. However, innovative startup ‘builder’ Polymath Ventures took the opposite path, moving from its original office in Medellin to a larger one in Bogota in 2013.
The Startup Community
While the status of the ‘startup community’ in each city is less tangible than access to venture capital, the makeup of these communities is one of the main points of distinction between the two cities.
Having delved into entrepreneurship almost ten years before Medellin, Bogota hosts a more segmented community with connections that are industry focused. Meanwhile, Medellin’s smaller community tends to cluster around a few nodes of innovation like Ruta N due to the scarcity of options.
Furthermore, Medellin’s climate and quality of life have made it an attractive destination for digital nomads – more so than Bogota. While Bogota is a much bigger city, the international community in Medellin is expanding very quickly and is intimately connected through social networks in a way that Bogota’s is not. For example, the Digital Nomads Medellin Facebook group has almost 3,500 members, while Bogota has no such groups.
A 2014 study by Endeavor Insight mapped out the connections between tech startups in Bogota, which made it clear that Bogota’s entrepreneurship community is split between at least ten groups, in comparison with Medellin’s three or four.
This segmentation is likely due to the age and development of Bogota’s startup ecosystem, which has had almost two decades to grow and become more specialized. Bogota’s population size of 10 million people, compared with Medellin’s 4 million, has also likely contributed to the subdivision of its entrepreneurship community.
Quality of Life
Beyond the direct differences in investment and community between Bogota and Medellin, cost and quality of life between these cities are drastically different — for any bootstrapped startup, the cost of living is a factor that cannot be discounted.
While Bogota may be the seat of power and offers significant advantages in terms of access to capital and entrepreneurship network, its cost of living is substantially higher than in Medellin. On average, rent in Bogota is 20-30% higher than in Medellin given the size and importance of the capital city. Furthermore, groceries in Medellin tend to be about 10% cheaper than in Bogota, with restaurant prices following the same pattern.
Bogota receives non-stop flights from most major cities in the US and Latin America, while Medellin is only connected to Panama, Miami, Houston, and New York. While Bogota’s international networks and access to capital are a serious advantage, the cost and quality of life in Medellin far outstretches the capital.
Although Bogota’s tech community got a head start on Medellin, the efforts by the Municipality of Antioquia have allowed Medellin to rapidly gain ground in entrepreneurship. Many of Colombia’s most innovative startups have offices in both cities, and venture capital is almost equally accessible in either city.
At this point, Bogota’s large, segmented tech sector and Medellin’s tightly-knit international community are in close competition for becoming the most important startup hub in Colombia.