Innovative ecosystems are increasingly becoming relevant entities in the global economy. They can be described as the networks of private and public stakeholders and community members supporting innovation and play a pivotal role in mainstreaming advanced technologies, enabling substantial leaps forward in innovating even traditional sectors.
While we are familiar with references to the Silicon Valley and to the London startup scenes, there are ecosystems in newly industrialized countries that are proving themselves as capable of attracting international investments as well as harboring high quality startups reshaping local markets.
Indeed, Colombia, the 4th largest Latin American economy and 3rd most populous country in the continent, has been on an upward trajectory in catalysing the attention of international investors and venture capitalists, with a watershed moment being represented by the startup Rappi raising more than US$1B in 2019, becoming the first Colombian unicorn.
The nomination of Medellín in 2019 as the Latin American headquarters for the Centre for the Fourth Industrial Revolution Network of the World Economic Forum highlights the city as an established innovation center
Aside from its capital city, Bogotá, a key innovation hub is found in its second city, Medellín. While at the end of the 1980s, Medellín was plagued by urban violence and drug cartels which made it sadly infamous worldwide, today its image has transformed. Thanks to the joint efforts of its public and private sector, it is today branded as an internationally renowned tech hub.
As it often occurs in the startup world as well as in financial markets, in its early stages of development the celebration of success stories and the enthusiastic rebranding of the city enacted a self-fulfilling prophecy, contributing to the attraction of investments and the further expansion of the ecosystem. On the other hand, the nomination of Medellín in 2019 as the Latin American headquarters for the Centre for the Fourth Industrial Revolution Network of the World Economic Forum highlights the city as an established innovation center and its role as a catalyst for the rest of the region.
The Medellín innovation ecosystem is built upon the solid basis of a deeply rooted entrepreneurial culture characteristic of its Antioquia region. Moreover, the political continuity and stability in the past two decades has allowed economic development as well as a transformation of the image of the city, compared to the end of the 80s and 90s.
The business platform Crunchbase reports there are roughly 200 startups currently located in Medellín
The initial push for the innovation hub came from the creation of the ‘University Company State Committee’ in 2003, a national policy aiming to encourage synergies between sectors with the objective of fostering productivity and competition in the areas of science, technology and innovation.
Finding fertile ground in the local entrepreneurial culture and in the pre-existing coordination mechanisms between universities, this alliance became the only successful one among the various Colombian regions in which it was implemented, becoming a unique case study.
Building on that, an operational arm to foster synergies was created in Tecnnova. Consequently, the then mayor Sergio Fajardo formalised the participation of the public sector in this alliance through the “Science, Technology and Innovation Plan for the territory – 2010”, together with the establishment of an agency in charge of the implementation of the plan: Ruta N. Its creation came about in 2009, in the form of a public joint venture between the mayor of Medellín’s office and the two leading state-owned enterprises of the city (UNE and EPM). Since then, Ruta N has been the cornerstone of Medellin’s ‘District of Innovation’.
One of the main objectives of its innovation ecosystem is attracting international enterprises to the city. By channelling the talent and resources they bring into the local system, which is supported by the public and private sector as well as academia, their ultimate goal is to foster technological progress and enable job creation. It has been reported by Ruta N that since 2015 Medellín has attracted 379 companies, among which feature AI Fund and Skillshare, creating 11,000 jobs. The business platform Crunchbase, on the other hand, reports there are roughly 200 startups currently located in Medellín. The pleasant weather, the relatively low cost of life and the beauty of the city also constitute incentives for digital nomads, companies and startups alike to base themselves there.
Medellín’s Mayor Daniel Quintero shared his ambition to create a “Software Valley” in the city to strengthen the local industry, showing an orientation towards the Silicon Valley model of Software-as-a-Service ecosystem
Another distinctive feature of Medellín as an innovation ecosystem is the strong involvement of the public sector. At the national level, initiatives such as Bancoldex, a state-owned commercial bank operating as Colombia’s entrepreneurial development and export-import bank, and Innpulsa, a government-backed entity facilitating innovation, entrepreneurship and business development within Colombia, show the entrepreneurial development efforts of the public sector.
On the other hand, at the local level, the connection between the vision and activities of the ecosystem and city development strategies is in plain sight. For instance, Medellín’s latest development strategy “Science, Technology and Innovation Plan 2021-2030”, whose roadmap definition started in June 2021, is based on a mission-driven approach revolving around innovation as an enabling factor for smart cities, quality jobs and tackling pollution.
These themes are also in perfect alignment with the 2030 Agenda for Sustainable Development of the United Nations. In addition, Medellín’s Mayor Daniel Quintero shared his ambition to create a “Software Valley” in the city to strengthen the local industry, showing an orientation towards the Silicon Valley model of Software-as-a-Service ecosystem.
As it is to be expected, there still are challenges to overcome. One of them is that local universities’ curricula often do not match the needs of the market. In the case of startups and international companies, this manifests as a limited pool of highly skilled local software developers to draw from. To tackle this issue, one of the objectives for 2030 is the democratisation of access to education through digitalization, bringing down the barriers that often prevent low-income populations, often women and young people, from accessing quality jobs.
Concerning funding, disinterest from institutional investors in local funds along with intricate regulatory frameworks have so far created hurdles in establishing local VCs. Due to this phenomenon, most pre-seed and seed investments for Colombian startups currently come from angel investors, family offices and accelerators while in later stages almost exclusively from international investors.
In conclusion, even once stripped from the compelling storytelling around it, the “hype” around Medellín stems from an intriguing innovation ecosystem in development. One of its most fascinating features is how the innovation ecosystem has been a key element in the rebranding of the city while successfully blending with its local economic and social context. For these reasons, it has the potential to become a case study on how technological progress can contribute to the improvement of the quality of life and the education of its population. While there still has not been a unicorn coming out from the city, investors are looking at its landscape with interest due to the value of the ecosystem that is being built. Another sign that, ultimately, Medellín is worth keeping an eye on.