Nora LearyStartups are booming in Latin America as innovation and development increases in the region.
Even so, while there is plenty of advice for scaling and funding that can transfer from country to country, not much of it applies to Latin America.
The startup ecosystem is different in Latin America, so startups must take advice with a grain of salt when it comes from Silicon Valley.
After working with startups in Latin America for over five years, I’ve compiled a list of the worst pieces of advice I’ve heard, some of which has mistakenly been heeded.
#4: “You Must Launch in the United States First”
Many Latin American startups believe success is defined by their popularity in the U.S., so they push for a U.S. launch without being prepared or having a sound strategy for the country.
Some startups even set up wildly expensive U.S. offices in Silicon Valley to “establish a presence” in the country. These companies fly through funding because San Francisco is insanely expensive.
Latin American startups might work in the U.S., but they might not. It’s more important to determine if there is a need for the concept in the U.S.
Silicon Valley has over 23,000 startups, while the entire country of Mexico has less than 3,000. Silicon Valley is over-saturated, and while there is serious money to be raised in the U.S., startups should do ample research into where their concept will work best before going straight to the U.S. for launch.
#3: “Don’t Copy Other Companies”
For some reason, copycatting ideas that work in other countries has been determined “out of bounds” in startup culture. But copycatting in Latin America works — not only have the ideas been tested, but Latin Americans have the home advantage, understanding the in-country market better than the original company launching in the region.
The most famous example is MercadoLibre, an eBay copycat now worth $5.7 billion. And other companies have followed suit:
- BlaBlaCar: Uber copycat, valued at $1.6 billion.
- ClanDescuento: Groupon copycat, bought by Groupon after a few months in business.
- Dafiti: Zappos copycat, raised over $243 million.
These companies had to innovate and thrive when it came to execution, but the idea did not have to be original. Copycatting can go wrong, but if carefully planned and strategized, it can have tremendous earning potential.
#2: “Avoid The Government…it Will Hold You Back”
Latin American governments can be challenging to deal with, but this is now changing and they are working with startups to innovate and change norms.
Although red tape exists, and there might be more than in western countries, governments are giving startups and entrepreneurs alike a helping hand.
Mexico is making headlines as the government distributed $658 million in 2014 to roughly 620,000 entrepreneurs, which resulted in 6,000 new companies and 73,000 new jobs. The Colombian government has offered tax breaks for investment and in Medellin committed $400 million to make the city an innovation hub.
Government-backed accelerator programs are all over Latin America. The most famous occurrence is Startup Chile, which has now backed over 1,300 global startups with a portfolio valuation of $1.4 billion. This has spurred other programs such as Startup Peru and Startup Brasil. Governments across Latin America see the potential for startups to make a hugely positive impact on the country, so they are putting the money up for innovation.
#1 “Western Countries Have the Best Resources”
From funding to mentors to accelerator programs, some startups are encouraged to look to the west to help move them along. The reality is that there are great resources available in Latin America as well.
In 2015 alone, a total of $31,563,841 USD was invested into 1,333 startups in the region. Latin America boasts over 60 accelerator programs, and there is a new trend of startups from the U.S. moving down to participate in Latin American accelerator programs, particularly Startup Chile.
The economies, the lower cost of living, and the ease of doing business have brought entrepreneurs down south, along with high-quality mentorship and funding opportunities.
Changing the Advice for Latin American Entrepreneurs
Now that technology and innovation are growing at a faster rate in Latin America, entrepreneurs need to take more advice from local experts.
Rather than trying to make advice work for their company, startup founders should look at what innovators are doing in the region.
As the ecosystem for Latin American startups continues to grow and change, the advice should shift with it.
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