Now Latin America’s third-largest economy, and a world-renowned hub for technology and innovation, Colombia is positioned as one of the region’s most viable markets for startups.
The country strives towards reducing barriers to entry, including pushing its agencies into the digital realm with updated administrative procedures. This is good news for new and expanding companies: Colombia is making itself more accessible to foreign entrepreneurs.
Historically, heavy bureaucratic red tape created a natural barrier to entry for many smaller businesses lacking the capital to invest in an expensive upfront incorporation process. Now, startups can move into Colombia’s growing economy and take advantage of previously untapped industries.
Find out about SME and startup activity in Colombia, and some examples of success stories in this attractive business environment.
Colombia nurtures a growing startup scene, driven by the reputational wealth of Medellín and Bogotá, both increasingly popular destinations for innovation, digital nomadism, and modern business models. Crunchbase reports that the country houses 191 startups, managed by 307 founders and with access to around 366 active investors.
A study by Gem Consortium indicates that a significant proportion of the adult population in Colombia have favorable perceptions of entrepreneurial opportunities (46.68%) and capabilities (72.37%) in the country. Increasing e-commerce transactions and growing investor confidence support the continued development of entrepreneurial activity in the country.
What startups may lack in capital funding in Colombia, the country makes up for in its level of access to key North and South American markets nearby. This includes Brazil, Mexico and the United States and Canada.
The country now sports a Ministry of Science, Technology and Innovation geared towards implementing the development of these fields in Colombia as per President Duque’s National Development Plan. This plan, laid out for Duque’s presidential term of 2018-2022 announces several ‘pacts’ aimed at developing entrepreneurship, science, technology and innovation in the country across its major and emerging industries.
Additional government initiatives such as Ruta N and INNPulsa facilitate startup growth in Colombia.
Ruta N is a government-sponsored organization based in Medellín that also receives support from private agencies. Ruta N’s objective is to spur continued growth of early-stage companies, start-ups and SMEs through education, networking opportunities and potential funding and promotion.
Ruta N’s focus on the promotion of technology and innovation in business has facilitated the development of a successful start-up environment in Medellín. The city now known worldwide for its evolving tech and entrepreneurial capability.
INNPulsa is another group supported by the Colombian government to promote innovation and entrepreneurship by awarding grants to startups. INNPulsa works towards an ambitious goal of propelling Colombia to the top 3 most innovative economies in the world by 2025. By 2032, INNPulsa aims to establish Colombia as one of the world’s most competitive economies.
Colombia’s most famous startup success story is the unicorn delivery application, Rappi. Founded in 2015, Rappi grew so significantly over the last 5 years that it is dubbed Colombia’s ‘unicorn’. It now operates in Argentina, Brazil, Chile, Mexico, Peru and Uruguay, and has established valuable partnerships with companies such as Avon (Brazil) to transform delivery services. Customers can now receive food, groceries, withdrawn cash, and products in a matter of minutes or hours. This startup is valued at around US$1.1 billion.
Business-to-business (B2B) startups such as Datagran, Nextonia and Feelenials introduce AI into workplaces to increase efficiency and analytic capabilities. Chiper aims to support the niche economic foundations of Colombian businesses by acknowledging that a significant proportion of the economy lies in micro and small businesses. Chiper enables small business owners to access a wider selection of suppliers in order to make better or more cost-effective purchasing decisions.
As with other major markets in Latin America, financial technology or ‘fintech’ is also on the rise in Colombia. As a country with a large unbanked or underbanked population, startups that innovate and improve accessibility and usability of traditional banking institutions are set to succeed in this market. In particular, Colombia is seeing a rise in the number of startups aiming to innovate:
As with the rest of the region, Colombia is working to develop greater digital inclusion in the country to ensure its population and businesses will stay competitive in an increasingly digital world. Like other countries in Latin America, this development is reflected in the number of technology-focused businesses emerging in Colombia’s startup and SME scene. This includes fintech, insurtech (insurance technology) and regtech (regulation technology).
Business development is moving online. As the economy experiences a general increase in household wealth, mobile and other device use also increases. This adoption of smart devices has drawn businesses into the online world, as the swelling middle class seeks variety and convenience in their purchasing experiences.
Investor confidence in Colombia’s developing startup scene is increasing. Consider the environmental factors that facilitate entrepreneurship and startup activity in the country. Colombia offers equal opportunity for foreign and national investors, welcoming increasing FDI inflows to support its ambitious development goals.
The Latin American Venture Capital Association (LAVCA) reported that the first half of 2019 brought in US$2.6 billion in venture capital investment in Latin America, raised across 160 transactions. This is a significant increase from 2018, where the region reportedly raised US$2 billion across 463 deals for the whole year. Looking further back to 2016, the region raised just US$500 million over the 12 months. This indicates that not only is venture funding activity on the rise, but more money is coming in over fewer transactions. We can expect to see this trend continue in the region’s key economic performers like Colombia, as the country works its way into top world rankings for startup activity and innovation.