How Will Key Latin American Markets Support Startup Growth In A Post-Covid Era?

With economies and businesses shutting down due to Covid-19, many Latin American startups lost funding opportunities and are not sufficiently supported by government initiatives. Despite this, the startup community remains resilient and innovative with fully virtual accelerator events carried out in different countries across the region.

How much do current government initiatives support small businesses in Latin America?

Small businesses make up the backbone of Latin America’s economy, to the point where 99% of small and medium-sized enterprises (SMEs) formally hire 61% of the population. Governments across the region have implemented varying degrees of economic stimulus packages to help these businesses. To explain this, we will compare the measures put in place by Peru, Argentina and Mexico.

The Peruvian government inserted US$26.4 billion (12% of its GDP) into the economy with guaranteed loans to businesses, investments in health infrastructure and support for the mining industry. Likewise, the Argentine government inserted US$11.1 billion (1% of its GDP) into the economy by offering direct payments to unemployed workers and suspending social security contributions by companies in the industries most affected by the lockdowns. Finally, although Mexico has not announced an official federal economic stimulus program, it offers US$1,000 loans to households and small businesses with less than 10 employees and advance payments of pensions. With governments taking drastically different measures, startups in Latin America turn to accelerator events for support during and post-COVID.

Facebook Startup Circle

Facebook’s Startup Circle is a mentorship program launched in the Middle East, Asia-Pacific and Latin America. Facebook Startup Circle helps early startups scale their business and gain access to funding opportunities via coaching, lessons and networking.

Three countries were chosen for the program in Latin America: Argentina, Mexico and most recently Colombia. Colombia’s Startup Circle launched right in the midst of the pandemic in June. Colombia is the second-largest Spanish speaking country in Latin America, and Facebook is one of the country’s most-used apps.

Google for Startups Accelerator

The Google for Startups accelerator is a three-week-long mentorship program that connects startups to entrepreneurship networks in both Latin America and Silicon Valley. The goal is to promote innovation and encourage startups to be drivers of change in Latin America.

Out of 230 Latin American companies that applied, 12 were selected from Mexico, Colombia and Argentina. This year’s cohort includes companies such as Cliengo, a lead management platform in Argentina; ePayco, a platform to process online payments in Colombia; and Moons, a sells invisible teeth aligners in Mexico. Companies that successfully completed previous Google for Startups events include Platzi, an e-learning platform from Colombia and Quinto Andar, a real estate Brazilian platform.

MassChallenge Mexico

Since 2016, this 4-month accelerator program has gained a great reputation for developing 140 high-impact startups. In June of this year, 37 Latin American companies were vetted by 400 judges out of 614 applications. Just as other accelerator programs this year, MassChallenge Mexico was hosted 100% online.

Companies in the 2020 cohort include Eprezto, a startup that sells car insurance online in Panamá; Yu-Track, a collection logistics automation platform from Chile; and La Comandanta, who sells Mexican creole foods in Mexico.

Visa Everywhere Initiative – Latin America and Caribbean 2020

The goal of the Visa Everywhere Initiative is to drive innovation in digital payments. There are two challenges startups must solve in this event:

1. The ‘Small Business Recovery’ challenge is in the search for new technologies that fall in the following categories: accept contactless and mobile payments, grow on e-commerce, move money faster, solve for liquidity, chargebacks and disputes, auth rates and operations, and POS lending and distributions. Visa is looking for ways these technologies can strengthen small business operations and capabilities.

2. The ‘Frictionless Mobility’ challenge is in search of companies in the following sectors: biometrics, authentication, internet of things, artificial intelligence, security/identity, blockchain, peer-to-peer payments and mobile payment infrastructure. Visa is looking for ways companies can use these technologies to increase the speed, ease and security of payments in public transportation and mass-transit systems.

Founder Institute’s Virtual 2020

The Founder Institute is the world’s largest pre-seed startup accelerator with 81 accelerator events across many countries this year. The Founder’s Institute is based in Silicon Valley with the mission to “empower communities of talented and motivated people to build impactful technology companies worldwide.”

This year, the Founder Institute Virtual 2020 targeted Honduras, Brazil, Bolivia, Costa Rica, Mexico and El Salvador. In this event, startups will learn about structured growth processes and receive constant feedback on their strategies to build a global network.

Startups in Latin America Post-COVID

As economies re-open, financial burdens in government institutions and industries may take a long time to recover. As a result, investments towards startups will slow down. This means Latin American entrepreneurs must find ways to grow without external capital and take advantage of accelerator events. Accelerators encourage partnerships between large companies and startups, thus facilitating the transfer of knowledge and capital.

According to a survey conducted by Biz Latin Hub in June 2020, 44% of respondents indicate having a largely negative perception of the current Latin American economy. On the flip side, 45.3% indicated having a largely positive outlook for the future of the Latin American economy. In fact, 57.3% of respondents are considering expanding their business into the region in the future. However, many respondents expressed cautious optimism at economies’ abilities to bounce back after the COVID-19 pandemic.

COVID-19 brings to light the digital gap between companies and forces them to adopt new technologies. In a way, the pandemic is also closing the digital gap in Latin America and startups are leading the way. When startups are supported, they grow, offer innovative solutions, create employment opportunities and stimulate the economy.