Many entrepreneurs and investors study the prospects of Spanish startups building a network in or expanding to Western Europe and the United States. However, there is another large market that could ignite the Spanish startup village and catalyze unchartered growth: Spanish speaking populations in Latin America. The same reason why expanding to the former locations, although a logical approach, is difficult for Spanish startups, is the reason why it makes sense to expand to the latter: language.
The Spanish language is a bridge connecting Spain and its startups with markets and consumers throughout Latin America. The five most populous Latin American countries (Brazil, Mexico, Colombia, Argentina, Peru) alone account for over 450 million people, and apart from Brazil, these countries share Spanish as a common language. It’s important not to forget that the Latino population in America is another large Spanish speaking market: the Latino population in the U.S. reached 58 million in 2016 according to U.S. census data, and of these 58 million people, a record 37 million ages 5 and older speak Spanish at home.
The language connection has led to a cross-pollination of ideas and talent between Spain and Spanish speaking populations in the Americas, and makes Latin America a natural destination to which Spanish startups scale and expand. Spanish founders take advantage of their access to premier technical talent across Latin America, and import developers from countries such as Argentina. From a consumer market perspective, Although many Latin American countries are characterized by economic instability, the potential of the region, and its unsaturation relative to European markets, makes it an attractive location. In fact, many Spanish companies will look to expand to Latin America before expanding to other European markets despite these European markets being much closer geographically.
One such company is ride-hailing unicorn and Uber rival Cabify. The company was founded in Spain in 2011 and is based in Madrid, but has invested much of its raised capital in expanding its footprint in Latin America. In January 2018, the company raised a US$160 million Series E round at a US$1.4 billion valuation to continue growing in the region, followed by a US$70 million debt financing round in 2019. Cabify currently operates in Spain and Portugal, as well as several Latin American markets. About a year after it started operating in Spain, the company took an ambitious leap into the Latin markets, expanding to Mexico, Chile, and Peru (it has since expanded to several additional Latin American markets). By 2016, 80% of its revenue came from Latin America. There are certainly cultural differences between Latin American countries that have affected Cabify’s strategy in each country, but a shared language has played a large role in driving Cabify’s growth in the region.
Other notable Spanish companies that have begun expanding into Latin America include Barcelona-based delivery app platform Glovo, and the Valencian laundry-on-demand startup Mr. Jeff.