Predictions for the Startup Landscape in Latin America in 2021
Since 2016, venture capital investment in Latin America has massively increased annually, reaching a record high of US$4.6 billion in 2019.
FREMONT, CA: In the first half of 2020, the COVID-19 crisis forced local and global investors to rethink their strategies. COVID-19 is altering consumer and social behaviors throughout the world. These changes have accelerated the adoption of digital channels for various purposes, including purchasing goods and services, learning, and payment.
New opportunities spawned from the crisis in Latin America are as follows:
Growing small businesses
More than 90 percent of Latin American businesses are small and medium-sized. These businesses account for a large share of jobs and GDP in Latin America. Mismanagement causes up to 75 percent of them to fail within the first two years.
There are many unregistered small businesses in Latin America. As a result, they face narrow margins, cash flow issues, and limited growth opportunities: smaller tax collections and lower productivity result for local governments.
B2B software is still scarce in Latin America. Starting up in the region can help businesses meet new consumer demands in a COVID-19 world, digitize their operations, and free up time to focus on core business tasks. The availability of high-quality, low-cost technical talent in Latin America allows startups to operate and scale their products more efficiently than in other regions. COVID-19 has accelerated this trend. Small and medium-sized businesses have a tremendous opportunity to outperform their competitors, many of whom are still using pen and paper or legacy software.
Enhancing educational technology accessibility
When income inequality is combined with Latin America's COVID-19 crisis, low-income families face unprecedented difficulties. Access to a high-quality education is critical for addressing these inequalities; however, ongoing school closures have added new obstacles to implementing accessible education technology (Edtech). While some governments have acted quickly to ensure students have access to educational materials, significant gaps remain. Innovative solutions are required to address connectivity challenges and provide educational access for the region's most vulnerable populations.
Providing accessible educational materials is only one aspect of the challenge. Additionally, there are opportunities to enhance digital literacy and ensure that all students have an engaging and meaningful learning experience.
Constructing a global e-commerce and payment infrastructure
Access to the internet via mobile devices is enabling e-commerce growth in Latin America. E-commerce is expected to reach $74.8 billion in Latin America by the end of 2020. As more consumers in these emerging markets embrace e-commerce, more businesses can go online. According to Google, only 10 percent of Latin American small and medium-sized companies have a web presence, and only 2 percent sell online.
While Latin America is not a homogeneous market, common challenges exist. Accepting payments from foreign buyers and in multiple currencies complicates regional e-commerce. Payment solutions for small businesses are often prohibitively expensive or complex. Enterprises are increasingly looking for software solutions that can help them overcome physical payment and logistics issues, as well as government inefficiencies. Startups can cut costs and improve cross-border payment options in many ways.