Startups in Latin America and the Caribbean will experience in the upcoming years a growth in number, financing possibilities, access to new markets and capacity to modernize various sectors of the economy. Marisol Argueta de Barillas, Senior Director of the World Economic Forum for Latin America, believes that startups will play an essential role in helping the private sector in Latin America to be more innovative.
Dynamic Latin America Ecosystem
A report by the World Bank shows that companies in the region are 20% less likely to introduce a new product than those located in countries with similar incomes in Europe and Central Asia. Overcoming this negative trend is one of the great challenges facing the Latin American startup ecosystem. “The entrepreneurial ecosystem is increasingly powerful in Latin America”, says María Benjumea, president of Spain Start Up, and she predicts an “impressive” momentum in the next years. She affirms that “the funds begin to be more multiple and Latin America is more and more open to the world”.
According to the OECD report ‘Startup Latin America. Building an innovative future’, the countries of the region are structuring and strengthening policies to promote ‘startups’. New institutions are being created, introducing new support instruments and reforming programs to generate greater impact.
“Despite the not so favorable context, the ‘startups’ world shows us a dynamic Latin America, which is looking for new solutions, reforming instruments, and where startups are already a reality, although incipient”, the report says. Brazil and Mexico are the countries with the highest number of emerging companies, over 2,000 each. Argentina, Chile, Colombia and Peru already have around 500 ‘startups’, respectively.
Latin startups face numerous problems in both incubation and acceleration processes. The limitations in the access to funding, the absence of a collaborative culture and the need to aspire to global markets are the main weaknesses of an ecosystem that also has to assume the importance of market studies to know what the real impact of their products could be. These are some of the necessary steps a startup must take in order to guarantee its success and viability in the Latin American ecosystem.
EMPOWER WHAT MAKES YOU DIFFERENT
It’s important to have a product that is clearly different from your competitors or that, at least, can be complemented with that offered by other startups in the area in which you work. For this, it’s essential to clearly define your startup, your product and the way to market it. If your idea is not clearly defined, consumers will feel that it’s a copy of something already in existence.
THINK OF A SOLUTION TO A PROBLEM
Your idea has to respond to a demand from society. It has to be useful; otherwise, it will be lost in the ocean of startups and ideas that have not just triumphed. Don’t forget that more than 70% of the projects that arise in the region end up failing due to the absence of a plan and because the idea didn’t have the backing of a market study to support their need or demand. If your product or service doesn’t solve a problem, need or identifiable desire, you will not make people excited for it. Find a problem and solve it more thoroughly than anyone else.
STUDY THE MARKET
Are you the first with this idea or do you already have competition? Research online, attend lectures in your industry, talk to experts and find mentors. Even if you find other companies that already do the same, get in touch with them to explore ways to collaborate or even to associate. If those companies operate in another country, it can be a great opportunity to create a global startup that scales to other markets beyond the local one. This task should be the first step before moving to other decisions. In a globalized world, size matters when it comes to competing. Research businesses that could compete for your potential customers. This can be done by determining and analyzing your competence.
DEFINE WHO YOUR CUSTOMERS WILL BE
This is one of the critical points because there is usually a large space between the dreams and projects of an entrepreneur and the market reality. Who are the early adopters of your product or service? Do you have the ability to compete with your competitors? Will consumers really want what you offer? Or do you need to educate them to convince them? Answering these questions is a necessary step before undertaking your business venture. Many times, when the company is already underway, the market reality offers a series of problems that are difficult to solve.
VISUALIZE THE STRUCTURE OF YOUR STARTUP
There are a series of obligations that all entrepreneurs must assume before launching their company. The basic problems to which you must pay attention are: Your commercial registration, legal advice and accounting support, construction of the business effective financial model and construction of your business formal operation model. One of the most common recommendations in the initial stage of a startup is to pay special attention to the pleasure and drive of the project, not money or income.
FIND YOUR RIGHT PARTNERS
Risks are natural partners of any startup. The most common are market risk, financial risk and the risk of working as a team with other partners.
The first three are part of the manual of any entrepreneur but the last one usually goes unnoticed because nobody questions at an initial stage the suitability of his or her traveling companions. You must form a team, not only of friends, but also of experts who are trained to respond effectively in each area of the company. The percentage of startups that have a great idea and a favorable market but fail due to internal problems is very high. Don’t forget that the team is necessary to develop ideas on product construction, market launch and sustainability.