You don’t have to look hard to see why the startup community in Latin America has long faced a lack of capital and resources to fuel significant growth. Many Latin American entrepreneurs have endured decades of political and economic hardships that left the investment landscape in a less than desirable state — especially for emerging startups.
Thankfully this is all changing, and at an unprecedented rate. Entrepreneurs across the region, as well as government initiatives and investment opportunities, are booming and transforming everything we once knew about the ability to raise funding here.
Of course, the lack of funding opportunities has not stopped the region from churning out some major success stories, such as MercadoLibre and Open English, but the once-immature startup environment is finally beginning to blossom with a recent injection of capital, funding options and incredibly savvy entrepreneurs.
Here’s a look at how a few notable startups are breaking down the barriers to capital and raising some serious cash in Latin America.
Thinking strategically, globally
Similar to Upwork but focused on the Latin American and U.S. Hispanic market, the online marketplace for freelance and remote workers Workana rolled out across the region, picking up $500,000 along the way in 2012 from Evenbase and Latin American angel investors. The Argentina-based company then went on to raise a $2 million round earlier this year from SEEK, Australia’s No. 1 jobs site. So how did the Latin American startup raise this much capital when there are so many global competitors in this space?
Instead of competing, Workana looked globally for strategic investors in the same space, and didn’t waste any time focusing on the United States. In Latin America, Series A investment rounds tend to be in the $1-2 million range, and Tomas O’Farrell, the co-founder of Workana, confessed that most of the U.S. funds he’s encountered have been reluctant to invest these smaller amounts, especially in a company based in Latin America.
So instead of the typical U.S. approach most international startups take, Workana found fundraising success by pairing up with two other global leaders. Evenbase, which was acquired by Competition and Markets Authority in 2014, was a leading digital recruitment group in the U.K. The company’s portfolio included recruitment site Jobsite and CV search software firm Broadbean Technology. According to Evenbase, Workana was a perfect fit with their international growth strategy, which involved investments along the recruitment value chain.
We are starting to see what a successful Latin American startup ecosystem could look like when the right resources are available.
Now with the recent investment from Australia’s SEEK, Workana hopes to expand its 50 percent market share in Latin America and open even more doors in its largest markets — Brazil and Mexico. SEEK is a shareholder of corporations such as Catho in Brazil and OCC in Mexico. Both Catho and OCC Mexico are the leading job boards in their respective countries.
Workana’s Tomas O’Farrell stated seed-stage and angel investment on the ground is improving for Latin American startups, but if they want to accelerate quickly, be open-minded and look abroad. Stay on top of industry trends in other emerging markets and always be on the lookout for any possible partnerships that have demonstrated an interest in Latin America by investing or partnering with established companies in the region.
Building serious survival skills
P2P lending network Afluenta has established itself as a key player in the Latin American fintech space. The platform is on a mission to transform the process of applying for a loan and broaden access to financing across Latin America. With operations in Peru and Argentina, and completion of its Series B funding round, the company is now planning its next move into Colombia, Chile, Brazil, Mexico and Uruguay.
So how did this fintech startup prepare itself to raise an $8 million round from the International Finance Corporation (IFC) and Elevar Equity in a region where startups rarely see that kind of cash early on?
Alejandro Cosentino, CEO of Afluenta, insisted on first building local relationships in local markets — Argentina, Colombia, Brazil and Mexico. To overcome the instabilities often faced in Latin American markets, he stated startups in the region need to find partners that understand those instabilities and can help see them as opportunities.
In Afluenta’s case, Alejandro believed the frequent uncertainties in the region have helped his startup build up its survival skills. When you prepare for the worst, chances are your startup will have a much greater chance of surviving.
Alejandro also claimed he overcame the typical hardships startups face in Latin America by following the rule of the three Rs: Research, Rehearse and Raise. With the amount of information now available online to help startups prepare for fundraising, he encourages other Latin American startups to follow this rule and trust their gut when it comes to partners, whether based in Latin America or abroad.
Moving when the timing is right
From Buenos Aires to Mexico City, San Francisco to Brooklyn, the Funne.ly team has spent the last few years immersing themselves in different cities across the globe to grow the company into the successful social ad platform it is today. Not surprisingly, the strategy seems to be working. The Argentine startup recently raised seed funding just shy of $1 million led by Verizon Ventures.
Although the development and design teams remain in Latin America, the 500 Startups graduate has been able to expand its team faster and make funding last longer, which might not have been possible had the founder, Lucila Campos, stayed in one place. With mostly U.S.-based e-commerce clients, it made sense for Funne.ly to look beyond Latin America to accelerate its growth.
The time spent in San Francisco helped Campos raise a successful seed round, but ultimately she found the city to be lacking and quickly moved on. In a Technical.ly interview on Funnel.ly’s next move to Brooklyn, Campos stated, “Here you can actually nurture your company, learn from companies that are not in your space because they have no idea what a VC is.” This is good advice for Latin American startups focused on expanding to the United States. Oftentimes, Silicon Valley isn’t the best fit, and it’s important to instead focus on the places most beneficial for your startup’s goals or vision.
We are starting to see what a successful Latin American startup ecosystem could look like when the right resources are available. There’s no doubt access to middle- and late-stage funding in Latin America is on the rise and, as we see more success stories come out of the region, more funding opportunities will also emerge. I’m optimistic that success stories like these will help boost the region’s funding landscape to new heights.