A Look at What’s Fueling Startup Investments in Colombia
A Look at What’s Fueling Startup Investments in Colombia
The Latin American startup scene is attracting more and more attention and investments. In 2018, venture capital investments in Latin America doubled for the second consecutive year, according to LAVCA’s Annual Review of Tech Investment in Latin America. Looking at the major markets in Latin America in 2018, most show increases in VC investment in keeping with the regional average. These markets have brought us to 2020 — outpacing them all — is Colombia. Here’s a look at what’s fueling startup investments in Colombia.
Colombia is not new to the startup scene, but it is beginning to garner increased attention from foreign VCs. Here’s a look at three factors fueling investor interest in Colombia’s technology startups.
A growing, increasingly connected consumer base
Colombia is an attractive market for technology companies. In addition to the work done by both private and public entities to foster entrepreneurial development, Colombia has several unique characteristics that give it immense potential for growth and disruptive transformation.
Market size.
– Colombia is the 29th biggest country in the world with a population of nearly 50 million. Since the early 2000s, the Colombian middle class has more than doubled, significantly increasing the consumer potential of the Colombian market.
Increased connectivity.
– Over 50% of Colombians are already smartphone users. This number is predicted to reach 75% in the coming years, which, combined with a relatively fast and ubiquitous Internet connection, creates an increasingly large market for technology-based ventures.
Shift towards online consumption.
– In addition to a growing connected population, a shift in consumer habits is driving eCommerce. The eCommerce industry is growing steadily, with a 24% increase in the number of digital transactions from 2016 to 2017.
Industry gaps.
– Colombia has a few industries with massive potential for disruptive transformation, in particular, health and finance. Colombian public healthcare is decentralized with the lowest-earning tier of the population receiving free, government-subsidized services, and the rest of the population receiving health services administered by various private companies. The data sharing gap that exists between health providers begs for innovative solutions.
On the financial side, banks are investing heavily in fintech services and pushing the transition toward digital banking. Money transfer services and online bill pay are already available, but, according to the World Bank, only 38% of adults have bank accounts, making this a prime market for expansion.
A solid foundation of government support
Colombia suffered decades of violence, instability, and corruption. However, the 2016 Peace Deal with the FARC, among other efforts, changed its international reputation, leading to a 300% increase in foreign visitors since 2006. As part of the national improvement efforts, and in anticipation of this shift in perception and increased foreign interest, the Colombian government laid the groundwork for a startup-friendly environment years ago.
Colombia’s second-largest city, Medellín, is probably best known for this accomplishment, with a reputation for supporting enterprise innovation and a growing knowledge economy. In 2002, the city established Medellín ACI at (Medillín ACI.org), is the Agency for Investment and Cooperation.
Companies promote international relations.
The company fosters development by promoting strategic international relations and foreign investment in the city. Ruta N.com, a public-joint venture established in 2009, also helped the city earn significant attention by providing landing services, office space, and incubation for startups.
The government creates programs to help entrepreneurs.
In 2012, the national government created the programs iNNpulsa and apps.co, both promote innovation, business, and technological developments in Colombia by providing funds and coaching programs to promising entrepreneurs.
Earlier this year, the Colombian government further demonstrated its commitment to promoting and funding innovative developments with the creation of the Ministry of Science, Technology, and Innovation, (rcnradio.com).
Innovative incubators are being set up by companies and supported by government.
In addition to these government programs, there are numerous incubators and accelerators throughout Colombia. Parque del Emprendimiento, Cluster CreaTIC, ParqueSoft, Macondo Lab, Socialatom Group and Creame are a few of the more established organizations. New groups, such as technology boot camps, and programs are regularly popping up.
Increased foreign investment
Recent foreign investment is helping to put Colombia in the spotlight. Colombia received $ 334M of investment in 2018, a nearly 5x increase in venture capital from the year before. Most recently, Softbank Group Corp invested $ 1B in the Colombian unicorn, Rappi, founded by Felipe Villamarin, Sebastian Mejia, and Simon Borrero.
With over $ 1.4B in disclosed funding, Rappi is now one of the highest-funded Latin American startups.
The investment from Softbank Group Corp is the type of attention that creates a positive cycle.
When international accelerators and VCs turn to Colombia, investment amounts increase, leading to more attention, then more funding, and creating a fertile environment for the creation of more startups and more investment opportunities for VCs.
Many Colombian Startups that have earned recent attention from foreign investors.
Included here are companies and the individuals who have brought it all together. These companies and each individual listed here has a personal listing on Crunchbase.
Merqueo
– This online supermarket platform founded by Miguel Mc Allister and Sebastian Noguera Escallón recently joined the Colombian eCommerce scene. They’ve raised $ 14M from US-based VCs Portland Private Equity and Endeavor.
Frubana
– Founded by Rappi’s former Expansion Leader, Fabian Gomez Gutierrez, Frubana simplifies the supply chain for the food industry, allowing restaurants to deal directly with producers. In two rounds, they raised $ 12M from several VC firms, including Y-Combinator and Kairos.
Kushki
– Founded by Aron Schwarzkopf and Sebastian Castro, Kushki is improving payment systems in Latin America by facilitating currency conversions and international transfers across the region. Kushki recently raised a Series A round from dev labs and Magma Partners at the end of 2018.
Truora
– Founded by Cesar Pino, Daniel Bilbao, and Maite Muniz Telleria in 2018, Truora is tackling identity theft and fraud in Latin America. Its platform supports over 10,000 checks per hour and was part of the Winter 2019 Y-Combinator class. Though still in early funding stages, Truora left Y-Combinator with regional investors Magma Partners and Kaszek Ventures, and foreign investors Y-Combinator and Accel.
ADDI
– Elmer Ortega’s Bogotá-based fintech company offers credit and digital financial services and raised $ 14M this year with lead investor Andreessen Horowitz.
Ayenda Rooms
– Andrés Sarrazola founded Ayenda Rooms with the goal of becoming Colombia’s biggest hotel chain. Ayenda Rooms offers an online reservation platform with a growing number of franchised hotels. The startup recently received a $ 1.2M investment from SoftBank, and still undisclosed investments from GE32 Capital and Kairos.
Omnibnk
– Founded by Diego Caicedo and Andres Abumohor, Omnibnk is one of the first neobanks in Latin America to provide quick loans to SMEs of up to $ 1M — based on a company’s electronic invoices. Truly innovative.
Conclusion
These Colombian startups received significant investments already in 2020, and it’s no wonder.
- With increased government-backed support for investment and innovation.
- A growing and increasingly connected middle-class market.
- Growing investment from foreign VCs.
Colombia is receiving more and more international attention and is becoming known as one of the hottest countries in Latin America for startups and investment.
Image Source unsplash.com
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