Will The Next Startup Unicorn Come from Latin America?

May 23, 2016

While most startups are chasing unicorn status, some are closer to attaining it than others. The majority of unicorns are located in the United States, more specifically in Silicon Valley. But that is starting to change, albeit slowly. While unicorns are starting to pop up outside the San Francisco area, they are also starting to pop up much further south.

Latin American startups have started to catch the attention of unicorn chasers as their companies get closer and closer to that $ 1 billion valuation mark.

The current Latin American unicorns include: MercadoLibre, B2W, OLX, TOTVS, Despegar, and Globant. There are many other companies that are rounding that billion dollar mark, and VCs are starting to take note.

So why should Latin America garner more attention than companies coming out of Europe or Asia? The growth factor and the innovation levels are what make this region an attraction to VCs and the technology community as a whole.

Latin America is Growing

Latin America as a whole has been growing quickly and consistently year after year and the region’s GDP is expected to reach $ 15.14 trillion by 2025, making it one of the most important global markets in the world. Companies in Latin America are jumping on this momentous growth and building innovative and unique companies that disrupt the global market.

Latin American countries have opened up to partnerships with China, increasing trade relations between the two regions. And while the end result of this partnership has yet to be determined, it has brought more money into Latin America, as well as global recognition.

Mini Silicon Valleys have also popped up across Latin America – from Santiago to Bogota to Mexico City – and global startup founders are moving to these regions where talent remains high and cost of living remains low.

Innovation in Latin America

Innovation and market savviness is matching this economic growth. Many Latin American companies have been able to “find the gap” in the oversaturated startup market. The Venezuelan founders of Open English realized a gap in the language learning market: learners either had to learn in person with a native speaker who lived in their country or pay a lot to learn online. The team was able to undercut the market by offering cheaper English classes taught by native teachers, and the ability to take classes whenever the learner wants.

The team very smartly focused on opening headquarters in Miami, though they hold a presence in Silicon Valley. This move led Open English to capture talent and market space by realizing Miami is the natural bridge between the US and Latin American markets. The company’s smart decisions and continual innovation will make it a key player in the run for unicorn status, as they’re currently valued at roughly $ 350 million.

Copycatting Done Right

Many claim that Latin American startups simply copy what works in the United States and apply it to Latin American countries. This, to some extent is true, but there are many companies doing it right. Take Brazil’s Dafiti, valued at roughly $ 887 million.

Dafiti has been dubbed, “the Latin American Zappos”, but that’s not totally what made this company a success. Dafiti launched right as Internet access in Brazil became more widespread and when the e-commerce craze began in the region. Not only did Dafiti capture the market, who was ready for an online shopping experience, but they also offered a great user experience.

Dafiti offers free returns and exchanges – something that is definitely not the norm in any online or offline stores in Latin America. The company has incredibly happy customers, which translates to returning customers and an increase in sales. Dafiti has been able to use a known business model (Zappos) but tailor it to fit the Latin American market, making it quite a success in the region.

In the next decade, not only are we going to see more unicorns coming from Latin America, but we’re going to see many startups utilizing Miami as the bridge between the US and Latin American market. The innovation in the region is finally getting global recognition, which means more VCs will invest in startups in Latin America. This is a region to watch as the startup boom continues on.

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