TL:DR: Here are some of the trends we see for the tech sector in the short-term, per The LatAm Tech Report:
1. Even your grandma has a smartphone now. Mobile penetration for the four largest economies in LatAm stays well above 80 devices per 100 people;
2. Other people can shine with an API. Software as a service (SaaS) is now widespread, from back-office to embedded digital solutions;
3. That incredible talent is there, but not for long. Some startups announce layoffs, while others make use of their remote work policy and of LatAm's currency devaluation to hire talents in the region;
4. Some regulations have improved. Examples are Open Banking in Brazil and telemedicine throughout Latin America;
5. Inflation, interest rates, and consumer debt matter to startups. Keeping an eye on macroeconomic events will continue to be important for tech founders.
The LatAm Tech Report covered short-term trends for seven industries in Latin America. You can download the report for free and check out everything about your industry – but there are also some insights that are common to all founders and startups, and that's what we'll talk about here.
From mobile being everywhere to macroeconomics impacting the startup life, you can already take note of these trends and apply our advice in 2023.
We've been saying this for a while, but we love to repeat it for the newcomers: remember that boom in tech adoption we've seen during the pandemic? Well, it's not only still happening, but also holding up more in LatAm in comparison to regions like the US.
Internet penetration is growing year after year. But the most interesting part is the growth in mobile: in Latin America, smartphones are more affordable and numerous than desktop computers and, in some countries, even more widespread than bank accounts.
After the pandemic pushed digitization forward and brought millions of new consumers to e-commerce, smartphones have now also become Latin Americans’ preferred way to shop.
E-commerce surpassed the US$ 100B barrier in 2021. This number is expected to double by 2025. Mobile plays a huge role in that, as you can see above.
And it's not only a question of access to smartphones x desktops. Buying on mobile can also feel easier: since most smartphones are personal devices, consumers can load and save their card information, connect with digital wallet apps, and use biometric identification.
We're pretty sure your development backlog is pretty full (as always). But you might consider giving "improving the user experience on mobile" a bump up on your list for 2023.
Let's rewind our clock to eight to ten years ago. There was no existing infrastructure for most technological products and services. Companies such as Nubank had to build the infrastructure from scratch.
A.k.a. your worst nightmare.
Back then, smartphones were starting to grow in popularity. Today, almost everyone is mobile and your startup needs to provide more and better products and services through the phone.
Let's say you don't have the capacity to build this infrastructure from scratch. Should you just sit in the corner and cry?
Nah, not really. That's when APIs come into the scene.
Application programming interfaces make two systems communicate with each other. Let's take a well-known example of the impact of APIs: Open Banking.
Open Banking allowed financial institutions to share information from customers with third parties. And you guessed it – that's done via APIs. A fintech can be a part of other fintech's app and reach more customers. Likewise, the other fintech can tell their customers that they have new financial services in their offering.
Here are some benefits of using APIs, and software as a service (SaaS) in general. They are a way to:
The point is: you don't need a huge tech team to access good and updated products and services anymore. There are many startups with platforms to enable faster time to market for your startup's solutions.
Open a space in your New Year Eve's schedule to think about what features are the most demanded by your customers – and how other startups can help you on that journey. We're better together!
You probably receive every week a message about another startup doing another layoff. Your early-stage startups could be the savior at that moment: it's a chance to access a pool of experienced talent and hire some of these employees to build your first team. You can even think of nabbing that super-specialized professional that didn't get laid off but started to rethink their future in the company.
That's the glass half full.
Then, what's the glass half empty?
Other startups are thinking the same. And they're everywhere.
A common thread in the LatAm Tech Report is the constant difficulty of hiring startup talent. In some areas, it's even harder because the employees need to really specialized, like healthtech and SaaS.
And that constant difficulty got aggravated by the pandemic. More companies adopted a fully remote or hybrid work routine, and some stayed that way. That means that headquarters and employees could be anywhere in the world.
In LatAm, we have excellent talent and a devalued currency – and that's the perfect recipe for international companies. For regional startups, it's hard to compete with salaries in dollars or euros.
In 2023, have your eyes open to new talents in the market and also be prepared for the international competition for talent.
Evaluate who you really need in your team and work to retain them. Yes, that could be through a money shower. But we like the approach of letting your employees build real wealth through equity in your startup. How to do that? With an awesome ESOP plan.
Regulation keeping up with a new state of affairs is a constant problem for businesses in general. But more so in startups, developing products and services at the speed of light.
We are happy to say that we indeed advanced in some areas in the past few years. You should take note of new regulations and then think about how to leverage them.
That's the case of fintechs in Brazil, for example. The Central Bank approved regulations for lending fintechs and for Open Banking. It also created PIX, an instant payment system. Finally, it's now discussing crypto regulation.
Another example is healthtech. Some countries in Latin America regulated telemedicine or expanded its scope because of the demand brought by the pandemic.
Experts believe that regulatory bodies will review their previous allowances. But it's unlikely that things will return to the state before covid-19, in which technology wasn't part of the usual activities – and you had to make company to stale magazines for hours in the doctor's office.
We aren't macro specialists (ok, you're the exception that proves the rule, Fernando). But we still need to understand a little bit of what's going on in the market and how that applies to our businesses.
In Latin America, banking lending interest rates have always been much higher than in developed markets. Is that because we have bank oligopolies and a lack of credit scoring? For sure. But that's also because of our higher inflation rates. Another constant is the high debt-to-income ratio.
The thing is: the pandemic has made inflation much worse and that's now reflected in the rise of interest rates. And here's what happened to debt.
This has some ripple effects on startups. B2C businesses in general should pay close attention to their customer's buying power – consumer fintechs have already seen affected fundraising this year because of investors’ concerns about the rising inflation and interest rates.
Something similar happened to proptechs, since real estate is a market highlight dependent on interest rates to fund construction and provide financing to property buyers. Airbnb, WeWork, and Opendoor are just some examples of proptech stocks on the public markets that have been strongly affected. Those with capital-intensive and low-margin business models are especially frowned upon right now.
In the founders’ lessons we shared recently, we've already talked about how we officially entered bear market territory this year, and about how our stay is expected to continue in 2023. You should study and be prepared to adapt and survive. One role, one focus: stay in the game.
Want to check out more trends for the short term or opportunities for the long term in your industry? Download The LatAm Tech Report and check out for free what's going on in B2C Fintech, B2B Fintech, E-commerce, SaaS, Proptech, Healthtech, and Climate tech.