December 7, 2022
Latin America is a giant. It's a market worth over 5 trillion dollars. A population of over six hundred million people. And a territory that stretches from Tijuana to Tierra del Fuego.
These big numbers also come with big challenges. You might be thinking that they are barriers we can't overcome. But we've seen time and time again that it works much like the opposite.
Startup founders are diving head-first into opportunities that are as vast as The Amazon River. And some of them have yet to be seized.
We've launched the first edition of The LatAm Tech Report (https://www.latitud.com/en/reports/the-latam-tech-report-2022) to provide new coordinates for your opportunity map. We took a deep dive into seven industries dear to Latin America – B2C Fintech, B2B Fintech, E-commerce, SaaS, Proptech, Healthtech, and Climate Tech. There, you can find all the data and interviews with industry experts to know the past, present, and future of each sector.
We also wanted you to hear directly from the founders thriving in these seven industries and in Latin America. So, in this episode of the Latitud Podcast, the creators of Pomelo, Addi, Bitso, Morado, Nuvemshop, Xepelin, Clivi, Sami, and SuperPlants shared with us what insights startup founders in their industries can't miss.
You've probably heard me say this before: fintech is the gateway drug to venture financing in Latin America. Startups in the sector are booming and VCs are writing checks to curb their fear of missing out.
But why is fintech so huge in Latin America? Because up until recently, we only had a handful of players in the game – and that didn't leave much space for innovation. A huge chunk of the population wanted to access financial products and services. World-class talent saw this as the sizeable opportunity it was. Now, these founders are leading fintechs that solve deep structural problems in the financial system and change the lives of Latin Americans. Gaston Irigoyen, the co-founder of the fintech infrastructure provider Pomelo, knows this scenario all too well – and shared how other fintech founders should make use of it.
Gaston Irigoyen (Pomelo)
Our mission as companies and founders in the region is most likely very, very well-aligned with what the region needs and wants. And it's the fact that 300 million people still don't have access to financial services and we need to fix some structural problems like inflation, poverty, devaluation, and so on and so forth. This will be supported not only by the community and the industry, but also by policymakers, both local and international. That's almost a given insight that we can benefit from.
When we think about how fintech is going to play out in Latin America, that's probably a combination of what we're seeing in Europe, and in the US, in Asia, but also with local flavors. That's a combination of banking as a service, open banking, QR Codes, Central Bank-driven payment systems like PIX, stablecoins…
Here, the important thing for founders is to have a very thoughtful view on how this is going to play out and really get into those insights. Really discover what are the biggest needs, in what order they're going to play out, in what market. I think that's exactly where the secret sauce will lie for a lot of these companies, alongside execution, of course.
But being the apple of the investors' eyes, and being able to create and execute on top of various segments, doesn't mean that fintech creators have an easy life. Like every startup founder, there's the constant task of adapting to survive and thrive. Especially when you're dealing with the daily fluctuations of financial markets.
Santiago Suarez, the founder of payment startup Addi, warns that we're in a new landscape in terms of cost of capital and valuations. And Daniel Vogel, from Bitso, is once again facing the high volatility of cryptocurrencies. We asked Santiago and Daniel what should founders prioritize when they wake up to a new world? The answer was a throwback to the roots of every business: resilience, diversification, product, customer experience, and purpose.
Santiago Suarez (Addi)
Now that capital is going up in terms of cost, both for debt and for equity, building more resilient and diversified businesses is going to become more and more important. I believe that the days when balance sheet businesses were valued as software businesses are gone. What this means is that you have to double down on software, on services, and on delivering the best customer experience for your users.
Daniel Vogel (Bitso)
Someone was asking me recently if it's hard to be the CEO of a crypto company, given all the volatility in the market. And I was telling them that I've made a decision basically almost a decade ago that I wanted to see this through.
And so, it's not difficult at all. And one of the things that allowed it to not be difficult is to go back to purpose. And to really think about why the hell did I wanna go on this journey in the first place.
I feel like crypto is going to be transformational, I think in many ways it already is, although people fail to see that when bear markets like this are upon us. Going back to purpose is incredibly important. When everything around you seems to be crumbling down, and you feel like maybe you're losing your sense of conviction, I find it extremely helpful to basically go back to purpose.
That's what I use with my team, to energize them. That's what I use with myself, to energize myself. And that's what I use to energize my investors, family, friends, etc.
Latin American e-commerce broke the 100 billion dollar barrier in 2021, and it's expected to double that by 2025. But we're still in the early days of online shopping in the region. The Latin American e-commerce market is still only 19% of the US' e-commerce, and 8% of the Chinese e-commerce market.
Online shopping is an industry as ample as its numbers and potential. Because of that, e-commerce founders should also pay attention to the trends and opportunities inside the segment they’re in. Angela Acosta, the founder of the beauty e-commerce Morado, gives us an example with her newest insight about the beauty segment – and about tech in general.
Angela Acosta (Morado)
The one insight startup founders can't miss when thinking about the future of the beauty industry is definitely inclusion. Beauty is a feeling. When you a beauty product, you buy it with emotion. And today, there's still a huge gap when offering diverse or inclusive products. Products that make you feel something. Products that make the customer feel identified. The future of beauty is beauty for everyone, technology for everyone, and that's something tech founders can't miss.
Latin America is betting more on creating software as a service, and investors have also gone all-in. The total funding for SaaS companies in LatAm grew a hundred times from 2013 to 2021, and seven times when comparing only 2020 and 2021.
But there's still a lot of room for improvement. The fundraising for Brazilian SaaS represented only 1% of what American SaaS got during the last 10 years.
What would the 1% share with other LatAm SaaS founders, so that our share of the pie continues to grow? Santiago Sosa from Nuvemshop and Sebastian Kreis from Xepelin have made a similar warning. Don't take your eyes off what really matters after your company grows: the closeness to your customers. For Santiago, that's achieved through making an effort to create a mechanism that puts the user at the center of the company's universe. For Sebastian, the key is having a team that has ambition, but also a focus on product development.
Santiago Sosa (Nuvemshop)
The one thing that startup founders cannot miss might be really obvious and sound a little bit cliché, and it's customer centricity. As our companies start to scale and as founders and companies become increasingly more successful, attention shifts towards scaling the organization, attracting more senior talent, establishing processes, even fighting bureaucracy that starts popping out there. And the most important thing is that we make proactive efforts to make sure we stay very connected to reality and to customers. Establish mecanism to have the customer voice at the center of our universe and to be very close to customers ourselves. This is going to be particularly more important in the next coming years. We're going to be facing uncertain times and having our customers very close to us, listening to them, how they're dealing with reality, what are their updated needs, how we can help them become more successful, and how we can monetize is going to be very relevant and it can be easily overlooked.
Sebastian Kreis (Xepelin)
The one insight startup founders can't miss is to build a team that has really great ambition, and develop that ambition during time, and that has a really important product mindset. Because ambition without a product mindset helps to scale until one or two phases, but the product mindset helps you achieve what you wanna do in LatAm. There's the way how you can have really great close relationship with your customers.
Latin American founders in healthcare know that the impact their startups can have is only growing. LatAm has an inefficient healthcare system to support an increasingly elderly population, and technology can help to bridge this gap.
The opportunities go from telemedicine to wearables, from mental health to dental plans. Investors see that and have been pouring money into healthtechs. The LatAm Tech Report shows that healthtechs in Latin America have grown its annual funding by 48 times between 2015 and 2021, while startups, in general, have grown by 19 times.
Being part of such an ambitious segment, Vitor Asseituno from Sami and Ricardo Moguel from Clivi Health have similar advice to other healthtech founders. Now's not the time to think about hypergrowth. It's time to think about the true value you're building and why you decided to face that specific challenge when creating your startup. It's also time to pay attention to your healthtech's finances, focusing on efficiency and unit economics.
I believe the most important insight founders can't lose sight when thinking about medium and long-term view on the industry they're in is what true value they're building. We all got caught up by 2021 in the hypergrowth mode, raise, raise, grow, raise, etc. etc. And at some point, we might lose sight what true value we building inside the company. What we have learned from looking inside is that there are a lot of efficiencies we have built and are still building with technology that are very different from the traditional healthcare delivery models. And that's the true value that we're seeing that Sami is gonna deliver to the market for the next 10, 20 years. It's how can we be insanely more efficient than traditional players in the way we deliver good, quality healthcare with technology. (...) It's amazing how efficient we can become once we decided to do so and focus on that. I believe healthcare has been very inefficient for many reasons over the past few decades. And now there are a lot of technology and new ways to do it. We are amazed by the results of rechanging the focus to that and less focus on hypergrowth and fundraising.
Ricardo Moguel (Clivi)
We shouldn't forget why we started. That's super, super important. The mission should make sense at least for the next 50 years. Healthcare is resilient to crisis. We have to keep focused on industry trends. How the industry we are in, healthcare, is developing, what are those milestones we need to validate, have it super crystal clear from now. Founders should be laser-focused on burn rate and growth. And then unit economics, unit economics, and then improve the unit economics.
Climate change is going to have a disproportionate impact on LatAm, because of our dependency on industries such as agriculture and mining. But we are also very well-positioned to transform this challenge into an opportunity: we're sitting on some of the most valuable carbon deposits in the world, not to mention our biodiversity and richness in fresh water.
So, what should climate tech founders watch out for? Daniel Salinas, the founder of SuperPlants, chatted with us about this. For Daniel, founders should focus on one single metric: performance, or the scale at which your startup is helping to take carbon dioxide out of our atmosphere. And, as founders in other industries have mentioned, never forget why you started and the people you're building your startup for.
The number one insight that a climate tech founder cannot miss is that, at the end, what matters is the scale at which the startup can take carbon dioxide out of the atmosphere. The ones that are gonna be actually leading a change on climate change are the ones that have a high climate performance potential and a superior product performance, with competitive unit economics and, in some cases, even lower prices than the competition. That's the way to really exceed the natural endowment and biodiversity potential that Latin America has. That has been there for centuries and it will continue to be there in the future. We could ultimately reach to a goal of making a Latin America that's getting investment for climate. Ultimately, the price of a stock, the green label, or a certificate, or an advertisement, or what others can say about climate campaigns doesn't really matter. What is important is to remain focused in the reasons of why it's important and to who it's important to help mitigate and adapt the effects of climate change.
Thank you for listening to the Latitud Podcast with the founders of Pomelo, Addi, Bitso, Morado, Nuvemshop, Xepelin, Clivi, Sami, and SuperPlants.Subscribe wherever you listen to your podcasts for more talks with great founders like them and download The LatAm Tech Report through the link in the episode's description. I’m your host, Brian Requarth. Vamos LatAm! See you next week.