LatAm Tech Scene - Growing Fast

Latin America is the world's fastest-growing internet market, so is it time to don your silicon sombrero? LatAm INVESTOR investigates...

Silicon Sombrero?

Go-Daddy has landed in Latin America. The domain sales giant is using the UNO domain – a new web extension for Spanish-speaking internet sites – to increase its presence in the world’s fastest-growing internet market. The move shows the business potential of Latin America’s tech scene. At present internet penetration in Latin America currently sits at about 40%, compared to almost 80% in the US. Analysts expect that penetration will reach 60% by 2015.

Go-Daddy’s move is also a sign of something more fundamental. As commodity prices slip and traditional Latin American export machines start to falter, policymakers and investors are placing more attention on other parts of the economy.

Government Support

In Chile, the government has been thinking of a way to lure internet entrepreneurs down to remote Santiago, one of the world’s southernmost capital cities. The result is ‘Start-Up Chile’, which offers small tech entrepreneurs a visa and $40,000 of seed capital. “We don’t even ask for equity in return”, says Matias Mori, the former executive vice-president of the foreign investment committee of Chile. “We just ask that they stay in Santiago. We believe that the presence of these companies will help our labour force develop new skills.”

They say that imitation is the sincerest form of flattery, so no doubt the Chileans were delighted when Brazil launched a very similar looking ‘Start-Up Brazil’ programme that offers $100,000 to small tech companies. In Colombia, the government has established INNpulsam, an organisation that offers advice and seed capital to start-up companies on one hand, while on the other it helps larger companies update their IT systems.

Meanwhile in Mexico the government is building an extensive $5bn ‘creative digital city’ in the country’s second-biggest city, Guadalajara. It is already a hotspot for Mexico’s digital companies, so now the government is building a 600-acre campus that will bring tech firms and academics together in one place. The government hopes that by providing the right setting, everything from superfast broadband to a picturesque landscaped environment, it will encourage more companies to move to the city.

How to play it

So how can investors look to take advantage? One of the newest ways could be through U-Start, the Swiss-based investment advisory firm. This month it launched new offices in Brazil, Chile and Mexico.

U-Start helps investors to connect with good investment opportunities in the whole world and this job is very important to allow more high potential business to find a way to success…. Felipe Matos, Start-Up Brazil"

With an estimated €3.8bn under management from 132 global investors - consisting of family offices, high-net-worth individuals, VCs and angels – U-Start has a track-record of delivering funds to embryonic firms in emerging markets – so it could be an interesting option for investors looking to tap Latin America’s growing tech scene.