Summary: The State of Venture Capital and Entrepreneurship in Latin America for 2013

By Madeleine Kir Ferry Johnson

A panel of entrepreneurs and investors addressed the growing number of new tech companies in Latin America, as well as the challenges to fostering a more sophisticated venture capital ecosystem in the region.


  • Cate Ambrose, President, Latin American Venture Capital Association (LAVCA) | See Ambrose's Powerpoint presentation.
  • Juan Pablo Cappello, Co-Founder and Board Member, (moderator)
  • Boris Hirmas Said, Chairman, Tres Mares S.A. (Santiago, Chile); Chairman, Yellow Pepper Mexico SA de CV; and Entrepreneur-in-Residence, Pino Center, Florida International University
  • Manuel D. Medina, Managing Partner, Medina Capital Group
  • Andres Moreno, Founder and CEO, Open English


AS/COA hosted a forum on venture capital and entrepreneurship in Latin America, in collaboration with LAVCA and the LAB Miami. A panel of entrepreneurs and investors addressed the growing number of new companies receiving funding in the region, the importance of connections between U.S. investors and Latin American companies, and the challenges to fostering a more sophisticated ecosystem for venture capital in the region.


Building the Ecosystem for Investment and Entrepreneurship

Last year, nearly $8 billion was committed to more than 200 deals in Latin America—with over half of these deals in the information technology (IT) sector, explained Cate Ambrose of LAVCA. Startups in IT included e-commerce, data storage, mobile platforms, outsourcing, and infrastructure. The number of IT deals climbed from only 18 in 2008 to 104 in 2012.

Ambrose noted that this data shows greater investor appetite for investment in Latin America, a trend driven partly by success stories spurring interest in new companies in the region. Andres Moreno of Open English shared the story of his company’s fundraising efforts, starting with a round of convertible notes that took over a year to raise $400,000 before seeking venture capital funding.The second round of funding took 60 days to raise $43 million, and the next 45 days to raise $65 million. He stressed that firms such as Kazsek that have invested in Open English are now looking at other deals with Latin American companies for the first time.

Boris Hirmas of YellowPepper added that the region needs role models to inspire younger generations to pursue their own startups. One key indicator in LAVCA’s Annual Scorecard measures entrepreneurship and shows positive results for the region in 2013. LAVCA looks quantitatively at how many companies were created and sustained, and incorporates qualitative data from interviews with entrepreneurs. Both Colombia and Mexico jumped one point higher this year, exemplifying progress. Brazil and Argentina, while not strong on some of the other indicators such as intellectual property rights or judicial transparency, have also been strong in entrepreneurship.

There are many players emerging to enhance this ecosystem and teach the region’s entrepreneurs to speak the same language as investors coming from abroad, panelists noted. Accelerators such as 21212 in Brazil and Wayra across the region are mentoring hundreds of new companies. Government funding—from programs like Start-up Chile or investment from development banks such as Brazil’s BNDES—has also broadened the field.

Ambrose cited Brazil, Chile, Colombia, and Mexico as the four markets where one finds the most support from governments and development banks, but stressed that it takes decades to build a venture ecosystem and the level of sophistication among companies that is expected by investors. Manuel Medina of Medina Capital agreed, saying his firm spends more time on due diligence for deals in Latin America.

The U.S.-Latin America Relationship

Investors bringing capital to Latin America often tie funding to a U.S. connection. Moreno explained that when his company first sought funding in Silicon Valley, they had to establish an office in California as investors expected to be close to the companies they were funding. Had the company kept the head office in Venezuela, the funding would not have been secured. Ambrose agreed, saying that entrepreneurs who have never left their home market may have difficulty securing funding. If there is interest in scaling the service or technology to the United States, or other experience with the U.S. market, this process becomes easier. 

Medina offered the example of his fund, which does not invest in Latin America unless there is a U.S. connection. Medina Capital invests exclusively in technology infrastructure such as networks, big data, and cybersecurity, and seeks companies to mentor and develop to bring in order to bring into the U.S. market. He added that U.S. companies also have a strong advantage in valuations. A U.S.-domiciled company will have a significantly higher valuation than the same company with the same product based in Chile or Argentina.

Still, Moreno noted that the reception of Latin American entrepreneurs has changed in Silicon Valley. The region is gaining attention for its emerging economies, where greater access to credit brings consumer demand for technology-related services. Ambrose added that Brazil has dominated regional venture capital investments because firms such as Accel Partners, Tiger Global, and Flybridge recognize these opportunities. Much like in China, investors saw a market with 200 million consumers eager to buy over the internet.

Ambrose noted that outside of Brazil, companies need to look at either pan-regional enterprises or development for the U.S. market in order to show the scale needed to attract later-stage investment. Successful deals often involve the intersection of international and local entrepreneurs.

New Ideas, Strong Talent

Hirmas stressed that there are fresh ideas in Latin America that can be brought to the U.S. market. Mobile banking is one example, where the technology and platforms have been developed abroad by companies such as YellowPepper, and now function in the United States as demand increases for similar services. Medina added another example from a company in Colombia that operates in the cybersecurity space, protecting banks from fraud. He argued that Latin America has a lot of experience in anti-fraud and the product set developed by this company was much more powerful than anything he had seen in the United States.

Juan Pablo Cappello of noted that this trends runs against the grain of mainstream thinking, which portrays Latin America as a market filled with copycats as opposed to new ideas. Ambrose added that contrary to popular wisdom in Silicon Valley, there is an incredible pool of talent for creative professionals and developers, particularly in Argentina and Colombia.

Moreno agreed, noting that Open English has established service hubs in the region around the best talent. The company found skilled developers at the best cost in Argentina and set up an office there. Open English established three call centers in Colombia, where there were sales and service professionals best-suited for the company. But the enterprise is headquartered is in Miami, where Moreno said it has access to well-trained professionals with experience at larger firms working across Latin America. Miami also has the advantage of being in the United States, which is useful for raising capital.

The Importance of Regulation

Speakers agreed that regulation presents one of the biggest hurdles to expanding companies across borders. Moreno noted that the language instruction space tends to be unregulated, allowing the sector to quickly expand throughout Latin America. Medina shared difficulties his firm has had expanding to Europe, where the regulatory environment for moving data tends to be stringent. The problem of data regulation does not exist in Latin America, he said.

Hirmas added that YellowPepper’s analysis of new markets is driven by regulations. For example, YellowPepper entered the Mexican market because of a positive regulatory environment, but has not yet entered Brazil. He noted that in Chile, investors feel confident because they are aware of the rules. The legal framework is less friendly to investment in other markets and should be reformed, he said. Otherwise, he asked, “why would a U.S. investor to go Latin America?”