How ecosystems in Latin America will help Canadian startups go global

Above: John Ruffolo of OMERS Ventures during an on-stage interview with Startup Canada CEO Victoria Lennox at the LatAm Startups Conference

By Jacky Habib
Posted August 19, 2015

Canadian startups can benefit from going global – and recently, they’ve been particularly interested in going south. The LatAm Startups conference, hosted during the Pan American Games in Toronto last month, brought together entrepreneurs, investors and public representatives from Canada and Latin America to discuss opportunities for collaboration.

“The demographics in Latin America are better than anywhere,” said John Ruffolo, CEO of venture capital firm OMERS Ventures in an interview. “Everyone is thinking about China but we are starting to think about [investing in] Latin America because of a similar time zone and culture.”

The annual LatAm Startups Conference made way to Canada this year after Startup Canada CEO Victoria Lennox spoke to entrepreneurs in Peru in 2014 to encourage collaboration, experimentation, and competition between startup ecosystems in Canada and Latin America.

“The growing grassroots ties between startup ecosystems in Canada and Latin America are mutually beneficial,” said Lennox. “Entrepreneurs in both regions need access to global markets, investors, and networks beyond their own borders to scale. We need to encourage our entrepreneurs to maintain their home base in Canada but test new markets outside of North America.”

The startup scene is popular with Latin America’s youthful population. The average age of an entrepreneur is 29. As one conference participant put it, for Latin American youth, saying “I have a startup” is the new “I have a band.”

There are over 13,500 startups in Latin America, and the number has been rapidly increasing. It jumped 24 per cent from 2014 to 2015.

However, some Canadians who have set up shop down south say it hasn’t been easy. While traveling in Brazil, Añyas Vida, a Toronto-based entrepreneur, realized there weren’t many hair salons that catered to women with thick, curly hair, so she returned to start a business.

“I spent six months there trying to set up the salon and it went nowhere. I wasn’t able to get a business license,” she said. “Brazil is a beast to tackle. The bureaucracy is unbelievable and I don’t get it.” Despite this, Vida is set on doing business in the country, and says she will return next year to continue the process.

Other Canadian entrepreneurs cited bureaucracy as a barrier to entry in Latin America, as well as language, cultural differences and a low tolerance for failure. Jonah Brotman, a serial social entrepreneur who has worked throughout Latin America says one of the top lessons he learned is that “business as usual isn’t business as usual.”

With the rise in entrepreneurship, come incubators, accelerators and people who are determined to make it easier to do business in Latin America.

One such person is Marcus Dantus, the founder and CEO of Startup Mexico who wants to strengthen relationships between Mexican and Canadian entrepreneurs. Because access to capital is important for startups, Dantus says founders have their eyes on Silicon Valley. “Silicon Valley is blocking our view of Canada and it’s also blocking Canada’s view of Mexico,” Dantus said.

By 2003, the country had never had any incubators and it now has 500, according to Dantus. “It’s time for the world to realize innovation doesn’t just happen in Silicon Valley,” he said.

Shafin Tejani, founder of Victory Square Labs, said learning about innovation from Latin America startups will impact how his company scouts potential startups to invest in. The Vancouver-based accelerator and investment firm, which has invested in companies in 21 countries, typically uses trade commissioners to connect with startups abroad.

Now, Tejani says they will refer to startup ecosystems. “These ecosystems can feed us these people and companies that fit our profile, so they’re vetting them. This makes it significantly easier instead of us having to seek them out,” he said.

Tejani was particularly impressed when learning about Startup Chile, a government initiative that attracts promising startups from around the world and offers them an accelerator program and a $40,000 equity-free grant. Startup Chile incorporates multi-tiered funding to provide funding to companies beyond the startup phase, depending on performance.

“As an investor, you want to go to a place where you’ll see the government and funding system is forward thinking,” Tejani said. “Chile is a region we’re going to look into now.”

With Latin America’s youthful population and startup ecosystems that cater to them, Canadian entrepreneurs are at a position to take advantage of this environment. These ecosystems can minimize barriers to entry and act as a link to help Canadian businesses expand their operations.

Although it’s easier now than ever for startups to move into Latin America, John Ruffolo cautioned entrepreneurs from relying too heavily on these structures. “The optimism you can have is spectacular,” he said, “but don’t rely on government or someone else to pave the way-it will be the quickest way to nothing.”

Lennox also acknowledged the importance of individual initiative when entering global markets.

“Entrepreneurs themselves need to contribute to the development of startup ecosystems and leverage them for effective transitions,” said Lennox.  “Regardless of where they do business, entrepreneurs need to build support networks around themselves with mentors, advisors, and other resources to further their own ventures and to make it easier for the next generation of companies to do so as well.”

Jacky Habib is a freelance writer and a fellow at the School for Social Entrepreneurs.

Kathryn Forrest
Kathryn Forrest
kathryn.forrest@startupcan.ca



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