The Call to Action
We believe Latin America should spur the rise of Tecnolatinas to take part in the ongoing industrial revolution, build the economy of the 21st century and build a path to abundance. Tecnolatinas have already proven that our region can innovate, create value and compete in the emerging technology spaces.
But they’ve only scratched the surface. With consistent and deliberate action, the region and its players can take the game to a whole new level and make entrepreneurial innovation the core engine of a growing creative economy. On that line, we see four broad levers to achieve this goal.
The most immediate area of opportunity is boosting the investor ecosystem. We need to make smart capital abundant for entrepreneurs throughout Latin America to enable them to successfully pursue their projects, stand and move in a playing field more comparable to that entrepreneurs outside the region do.
The experience of innovation hubs such as Silicon Valley and Israel shows that startup ecosystems take off only when venture capital develops. It also shows that it can be quickly achieved with the right policies in place. Local early-stage financing is particularly critical, it is easily within reach and it is a space where new funding models are constantly being developed.
Later-stage capital, on the other hand, can be more easily found abroad and requires more mature capital markets.
Governments need to remove legal and tax hurdles for angel investors and funds and enabling equity crowdfunding. At the same time, investors need a new mindset, by coming to grips with and learning how to identify attractive opportunities early on; by focusing on long-term value creation and, by sharing value with talented entrepreneurs with a capitalism 3.0 mindset.
A second avenue is connecting the dots. Although Latin America has many of the pieces of the entrepreneurial innovation puzzle, they are disconnected. There are tens of thousands of entrepreneurs and scientists, but the opportunities for them to connect with each other efficiently are still to be created. The region spends US$28B on R&D every year, but the connection with market needs is not really there. Because there are no effective technology transfer units and legal frameworks in place and true incentives for corporate innovation to happen are still a pending assignment. Corporations and startups in the region largely ignore each other because they still have not really figured out the value of collaborating through open innovation models. Another reason to explore collaboration with more intent is that innovation is not sufficiently connected with the needs of the bottom of the pyramid and with regional environmental challenges because the power of connecting, interacting, collaborating with each other is still under appreciated and frequently subdued by individual initiatives or collective interests.
A third path is establishing a friendlier environment for startups. Most LatAm countries present unfriendly business environments for entrepreneurs. Creating a company often takes months. Navigating highly complex tax and bureaucratic systems generally consumes inordinate amounts of time. Company failure is punished with years of legal quagmire and social stigma. In some cases, capital restrictions, complicated foreign exchange schemes and high inflation make international operations a nightmare, thus scaring investors. To support, retain and attract the best entrepreneurs so they can create jobs and successful businesses, it is critical to make things friendlier for entrepreneurs and investors. This can be attained by fostering a culture that celebrates risk taking and embraces failure as an opportunity for growth and learning. Success is to be celebrated, including all misses and mistakes there could have been in the process.
Another massive opportunity is expanding more aggressively into emerging market spaces. Today most Tecnolatinas are Internet players because entry barriers fell and markets expanded more rapidly there. But as some leading startups are proving, Tecnolatinas can also tap into other promising, though less visited, opportunity spaces where similar dynamics are taking place. Advanced robotics, synthetic biology, additive manufacturing, artificial intelligence, the Internet of Things, blockchain-based services, augmented and virtual reality, renewables and digital medicine will generate value pools worth trillions of dollars in the next decade. Only a few years ago these markets were negligible and difficult to access, but today they are all large, approachable and rapidly growing, with a few startups in the region. This is explained by mindset, the biggest barrier to entry. We can develop entirely new spaces, particularly through technology, product and business model innovations to attend sensitive ignored or disregarded needs of the vast majority of the population in Latin America.
Finally, another opportunity to tackle is the strengthening of the talent pool. For instance, by creating pathways for women to build startups. We can also show our most talented youth that entrepreneurship can be an attractive career path and an interesting option to access the ecosystem. We can provide visibility to role models so that they can show others how fulfilling, impactful and gratifying being an entrepreneur can be. It is to be expected a significant increase in the presence of women in the ecosystem. Schools and universities can equip students with entrepreneurship skills and promote STEAM courses (Science, Technology, Engineering, Art and Math) by making them more attractive and relevant. MOOCs can also be used to provide free quality educational content such as The Art of Entrepreneurship developed by Surfing Tsunamis and Acamica or the How to Build a Startup lectures by Y-Combinator and Stanford. We can push the envelop by multiplying the percentage of people who finish high school and university studies. We can build world-class learning and research institutions focused on technology that become innovation powerhouses.
To unlock this tremendous potential, the region needs leadership and a new mindset. Business, government and opinion leaders must put talent, entrepreneurial innovation and the creative economy at the center of their economic strategies. It is necessary to put behind the illusion that natural resources are the only driver that can propel the region and the countries within into an era of abundance, when we are in an age of accelerated technological progress.
The results of an approach like this will take time: the ecosystem needs it to mature. That’s why all efforts in that direction should be sustained -even though hard times- so as to be fruitful. The opportunity is unique: the power of innovation to create lasting value has never been so great or so close to reach. A final requirement: regional leaders in all arenas will need to overcome the temptation to protect the past and optimize the present and work on creating space for building the future. All players, public and private, have a role in making this happen.
Parents can educate themselves and expose their children to new technology fields and applications. They should explore together career paths that are relevant for the future and should be open and supportive about their preferences and choices: becoming an entrepreneur or a game developer can lead to a happy and prosperous future.
Schools should rethink their curriculum, approach and methods to equip students with 21st century skills such as creativity, communication, collaboration and critical thinking. They should engage students with project-based learning experiences and expose them to the entrepreneurial world. They should familiarize them with exponential technologies and explore both the opportunities and challenges they will bring so as to create a future of human-centered and planet-friendly abundance, inclusion and regeneration. They should develop new ways to instill values such as curiosity, courage, ethics and leadership.
Students should take ownership of their future, follow their passion and embrace the notion that they will live in a future of accelerated change which they can shape if they choose to. They can study the lives of entrepreneurs, they can learn to code with online courses, they can become makers and hack old devices, they can create their own websites, apps and even startups, and they can find new ways of using these technologies to save the planet and change the lives of us all, but most importantly, of the most vulnerable.
Universities should make Tecnolatinas and the ongoing technology revolution a new field of study and research. They should strengthen their innovation and technology transfer programs, create opportunities for students from different fields to connect and interact, and they should launch accelerators (like Stanford and Harvard did) where students can learn entrepreneurship by doing and create makerspaces where students can even build new products or services. They can make their study projects come alive by making business relevance a requirement and thus paving the way for new startups, with appropriate coaching, mentoring and funding programs .
Investors should rethink how they invest in startups and explore this space by placing limited bets until they have gained sufficient knowledge to make bolder moves. The investment mindset, the tools, the criteria and the process are totally different from what they’ve learned in business schools and applied in traditional opportunities, including in the private equity space. They should understand that to succeed they should have a mindset of abundance and should serve and learn from the entrepreneur rather than patronize and exploit him. Here high-power teams -rather than business plans- are critical for success. And it’s fact that early stage investment decisions should take just a few interactions. This is a high trust environment where reputation is a hard asset and collaboration is the norm.
Corporations should realize that global leaders around the world are creating open innovation frameworks to collaborate with startups, thus recognizing that disruption is more likely to come from outside their organizations. They should realize that their teams can become more effective by interacting with startups and learning from their playbook. They should be actively experimenting with hackatons, accelerators, makerspaces, co-working spaces and corporate venture capital funds. They should realize that the balance of power between David and Goliath is changing, that opportunities for collaboration exist and that the best course of action is to join forces.
Governments should realize that the Tecnolatinas are key to build a dynamic 21st century economy and be more aggressive in pursing strategies to foster their development. Just five years ago, only one of the top five most valuable companies in the US was technology-based (Apple) and represented US$376B in value.
Today all five are technology-based and represent a collective value of US$2.323B. Much has been done in recent years, but there is still a lot to be done for more comprehensive transformations in areas such as education, regulation and incentive development activities.
In sum, the Tecnolatinas revolution has just started. Latin America has a historic opportunity to leapfrog its way into the 21st century and these companies provide a unique vehicle to accomplish this goal. Tecnolatinas also open the possibility of a cultural transformation that will lead to a future of meritocracy, collaboration, sustainability and constant reinvention.
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