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CHAPTER 5

The Frontiers

We believe there are huge untapped market opportunities for Tecnolatinas. A technology tsunami is transforming the global economy, creating rapidly growing market spaces. So far, most Tecnolatinas have focused on mobile and Internet related businesses.

In a way,  the regional ecosystem looks like a pack of young kids playing soccer, running behind the ball and their peers rather than making full use of the court and strategically anticipating where the ball will be going in the next couple of shots. But the early success of some LatAm startups in other spaces, the rapidly decreasing costs of some technologies and the availability of a large untapped scientific talent pool make us believe we are only at the beginning of the revolution.

Until now most Tecnolatinas have been content to replicate the successful models of more advanced markets. But as born global startups like Satellogic show, Latam entrepreneurs can aim higher and break into new global markets with truly innovative solutions and business models. Anticipating the next waves of disruption and appropriately timing an entry is critical for success.

Seven technology spaces stand out for their huge growth potential and their accessibility by Tecnolatinas:

Fintech

New technologies and innovative outsiders are about to deeply transform the financial industry. Driving this change are mobile payments, the blockchain, crowdfunding, peer-to-peer lending and artificial intelligence, coupled with smartphone global penetration expectedly moving from 2 to 6 billion in the next five years. The fintech sector is still tiny relative to the size of the industry, but growth will be accelerated. Investments in fintech went from just over US$2.8B in 2013 to $13.8B in 2015. A recent McKinsey report estimates that digital technologies open an opportunity for financial services companies in emerging markets to create US$3.7T in value by 2025, incorporate 1.6B people to the financial sector, enable US$2.1T in loans and generate 95 million new jobs across all sectors of the economy by providing services that are 90% less expensive and creating new business models. Tecnolatinas have a huge opportunity to thrive in this space. Players that create disruptive solutions for financial inclusion in the region could extend their products to global markets.

Agtech and food tech.

The global food industry is the largest in the world, representing 10% of the global GDP (a US$8T sector) and plays a strategic role in the economy of the region. There is a massive need for change: our current food paradigm is destroying our health and our planet. But the global food innovation system is too small, too linear and too attached to the status quo. Food-related venture capital multiplied in recent years but it still represents less than 3% of global activity. As Kimbal Musk says: food is the next Internet. The opportunity is so massive that it will dwarf much of what we have seen in the technology space: food is more than ten times bigger than the global software sector. There are emerging opportunities in areas such as food e-commerce, urban agriculture, drones and robots for agriculture, satellite imagery, big data analytics, biofortified crops, cultured meat, cloning and animal protein substitutes. The biggest obstacle that prevents the region from taking a leading role in this revolution is mindset.

Artificial intelligence and automation software.

Artificial Intelligence is exploding and is expected to go from US$420M in 2014 to US$5B by 2020, growing at a CAGR of 54% fueled by massive investments by global players like Facebook, Microsoft, IBM and Google, and the availability of vast amounts of new data which makes deep learning approaches more viable and effective. Much of the market opportunity will concentrate in the creation of applications for these technologies. AI is increasingly available in open platforms, making them accessible to Tecnolatinas. Today, any innovative Latin American developer can create an application that leverages the power of IBM’s Watson and runs in the cloud and reaches billions of Internet users around the world. Similarly there is an attractive opportunity in robotics. According to The Boston Consulting Group, the robotics industry will multiply by at least a factor of 10X in the coming decade (from US$27B in 2015 to 67B in 2025) due to rapidly lowering costs and increasing flexibility and ease of use due to new functionalities such as human-friendly interfaces and enhanced machine vision.

Synthetic biology

The rapidly decreasing cost of reading, editing and synthesizing DNA is putting unprecedented power in the hands of small creative teams. The cost of a biotechnology lab has come down dramatically and, today, a skilled scientist with less that US$1,000 in equipment can begin editing life with the latest CRISP-Cas9 techniques and biohacker labs such as Biocurious are able to provide. US startups are leveraging synthetic biology to produce in vitro beef, shrimp, leather, vegan cheese and a host of other disruptive potential products for industries such as food, energy and medicine.

New accelerators based in Silicon Valley like IndieBio are churning out biostartups with only US$200,000 of investment with truly revolutionary potential: think milk and meat without cows, egg whites without chicken and cheap natural sweeteners to replace sugar. Latin America has a large pool of talented bioengineers. It is time entrepreneurs connect with them to change the world.

Renewable energies.

Every hour more solar power hits the Earth than that the world consumes in a year, the global solar market is doubling roughly every two years, the cost of solar energy has fallen by more than 70% in the past five years and new technologies like perovskite cells promise to keep powering that trend. Despite recent progress, Latin America has huge unrealized potential in solar and wind energy, for which it enjoys some of the most favorable conditions on Earth. Solar and wind are expected to dominate two-thirds of the US$12T energy investments in the coming fifteen years. Only a handful of startups, like Semtive, are developing innovative technology products and business models in this area, in which trillions of dollars will be created.

Virtual and augmented reality.

The emergence of virtual and augmented reality devices like the Oculus Rift and Hololens is expected to generate a new $150B market by 2020 starting from a base of only around US$5B in 2016. After years of development, this industry is beginning to take off, reinventing the way we play games, learn, entertain ourselves, communicate and buy things. Major global players like Microsoft, Facebook, Samsung, Sony, Google, are placing multibillion dollar bets on this opportunity.

On the higher end, Magi Leap is expected to come out soon with revolutionary augmented reality headsets. On the lower end, Xiaomi recently announced a US$30 headset for virtual reality. More than 60% of that market is expected to be related to content, software and commerce, making virtual and augmented reality just as accessible to Tecnolatinas.

Internet of Things (IoT).

In the coming decade the physical world will be digitized. We are going to see an explosion of objects and ever smaller and cheaper sensors and actuators being used to connect homes, wearables, cities, energy and transportation networks to the Internet. Today, Gartner estimates there are around 5 billion connected objects in the world, by 2020 that number is expected to jump to 21 billion devises. Mckinsey estimates this will unleash up to US$11.1 trillion per year by 2025 (a sizable portion of this value will be captured by users). This will open huge markets just like the smart mobile revolution did and we believe Tecnolatinas could address this market, particularly from a software angle.

Other spaces include digital medicine, 3D printing and nanotechnology. Entry barriers into these spaces are bigger because the cost of innovation is higher, the intellectual capital environment is more challenging and our regional ecosystem is not so well prepared to support hardware startups. Nevertheless we already see early successes from Latin America in each of these spaces.

Technology is changing the world and Tecnolatinas are positioned to benefit from the new unfolding industrial revolution. The incredible transformative power of the digital revolution continues to grow and is moving from bits to atoms.

The exponential development of digital technology that transformed our lives and the business landscape is contagious and is spreading to new fields like robotics, additive manufacturing, biotechnology, nanotechnology, digital medicine and neuroscience.

Again, the impact on our lives will dwarf what we have seen to this point. Reality shows that, as Peter Diamandis pointed out in his book “Abundance: The future is better than you think”, technology will enable us to tackle the grand challenges of humanity, like access to water, food, health, shelter and education. It will also result in massive value creation and a pace of change that, no doubt, will be difficult to accommodate with for many.

And there is more: technology innovation will open the door for new products and business models that combine different technologies in ways that deliver still superior value to clients. Tecnolatinas are just getting started!

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