Should Latin American entrepreneurs necessarily head to Silicon Valley when they go to the US? The answer is ‘no’ according to Buenos Aires startup network Palermo Valley, which chose New York to host its latest event, called Latin America Meets New York to talk Startups. If you missed it, here is what you need to know.
The main highlight of the event, which took place at the incubator of private tech university NYU-Poly last Wednesday, were its two panels, featuring entrepreneurs and investors with a deep knowledge the region, both from the US and from Latin America. The moderators were Vanesa Kolodziej, recently featured in our article Latin American Startups: 10 Women to Watch, and Diego Saez-Gil, an Argentine entrepreneur whose startup Off Track Planet was selected to participate in Start-Up Chile (see our recent story on the program’s new application round.)
“This event was off the charts”
Gary Vaynerchuk was so impressed with TNW Conference 2016 he paused mid-talk to applaud us.
As we already reported, Palermo Valley has been working on developing an ecosystem of startups in Buenos Aires, thanks to regular networking events. It’s also taking this further, with the ambition to build bridges between Latin America and the US. This translated into initiatives such as its group trip to Silicon Valley and this event in New York. Its location choice was motivated by the fact that both the Latin American and the NY tech scenes are attracting a lot of attention; it also has to do with the success of some Latin American entrepreneurs in the city.
To drop out or not to drop out
Andres Barreto is an example of a successful Latin American entrepreneur in New York. He may only be 23, but he’s already a serial entrepreneur, and a great one. Originally from Colombia, he co-founded the music streaming service Grooveshark. He’s now the COO of New York-based OnSwipe, a sleek tablet publishing platform (OnSwipe is so promising that we called it “the future of publishing.”) Andres’ co-workers are very young too, and two out of eight are college dropouts. So would Andres recommend students to drop out of college, like Peter Thiel does with his $100k grants? It turns out that his answer is more subtle than Thiel’s. His message is the following: “If you don’t need going to school to be successful, don’t do it unless you enjoy it.”
Andres also highlighted another issue: having dropped out of university may be a problem for Latin American startupers willing to move to the US. He gave the example of talented developers from Mexico he’s trying to hire. As he puts it, they left college early because of how talented they were, but the fact that they don’t have a degree makes it hard for them to obtain a H1B visa. Vanesa noted that for the same reason, many Argentine entrepreneurs also rely on hopes that a Startup Visa would be soon be introduced.
Why New York?
Why do some Latin American entrepreneurs choose to base their companies in New York? It partly has to do with geography: all panelists agreed that it was more convenient for Latin Americans to fly to New York than to Silicon Valley. Flying from NYC to Europe is easier too, pointed the Spanish CEO of Pixable, Inaki Berenguer. Being based in New York is also highly relevant to connect with the advertising and publishing industries. Beyond that, it’s a matter of choice: when you start a company, it means you might live for ten years in that place. To make such a long-term commitment, you have to take your own preferences into account. New York is faster paced, ‘open 24/7’ and Alex Torrenegra feels much more at home there. A Colombian serial entrepreneur behind sites such as Localo.com and LetMeGo.com, he moved to the city in 2000 and among other things, he enjoys the fact that it has a large Latin American community.
Compared to their home countries, New York also has interesting advantages for Latin American entrepreneurs. For example, Alex was able to find developers more quickly than in Bogota. More importantly, being based in the US makes it much easier to raise capital. According to Pedro Torres Picón from VC fund Quotidian Ventures, most VCs are still afraid to invest in non-American companies. However, it doesn’t mean that all Latin Americans need to move to the US to succeed and attract US investors. Patricio Jutard‘s company Three Melons is the proof of it: the online game studio’s team was based in Argentina when Playdom acquired it. However, it’s worth noting that his co-founder attended many events in the US, where he made interesting contacts. This is the key according to Inaki: fly to the US frequently to get to know potential investors and partners personally.
The importance of thinking globally
Besides hindering funding, being based in Latin America also makes it more difficult for a startup to get early adopters in the US, according to Pedro. This could be due to the fact that many Latin American startups initially focus solely on their local market, hoping to later grow internationally. This is a serious mistake, says Andres Barreto: going from local to global isn’t easier. Latin American startups should try from the beginning to create global products. For Vanesa, it’s more and more the case: she’s starting again to see Argentine entrepreneurs with global ambitions (which was the norm before the IT bubble burst in 2000.)
James Haft, a merchant banker and a mentor at TechStars NY, agreed that Latin American startups need to deal across markets to compete with their American counterparts: as he reminded the entrepreneurs in the audience, “you are not going to sell for a value that is higher than the markets you serve.” This is especially crucial in Argentina, which has a small internal market , as James knows well: he is an advisor at digital marketing agency Nextperience, which has offices in Buenos Aires and NYC and focuses on the Hispanic market.
Developing and marketing the local scenes
All panelists also agreed that Latin American entrepreneurs needed more role models, like the ones who already exist in Brazil, which has a more mature ecosystem than the other countries. For James, who was behind the sale of Internet advertising network Digital Ventures to Fox in 2007, there are true success stories in the region, but they often went untold. As Pedro pointed, this lack of well-known role models and of a developed ecosystem makes it harder for people to quit their jobs and launch their own startups: they are afraid and if they fail, there aren’t many startups that could hire them.
As the founder of Nearshore Americas and Sourcing Brazil, two sites that focus on IT outsourcing in the region, Kirk Laughlin also insisted on the importance for Latin American companies to market themselves actively. They can’t wait for others to find them; they should approach the media and explain what’s special about what they do. Satisfied customers willing to talk to the press are also a big plus in this business, where companies are not always keen to make outsourcing public. He added that there are many happy companies doing business in Latin America and confirmed that the region is attracting more and more attention from the buy side, despite the fact that it’s more expensive than India.
The Latin American startups also need mentoring – more than their American counterparts, as Vanesa found out since she started to coach Silicon Valley companies as a 500 Startups‘ mentor. However, her latest initiative, BA Accelerator, should help fill the gap. Its coaching process will be based on global best practices: Vanesa is currently negotiating a partnership with the Kauffman Foundation to use the set of knowledge and skills it developed.
Attracting capital to Latin America
What could really change the face of Latin America would be to attract capital and VC firms, which is sorely lacking (except in Brazil.) Regional initiatives such as Telefonica’s new fund Amerigo and upcoming Tayrona Ventures are very welcome (see our previous story). Chile is also making progress: according to Diego, angels are starting to form VC funds due to the interesting ecosystem that Start-Up Chile is building. Besides, capital can still come from the US, despite the fact that American VC funds with local offices are much more uncommon than they were before the 2000 bubble.
John Ason, who invests in early stage companies and recently funded Diego’s startup Off Track Planet, confirmed that he would consider investing anywhere and is indeed interested in Latin American companies. He detailed his screening process, based on one-age executive summaries focusing on what the startup does, and we can expect him to receive quite a few of these following the event.
What do you think of these initiatives? What is the best way for Latin American entrepreneurs to connect with investors?