What’s the Panorama for Colombia’s Startup Space Under President Petro?

Unlike the previous government, the new president’s plans do not put much emphasis on entrepreneurship, but there is focus on innovation, according to Alexander Riascos Caicedo, executive director of the Emprende Mejor foundation

Colombia's flag lights up the Colpatria tower in Bogotá, Colombia, on July 20, 2022.
August 10, 2022 | 04:49 PM

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Bloomberg Línea — Colombia is one of the Latin American countries with the best average economic growth in recent years, and has gone from being a lagging economy as a result of the internal crisis caused by the violence and rebel activity, to a country where the spotlight has shifted to important milestones, according to Alexander Riascos Caicedo, executive director of Fundación Emprende Mejor, a Colombian pro-business foundation.

One of the milestones of the Colombian economy has been the development of its entrepreneurship ecosystem in recent years. In the first six months of 2022, startups created in Colombia attracted more venture capital than ever before: $1.03 billion, according to recently released figures from Transactional Track Record (TTR).

Colombia saw a 63% increase in the number of venture capital transactions and a 29% increase in their volume, <compared to the same period last year, according to TTR.

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The constant and exponential growth of the entrepreneurial ecosystem in Colombia is due to the local and international players that are working together to create an environment conducive to a culture of entrepreneurship and opportunities, says Riascos, who also serves as a host of SUM International in Cali.

“Local actors such as Innpulsa, chambers of commerce, universities, innovation centers, among others, are detonating talent. In addition, there is something that has been fundamental and that is that young people who have already seen success stories such as Rappi or Nubank, to name just a few that have internationalized, and have realized that it was worth trying, and that is how in a process of inter-culturality, access to global markets and international collaboration dynamics has led to the results we have today,” Riascos adds.

Investors and accelerators have landed in the country to help drive the wave of innovation entrepreneurship in Colombia, he says.

In the southern region of Latin America, Colombia is the country with the fastest emergence of startups after Brazil, according to Soonicorn Club, which maps startups valued at more than $100 million. Colombia has 16 fast-growing startups close to becoming unicorns, followed by Chile with six and Argentina with five.

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But what will happen with the arrival of the new Colombian government led by President Gustavo Petro?

Startups in Petro’s Colombia

Riascos believes that with the entry of the new Colombian government, the challenge will lie in achieving growth in the entrepreneurial ecosystem and a greater emergence of technology-based startups, not only to boost the economy, but also for the country to become a leading player in the industry.

After analyzing the speeches by President Gustavo Petro, Riascos says the core themes of his policy are: women, environment, the low-income economy, and democratization.

“But there is not much emphasis on entrepreneurship, something that was more evident in the outgoing government,” he says.

Although Riascos acknowledges that although the word ‘entrepreneurs’hip has not been mentioned in Petro’s speeches, “Petro does emphasize the need to stop depending on mining and coal as a major source of income for the country, and repeatedly says that we must move from an extractive industries-based economy to a productive economy, and to be a knowledge society”.

“Regarding the knowledge society, that is understood as an emphasis from early school stages on strengthening the components that lead to stimulating creativity, innovation and those technical components that are the pillar of a knowledge economy; math, English, digital literacy, software development and programming, in addition to exponentially expanding the coverage of quality Internet in the country,” Riascos says.

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All these initiatives, from Riascos’ point of view, point to a favorable environment for startups.

“It is noticeable that there is an interest in strengthening the base of the process, that is, to serve the young population and how this starts early, to play a key role in what Petro calls the knowledge society.”

Colombian startups’ main challenges

There are still major challenges that the Colombian state must face. One of them, according to Riascos, is how to streamline the policy that protects technological and innovative business models. This is because “in the fintech sector there are legal loopholes that remain unresolved, in the collaborative economy there are still gaps, and regarding the agility needed to create a company, there is still bureaucratization in the process”.

In this regard, Colombian Juan Carlos Arcila, co-founder and president of the Latin American Congress on Innovation, Digital Banking and Technology (CLIBT) told Bloomberg Línea recently that fintech regulation is one of the urgent pending issues for financial technology startups. Arcila said it is an issue that is already being worked on, “right now those laws are being built, but they are not in place yet.”

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“Colombia remains in an uncomfortable position and far from countries that are showing positive changes, such as Nigeria, Kuwait, India and Tajikistan. Currently the country ranks 67th out of 190 worldwide [in the Doing Business report, which measures the factors that contribute to facilitating the starting of businesses], and although it is recognized for its reforms and initiatives for change, it is still very distant from developed countries and in that sense, it is no coincidence that the first places in the ranking are the countries where there are currently more startups”, says Riascos, who has led entrepreneurship programs in the country.

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“The challenge for the new government is to have clear policies that encourage and stimulate the creation of this type of business and at the same time, as Petro mentioned, to strengthen what could be called the seedbeds of the knowledge economy”, Riascos says.

The influence of global challenges

In addition to the challenges faced by startups in Colombia due to the change of government, there are also those created by the international scenario.

Juan Eduardo Contreras, country manager of Chilean proptech Houm in Colombia, says that the global context is already having repercussions on Latin American startups.

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“The havoc generated in the world by the war in Ukraine, the container crisis, added to the economic and social consequences caused by the Covid-19 pandemic, have given way to the shadow of recession around the world.”

This, says Contreras, has led to tighter valuations, difficulties in closing new investment rounds, and increased demands from investors, forcing entrepreneurs to find other sources of growth and funding.

“Anticipating the effects of the crisis, startups have taken early measures, made a reevaluation of growth objectives, cuts in their staff, limitation in expenses and investments, bootstrapping, have been some of the constants that occupy the agenda of entrepreneurs,” Contreras says.

And, in this context, in view of the change of government “entrepreneurs maintain conservative expectations and hope to have the economic and legal conditions to continue generating jobs and contributing to the development of the country,” says the Colombia director of Houm.