Which Latin American Cities Are the Strongest Seedbeds for Startups?

Bogotá — Venture capital invested in startups in Latin America in 2021 totaled around $15.7 billion, a record figure that surpassed the amount invested during the entire previous decade. However, this year startups in the region are facing more adverse conditions, including challenges to accessing capital amid higher interest rates and global economic uncertainty.

But despite this year’s challenges, and which have been reflected in a wave of layoffs in Latin America, there have been success stories, such as Colombian proptech Habi becoming the country’s second unicorn after Rappi, and Ecuadorian fintech Kushki becoming the first in that country to achieve the billion-dollar-valuation status.

And while “the region still lags far behind North America and Asia in terms of its share of the global value ecosystem, Latin America is growing at an impressive pace”, according to a report by research firm Startup Genome.

In its Global Startup Ecosystem Report 2022, Startup Genome highlights that, since 2012, the global average number of Series A rounds has tripled, while last year alone “a record 540 companies achieved unicorn status, up from 150 in 2020″.

The report also highlights which are the most robust startup cities in the world, according to various factors, ranging from the level of funding to connectivity, market reach, knowledge, talent and experience.

This year North America continues to dominate the global ranking, with 47% of the top 30 cities, while Asia ranks second with 30%.

The list is led by Silicon Valley (California), the global epicenter of entrepreneurship and home to the largest and most innovative technology companies in the world, with an average value of $2 billion.

Silicon Valley is followed by New York, London, Boston, Beijing, Los Angeles, Tel Aviv, Shanghai, Seattle, Seoul, Washington DC, Tokyo, San Diego, Amsterdam-Delta, Paris, Berlin, Toronto-Waterloo, Singapore, Chicago and Sydney.

Next come Stockholm, Bangalore-Karnataka, Shenzhen, Denver-Boulder, Austin, Delhi, Philadelphia and São Paulo, the latter ranked 28th and top in Latin America.

Regarding São Paulo, the report state that “its size and density offer founders a large market and the opportunity to connect with other innovators”, adding that the value of the city’s startup sphere is equivalent to $108 billion.

The Brazilian city’s seed rounds average $432,000 and series As $4.8 million, while its strongest sectors are financial technology, proptech and digital solutions applied to agriculture.

The second most robust startup city in Latin America is Mexico City, which the report describes as a fertile market for fintech solutions with its more than 21 million residents, with a “vibrant tech and cultural scene”.

Mexico City as a startup seedbed is valued at $22 billion, where average seed rounds are $500,000 and Series A rounds average around $9.5 million.

And described by Startup Genome as “an exciting startup hub”, Argentina’s capital Buenos Aires is the third largest startup sphere in Latin America, valued at $7 billion, thanks in part to the boost it has received from fintech solutions and blockchain, with the latter beginning to gain a lot of traction.

According to Startup Genome, “since 2008, accelerators and incubators funded by the city government of Buenos Aires and public-private investment schemes have supported more than 30,000 entrepreneurs in the city”.

The fourth-largest startup city in Latin America is Santiago-Valparaíso, while the fifth is Rio de Janeiro.

The report also includes a section on the main regional challengers, which include Bogotá, the Brazilian cities of Curitiba, Belo Horizonte and Porto Alegre, and Guadalajara in Mexico.

Regarding Bogota, the report states that the city’s combined startup value is $9.8 billion, and that such companies in the city enjoy diverse funding sources, including at least 21 venture capital funds and banks, and three angel investor networks.

“This energetic growth of the startup ecosystem was made possible, in part, by the enactment of an entrepreneurship law in January 2021, which eased regulatory burdens on companies and supported the development of local talent by facilitating the founding and growth of startups in the country,” the Startup Genome report states.

Translated from the Spanish by Adam Critchley