Entrepreneurship in Peru and Ecuador: ecosystems that have yet to turn startups into unicorns

Latin America has become the cradle of several startups that in the last year – many of them driven by the pandemic – have managed to take that long-awaited leap and become unicorns. This is the case of Ualá, Aleph, Mural or Tienda Nube, from Argentina; Kavak and Clip, from Mexico or Notco, from Chile, which reached a valuation of over US $ 1 billion. And the list of more startups that would be the next unicorns is long. This is demonstrated by an investigation by the venture capital firm ALLVP, which accounts for the club of soonicorn, or Latin American startups with the greatest potential to become unicorns. The report considers companies founded after 2012 with a valuation greater than US $ 100 million or that in their last round of investment have raised more than US $ 20 million of capital. Countries like Brazil, Mexico, Colombia or Chile stand out for having a list of several candidates. However, the story in Ecuador and Peru is different. In the first country they only have one startup aimed at the world of unicorns (the fintech Kushki), while Peru has two options: the edtech Crehana and the Favo food marketplace. And although Argentina follows these Andean countries with four startups, the land of tango is already home to several unicorns, such as the emblematic Mercado Libre and OLX. 

In the case of Ecuador and Peru, Both have ecosystems with similar characteristics that have delayed the generation of unicorn pasta startups. “Ecuador’s entrepreneurial ecosystem is in an initial stage and we are missing some factors to have unicorns or sonicorn companies, in this case. On the one hand, we don’t have as many entrepreneur support organizations such as incubators, climbers, mentoring programs and support programs for the development of knowledge and skills of entrepreneurs, which are so important for their startups to be successful ”, says Justin Schwartz, managing partner of the investment fund Impaqto Capital. On the other hand, the executive says that the venture capital industry is very small. “We only have five venture capital funds of different types, they are all small. Some invest in Ecuador and others in the region. There is definitely an access to capital gap for early-stage startups. Another point is that Ecuador is a small market, a startup cannot be successful or reach the level of a unicorn only with a focus on this country ”, he says. For Mauricio Andújar, CEO and co-founder of the digital transformation agency Liquid, the Peruvian entrepreneurship and innovation ecosystem is immature and still lacks time to reach the level of others, such as the Chilean or Colombian. “In the Chilean ecosystem, Startup Chile and the Production Development Corporation (Corfo) are two government vehicles that have made this dynamic. In Peru, in the last two years – with a pandemic and a political and economic crisis in between – government support has slowed. Programs like ProInnóvate have frozen aid and there are no new generations of nascent ventures and that is worrying. 

There are not so many new ventures coming out and my hypothesis is that it happens because there are not so many incentives for that to happen ”, he says. Additionally, Karen Montjoy, Entrepreneurship and Innovation coordinator of the Innova ESAN incubator, says that tax benefits are also necessary for more investors to invest in the ecosystem, make alliances with incubators and international events that promote entrepreneurship.


SOURCE: America Economy

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