🌎 Exploring Startups in LATAM 💻 Business Growth Trends | 🎙 The Nearshore Cafe Podcast

Welcome to the Nearshore Cafe Podcast, home to the most interesting stories and people doing business in Latin America.

Welcome everyone to another episode of the Nearshore Cafe Podcast. Today's podcast is sponsored by Nearshore Direct. Go nearshoredirect.com, a great way to find talent all over Latin America. I have been looking forward to this episode for weeks now. We are so excited to have Sophia Newman, co-founder and chief editor of Startups Latam. Sophia, welcome to the show.

Thank you.

Sophia, let's maybe first just set the scene. Where are you based today?

Yes, I'm based in Santiago de Chile. Yeah.

And for those who've never had the chance to travel all the way down to Chile, What, what should people know about the country and the city of Santiago?

Yes, well, Chile, it's a very large country. That's like a thing that it's like different from, from us, and it's very nice country. We have like desert in the north and like forest in the Patagonia in the south. So it's very like different across the country and it's a beautiful country. Of course, I think that everybody knows that Chile, it's like a place of wine. And yeah, but of course now it's like a, this scene from founders and startup is very, it's growing here in Chile too. So I think that's a very like a new characteristic from Chile. And now we are at winter, so it's really cold, and not like in Chicago or other places where it snows, but here it's cold and it's winter. So we are expecting for the summer to come soon.

Now, winter in Santiago, um, I imagine, you know, the mountains have snow on them. Is there snow on the street too, or is it more like rainy weather?

How would you describe It's like cold weather and sometimes it rains, but not that much. And like last year it snowed. We had snow a little bit, but just in like the mountains and certain like zones of the city, like the ones that are closer to the mountains. But usually we just have like a really cold winter with no so many rains because we're also like Of course, the climate change, the rain is not like, like years before.

Yeah, yeah. Um, one of my favorite topics is food. You already talked about wine. Um, well, maybe let's start there. Uh, is there a particular wine that is, um, that Chile is known for?

Yes, I think that is a wine called Montes, and it's like very popular And it's because it's like known in the wine industry because it has won a lot of awards. And last year I went to like this part of Chile that it's called Valle de Colchagua, where you can go and stay for a weekend and be near to all the vineyards and go to have a tour. So that's pretty awesome. And I went to this vineyard, and it was amazing. Like, they had this, like, very good restaurant inside the vineyard, and then you had the tour and drink a lot of wine. That, of course, amazing.

Amazing. It sounds a lot like, for those in California, a lot like the Napa, Sonoma with the wine tour. That sounds awesome with the vineyards. And what, what goes, what goes well with that type of wine? What kind of food?

Yes, we have a lot of types of food. Like, there's meat, of course, and people in Chile eat a lot of meat, but also like seafood. Like, we have— we are very close to the— all the country has coast, so, um, in every part of the country you can have good seafood like fishes. Or other types of food, and with white wine it's very good. And also like typical foods, like, um, it's called pastel de choclo, that it's like a corn cake with meat that is very good. And another like fast food, like completos, that is like a hot dog but more like big and with more things to put in.

Yeah, I have to say, I think in one of my trips, uh, I did have a completo and, uh, oh my gosh, it was like an enormous sandwich. There was mayonnaise and everything on there. Yeah, it was no joke.

Yeah, I always remember that when I saw a chapter of Anthony Bourdain's when he came to Chile and he tried the completo. He was like, oh my God, like, this is crazy. Like the amount of food that we put in the completo with avocado, tomato, and other things. And it's huge. Like it's very large. So yes.

Yeah, it was, it was a meal. Yeah. Usually in the States, you know, I'll have like, I can, I'm a bigger guy. I can have 2 or 3 hot dogs, but only one, one, one completo and I was complete.

Yes. When I was in the States last year, I tried my first hot dog from there and it was like very disappointing compared to completo.

It's like, where's the rest of it?

This is it.

That's great. Well, the big meat of the conversation that I wanted to talk about today was startups and this world of startups in LATAM. Uh, so maybe, um, let's first start off. What is Startups Latam? Tell us, tell us about this organization that you co-founded and how it all got started.

Yes, of course. Well, I was— when I graduated from college, I started— I'm a journalist, so I started working in newspapers and the innovation area, and I started like getting in touch with the startups ecosystem and venture capital. This was in 2018, so I didn't know anything about it before, and I started like getting to know this, this industry. And then I was in another newspaper writing about these topics. In 2021, I, I received a call from this website that is a news website, and that time was called Startups Chilenas. It was all the focus in the Chile ecosystem, startup ecosystem. And now last year we, we start not just focusing in Chile, in all of Latin American startups. And what we do is that we have like a news website where we write about what's happening in different places of Latin America. Like news. And also we make events, networking events in different points of Latin America. We were recently in Bogotá.

Yeah.

And also we are trying to like making a new platform so we can have more data. We want to be like the Crunchbase of Latin America. That is a big opportunity. To collect and have in like just one place all the news and all the data that it's like growing a lot recently. Like the number of founders and startups and venture capitalists is like going crazy the last 2, 3 years in, in this part of the world. So it's like a big opportunity to have all in one place and give to like, uh, to show the, the good news in Latin America and the talent of, of people here.

Absolutely, absolutely. Um, let's, uh, plug that website for our audience. Where can they find the website right now?

Yes, it's startupslatam.com, and also we have a big, big community on LinkedIn, and you can find us like Startups Latam. It's like a purple logo. And yes, we have like 61,000 followers. So we're growing every day and we post everything on LinkedIn, all the news. And, or we have like podcasts like this too. So you can hear it there and YouTube, our YouTube channel too. So. Like making content to, to show the talent and what's happening in the Latin American startup ecosystem.

Yeah, I want to start with Chile because that's where, where the business started. Give a sense of what the ecosystem looks like today. You know, and when you think of startup ecosystems, you're thinking of of capital, of course, and investors. You're thinking of talent and engineering talent and product talent especially. You're thinking of experience, you know, people who've had success and then they stay and recycle and mentor. And of course, there's other things that make an ecosystem, but, you know, what does that look like for Chile today?

Yes, I think it's reaching a new, like, level. It's more mature than years before in the sense that now we have, like, great founders that had success. For example, this, this case, this exit, um, a startup that is called Notco, and that it's in the States too, and it's a unicorn. Now the founder, Matthias Mocznik, invest in other companies here in Chile or Latin America. The same with another unicorn, a Chilean unicorn called Corner Shop, that it was bought by Uber. And the founder is very active investing in other companies. So that's the, the thing that founders that reach success and now they're like giving a hand back to the ecosystem, I think it's like a show that it's very mature, that's growing, and it's getting more mature, the ecosystem. Also, the number of venture capital firms are growing. Like, these past 2 years, I have seen a lot of new firms and also, like, a lot of companies making their own corporate venture capital. So the, the capital is growing. Of course, not like be like funds with millions of dollars are more, are smaller, but it's a good sign. And there are also like going on rounds of capital rounds with VCs from the States, so like talking and investing together with, with the States VCs. So that is a good sign too. And also like the number of founders, like, yeah, in a lot of um, interest on people that, I don't know, they, they're starting to build new companies, and if they fail, they start a new one. Like, the culture of entrepreneurs, like, it's getting bigger, and more people are choosing to build a startup, to, to get in the entrepreneur way, then getting into a company like a, like a worker.

Yeah. When you talked about some of the VCs, say, from the States, like the ones we might know of, like Andreessen Horowitz or Kleiner Perkins or Sequoia, or maybe there's others that I didn't mention. What is their interaction right now with, with the Chile startup scene?

Yes, there's a lot of like these big VC funds that have invested in Chilean companies. For example, I think that Notco received money from Tiger Global.

Yeah, yeah.

And, uh, or others. So like these big VC funds are watching the Chilean ecosystem and investing with these other more local firms. So that's like a good size so the local investment can learn from the industry that is more mature in the States. And also it's not just in Chile, it's like all over from Latin America. For example, in Bogotá, when we were making an event in June, in May, we met this guy that is a founder from startup called Juno. And he, he tell, told his story that he was like scrolling Twitter and he found like a post from Andreessen Horowitz and he applied and now Andreessen Horowitz invest in his startup. So it's like huge, like these interactions and, and that's Andreessen Horowitz is one of the, the big VC in the world. He invests in a Colombian startup, it's a great sign for other founders and like, I don't know, family offices that are also like looking and getting to trying to invest and entering to this industry.

Yeah. Now take Chile, for example. I'm quite interested in the venture capital arm of this. Are you seeing more like, say, Andreessen would open up an office in Santiago, or are there organic VCs in, in Santiago, you know, maybe from like founders that have exited, or, you know, or like you said, the family offices? What's maybe more common today? What do you see?

I see that maybe there's people like coming for a few weeks and like making a tour from Santiago startup ecosystem or Latin ecosystem, but it's not like the old times, maybe before pandemic, that they had to have an office in Santiago to make deals. So I think it's more remote. And also that is like this big wave of founders going to, I don't know, Miami. There's a lot of Latin American startups going to Miami and then maybe it's easy for the VC funds from the States to go to Miami and then meet the founders. But I don't see a lot of office in here, like maybe past days that it was necessary to be present to know.

Yeah, absolutely. I think Zoom has kind of disseminated it. Yeah, absolutely. How about the, the stages of fundraising? You know, as, as you know, maybe Santiago is not quite where Silicon Valley is. So are you seeing more like early to mid-stage rounds or are there also later stage larger rounds happening?

Yes. Like in 2021, that was like a record year. In Latin America in the number of investments, they were like a large in late stages round, like a C or maybe D rounds.

Yeah.

But now it's been like lower because of the, of course, global context.

Of course.

Like this year, we, I have seen a lot of A series or B, or even C, but not like late stage, like in the Silicon Valley ecosystem that it's very, very like millions of dollars. Here's like, I don't know, yesterday or this week, a startup, um, closed a fund for like $14 million. And that's like a, a big number here. Yeah, yeah. Or $30 million, but we don't see like rounds like $100 million. That doesn't— that is not very common here yet.

Yeah. Now, would you say part of that is because of the price of labor? Is that, is that a component of that? Or is there something else that's impacting the size of the rounds?

No, I think it's One, like the eco— like the mature of the ecosystem. Like, there's like these companies that, you know, are in a stage that they are trying to grow and scale around the world, but they're not like big, big— they're not yet that big companies to get the money. And of course, the, the global economic context, like the, the, the, the VC activity is low than last year in every—

of course, everywhere.

Yeah, of course that affects, um, Latin America too. Um, but the important thing I think is that we keep seeing, uh, rounds that it's good for like motivating other founders that are like holding and like keep reaching to VC funds. And also it's very good because last, this last year we have been very common with the bootstrapping term and bootstrap founders are like growing and preferring maybe that way that just like going to go get like funds in very early stage. They are like going when they are like more stable and like making sales. Like in 2021, a lot of startups that didn't have anything, um, get like, got like a million pounds. So now it's like more, more stable startups that are looking for capital.

Yeah, yeah, absolutely. You know, it also got me thinking about, um, the types of deal structures. And, you know, obviously this year Silicon Valley took a blow with Silicon Valley Bank.

Yes.

Going under. And, you know, that was something that didn't quite exist in other markets of creative financing for, for the start, for the tech startup world, you know, things like venture debt, you know, that you wouldn't really find, you know, in like a farming community in the Midwest in the US or something. Right. Did you see, you know, anything like that yet in Santiago, or is it more of the traditional, you know, angel seed, you know, Series A VC type of structures?

I have started to see like venture debt funds, like it's growing here. For example, in Chile we have one. And like a month ago, they, they closed like a second fund. So that's a good sign that, yeah, and they went— they were good with the first one and now they have the second one. And it's, uh, startups are, I think, like looking this other ways of getting the money, or also crowdfunding that is being here like a long time, but it's now like another way that, that founders are looking more, like more crowdfunding platforms. Um, of course, um, angel investors, but there's no like the amount of money that founders maybe need. They don't have that kind of money. But yes, venture debt and crowdfunding has been like growing, growing here.

Yeah.

So that's a good, good sign that another way to get to look for investments.

Yeah. Now you hit on something really interesting earlier around that it's maybe more acceptable to start a startup, fail, do another one. And not every culture around the world is, you know, is okay with that. Um, which also makes me think about the intersection of friends and family money, you know, like a friends and family round. Um, you know, when you, uh, um, when you talk about crowdsourcing or you talk about, um, uh, where do you go first, right? You know, do you just bootstrap because you don't want to fail your friends and family, or are they, you know, um How common is that and like what is the impact of the culture right now?

I think that a lot of founders maybe are using like, it depends of course like the state and the age of the founder because like maybe in the college graduates that are like very involved in this world and wants to make something. They go to friends and family. But we, I am also seeing like a lot of more older founders that they used to work in like, like regular industries for a lot of years and like 10, 15 years. And now they are like making their own startups because they have seen the potential to make, be going in the entrepreneur way. So, and I think that maybe there they use their own money and bootstrapping way. So I think it depends on the stage of the founder, like the age, but I have seen both. Like, of course, friends and family is like, it's always there, but also these bootstrapping way. And it's fair, it's getting to like being like seen a lot more than last year's, like that the founders were always like, we have to get money from VC funds. And now it's like, no, we have to get like a stable business model and start selling. And then we have more like arguments to go and present the pitch to, uh, to ABC.

Yeah, yeah. I wanted to talk about talent. So for those that haven't been to Santiago, at least, this is a modern, glimmering city with beautiful skyscrapers. The subway is like right on par with something you'd see in Singapore. Um, the, um, the roads, like everything is modern, well-built. Um, so I imagine, uh, there's no shortage of engineers, but, um, maybe a lot of them, uh, would normally go to civil engineering or industrial engineering. Um, you know, and we, we have this, uh, uh, conversation a lot, uh, in the States, you know, are the best engineers, are they going to work for banks or tech companies? Right. Um, how, how is the engineering talent, um, look right now? Where is it going? Is it keeping up with the demand for, for the, the needs of the software companies?

Yes, I think it's growing. Like a lot of engineers are like graduating from college, um, but of course like this gap in tech talent, it's a problem I think around the world. Like in a lot of countries, I don't know, I know that in the States or other parts of the country, they hire pretty people from LATAM because they're having this, like, the situation of the gap of talent. And so I think it's a problem around the world, and of course in Chile is that too. But the talent, it's like growing, and there's a lot of boot camps that when you are already graduate, there's more people like getting into these programs that there are like 6 months or 5 months and you have like this intense education to become more like a TI, IT, tech talent. So there's a lot of that. And I think the, like the talent that we have right now is choosing a lot of going to work for startups because of the benefits, like remote work, more vacations. Yeah. And help. And I don't know, like, you don't have to wear like a tie and a suit every day.

Yeah.

So it's like, um, like engineers are seeing and are going and choosing to work for startups more.

Yeah. Uh, I also wanted to ask you, as you talked about compensation and benefits, um, stock options, is that, is that a thing in America too?

Yes, a lot of like startups, um, at the beginning they offer stock options to, for like, um, to try to attract the, the talent. So it's a thing I haven't seen lately. Maybe it was more like the past few years because every startup was hiring people. Like, there was like this Crazy in LinkedIn. I have, I had seen like a lot of business, like job alerts, but now with the, the startups don't have like the amount of money they used to have. So the hiring, it's of course not, that's not that intense anymore.

Yeah. Yeah. Interesting. Interesting. Um, so we've talked a lot about Chile. Um, what should we think about more broad, you know, across the LATAM region, which, you know, is huge and every country has different nuances, but, um, as you're covering a much broader section, what are some of the overall trends that maybe you're seeing, um, that our audience should know about?

Like tech trends here?

Like, yeah, maybe, um, you know, are you seeing more fintechs versus, you know, agtech versus, um, all the money's going to Mexico? Or, you know, what are you, what are you seeing?

Yes, I think that here in Chile we have a lot of fintechs, uh, and they are like going to other countries, so it's like a good industry to, to make a startup. And also, like, the fintech industry is the first one to, to— and there is the more, most attractive one for VC. So a lot of fintechs, a lot of food techs here in Chile. And also, I think we have like an opportunity on like founding climate tech. Because the country is like very close to nature, like in Patagonia or the north with the desert. So a lot of climate tech like had an opportunity to, to build things and to try like in the field with, with the— in Chile and around LATAM. I don't know, for example, Colombia, it's very has a lot of delivery apps and like Rappi, the unicorn. So that's very— or PropTechs, like last year they have like a new unicorn and it was a PropTech. So Colombia is more like PropTech, delivery apps. Chile, FinTech, ClimateTech. Um, I don't know, Argentina, uh, like software companies. or fintechs too. So it's like very, uh, different, but of course the, the same at the end. Yeah.

Yeah, absolutely. Um, well, I wanna ask, uh, some, uh, uh, some alternative questions that might be a little, a little fun, a little goofy. Um, so, uh, you're obviously quite well traveled. Um, I would love to know the best purchase you've made, uh, for under $50 outside of Chile.

Okay, in Latin America?

It could be the States, Latin America, anywhere in the world. Just has to be outside of Chile.

I think in the States, like makeup and skincare products. When I go there, like going crazy at Sephora or Ulta Beauty. And yes, or I, in Colombia, when I went there last, like, 2 weeks ago, like, the food was very cheap and they have like a lot of retail stores that we don't have it here in Chile, like Stradivarius or like I don't know, like States stores, they are in Colombia. So that was amazing. And also I went to Argentina last April, and of course the food is really, really cheap, and books too. So those are very good, uh, purchase that I have done.

Good answer, good answer. Um, how about, uh, your favorite English word. So for example, for me, when someone asks me my favorite Spanish word or phrase, I still get a big kick out of just the simple ordering water, like agua sin gas, agua con gas. I just think it's so much more fun to say. Do you have a favorite English word?

Oh, I have to think. I don't know, like, ah, resilience. I think I like that word.

Resilience.

Yes. Or I don't know, I have to think more, but I like English. I don't speak it very well. I'm practicing, but, um, it's a very nice language.

Great. Uh, and the last question we have for you today, um, is advice. So we talked to a lot of people, a lot of companies in the States, and we're, we're very bullish on Latin America. You know, we think the 2020s are the decade for Latin America. So a lot of, a lot of people we talk to in the States are, um, they haven't worked with Latin America yet, uh, but they want to.

Yeah.

Um, and they're very curious. Um, what would be your advice on getting started, you know, how, um, you know, how, how they could be successful?

Yes, I think that like companies or like U.S. people that want to come here has to like to understand that yes, like we are like a, a group of countries that we share a lot of things like Latin America, but Latin America is huge and has different countries too. So Chile is very different from Colombia or from Mexico. It's very, very different, like the cultural, um, like the work, the climate. Like, I was recently, like I told you before, in Bogotá, that it was like, like very, very hot. And here in Chile, it's very cold. So it's very different. And that's a thing that maybe a lot of people outside Latin America that see us like, like every country is same, that, or maybe they don't know that we are different countries that are part of the, like, this big group. So it's like a good advice to know that every culture is different. And so making deals and business with people from different countries from Latin America is, is different. And it depends on the country. And I think that it's good advice.

Good advice. Yeah, good advice. Well, Sophia, what a pleasure. I learned a ton about the startup scene in Chile and overall. Hopefully we can have you back. We'd love to hear more about what's happening, the trends, what's going on in startups across Latin America. Well, let me thank our sponsor once again, Nearshore Direct. Go nearshoredirect.com. Great way to find talent all across Latin America. I'm Brian Samson, your host. Thank you again, Sofia, for being here.

Thank you. Thank you. I enjoyed being in this conversation with you. So yes, I hope I can be back another day.

Awesome. Well, we'll see you again, everybody. Thanks again for listening.

Thanks for joining us at the Nearshore Cafe podcast. Tune in next week for a new episode featuring another special guest.