Exploring the Growing Startup Scene in Latin America

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 nearshore direct.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.

For those who've never had the chance to travel all the way down to Chile, 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 different from us and it's very nice country. We have like desert in the north and 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 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. 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, 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 stirring 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 years before.

Yeah, yeah. One of my favorite topics is food. You already talked about wine. Well, maybe let's start there. Is there a particular wine that is 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 now in the wine industry because 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're very close to the. All the country has coast. So in every part of the country you can have good seafood, like fishes or other types of food. And with a white wine, it's very good. And also like typical foods, like it's called pastel de choclo, that is like a corn, a 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 I did have a completo and 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 and he was like, oh my God, like, this is crazy. Like, the amount of food that we put in, the gobleto 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 two or three hot dogs, but only one. One. One complete though. 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.

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

Yeah, that's great.

Well, the big meat of the conversation that I wanted to talk about today was startups and the this world of startups in Latam. So maybe let's first start off, what is startups Latam? 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'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 received a call from this website that is a news website and that time was called Startups Chilenas. It was all a focus in the Chile ecosystem. Startup, startup ecosystem. And now last year 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 Bogota and also we are trying to like making a new platform so we can have more data. We want to be like the crunch phase 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 two, three years in this part of the world. So it's like a big opportunity to have all in one place and get to show the good news in Latin America and the talent of people here.

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

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

Yeah, I want to start with Chile because that's where the business started. Give a sense of what the ecosystem looks like today. And when you think of startup ecosystems, you're thinking of capital, of course, and investors, you're thinking of talent and engineering talent and product talent especially you're thinking of experience, 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 what does that look like for Chile today?

Yes, I think it's reaching a new level. It's more mature than years before in the sense that now we have great founders that had success. For example, this case, this exit startup that is called Notco and that it's in the States too and it's a unicorn. Now the founder Matthias Mochnik invest in other companies here in Chile or Latin America. The same with another unicorn, Chile unicorn called Corner Shop, that it was bought by Uber. And the founder, it's very active investing in other companies. So that 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 this past two years I have seen a lot of new firms and also like a lot of companies making their own corporate venture capital. So 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 on like talking and investing together with. With the state's vc. So that it's a good sign too. And also like the. The number of founders like yeah, in a lot of 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 than getting into a company 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 Kalander Perkins or Sequoia or maybe there's others that I didn't mention. What is their interaction right now 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 receive money from Tiger Global.

Yeah.

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 signs 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 Bogota, 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 told his story that he was like scrolling Twitter and he found like a post from Anderson Horowitz and he applied. And now Anderson and Horowitz invests in his startup. So it's like huge like these interactions and that's. Anderson and Horowitz is one of the big be seen, the worst.

That's right.

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 in entering to the, 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 Sandreessen would open up an office in Santiago or are there organic VCs 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 Latam 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, for the VC funds go from the States to go to Miami and then meet the founders.

Yeah.

But I don't see a lot of office in here. Like, like maybe past days that it was like necessary to be present to know.

Yeah, yeah, absolutely. I think Zoom, you know, has kind of dismediated it. Yeah, absolutely. How about the stages of fundraising? You know, 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 it was like a record year in Latin America in the number of investments. There 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. Like this year we. I have seen a lot of A series or B, 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 close found for like 14 millions and that's like a, a big number here.

Yeah.

Or 30 millions. But we don't see like rounds like 100 millions. 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 echo, like the mature of the ecosystem. Like there's like these companies that are in a stage that they are trying to grow and scale around the world but they're not like big, they're not yet that big companies to get the money. And of course the global economic context like the VC activity is low than last year in every, of course everywhere. Of course that affects Latin America too. But the important thing I think is that we keep seeing rounds, that it's good for 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 than just like going to go get like pounds 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 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 the types of deal structures and you know, obviously this year Silicon Valley took a blow with Silicon Valley bank going under and you know that was something that didn't quite exist in other markets of creative financing for the tech startup world. You know, things like venture debt, you know that you wouldn't really find in a farming community in the Midwest in the US or something. Did you see anything like that yet in Santiago or is it more the traditional angel seed series A VC type of structures?

I have started to see venture death ponds. It's growing here for example until we have one and like a month ago they closed like a second fund. So that's a good sign that they went, they were good with the first one and now they have the second one and it's 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 of course 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 dev and crowdfunding has been like growing, 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. Which also makes me think about the intersection of friends and family money. You know, like a friends and family round. You know, when you, when you talk about crowdsourcing or you talk about 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, you know, 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 I also seeing like a lot of more older founders that they used to work in like regular industries for a lot of years and like 10, 15 years and now they are like making their own startups. They have seen the potential to be going in the entrepreneurial way and I think that maybe they use their own money and bootstrapping way. So I think 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 this a bootstrapping way. And 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 to A bc.

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. The, the roads like everything is modern with well built. So I imagine there's no shortage of engineers. But maybe a lot of them would normally go to civil engineering or industrial engineering. And we have this conversation a lot in the States. Are the best engineers, are they going to work for banks or tech companies? How is the engineering talent look right now where is it going? Is it keeping up with the demand for the needs of the software companies?

Yes, I think it's growing. Like a lot of engineers are graduating from college. But of course this gap in tech talent is a problem I think around the world, 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. Yes. They're having this like the situation of the gap of talent. 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 six months or five months and you have like this intense education to become more like 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 to for startups because of the benefits like remote work, more vacations, health and I don't know, like you don't have to wear like a tie and a suit every day. So it's like engineers are seeing and are going and choosing to work for startups more.

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

Yes. A lot of like startups at the beginning they offer stock options to, for like to attract, to attract the, the talent. So it's a thing I haven't seen lately. Maybe 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. So we've talked a lot about Chile. What should we think about more broad across the Latam region which is huge and every country has different nuances. But as you're covering a much broader section, what are some of the overall trends that maybe you're seeing that our audience should know about?

Like tech trends?

Yeah, maybe, you know, are you seeing more fintechs versus you know, ag tech versus 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 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 India is the 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 Climatech. The country is like very close to nature like in Patagonia or the north with the Duster. So a lot of climatic 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 Proptex like last year they have like a new unicorn and it was a property. So Colombia is more like propter Delivery apps. Chile, FinTech, Climatech and I don't know Argentina and like software companies or fintechs too. So it's like very different but of course the same.

Yeah, yeah, absolutely. Well, I want to ask some, some alternative questions. They might be a little, little fun, a little goofy. So you're obviously quite well traveled. I would love to know the best purchase you've made 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 Beauty. Yes. Or I in Colombia when I went there last like two 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 Stradivarus 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 purchase that I have done.

Good answer, good answer. How about 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 aguas and gas. Agua con gas. You know, I just think it's so much more fun to say do you have a favorite English word?

No. 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 it's a very nice language.

Great and the last question we have for you today is advice. So we talk to a lot of people, a lot of companies in the States, and we're very bullish on Latin America. You know, we think the 2020s are the decade for Latin America. So a lot of people we talk to in the States are. They haven't worked with Latin America yet, but they want to, and they're very curious. What would be your advice on getting started? You know, how. You know how. How they could be successful?

Yes, I think that, like, companies or like us, people that want to come here has to like, to understand that. Yes, like, we are like 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, like, the work, the climate. Like, I was recently, like, I told you before in Bogota that it was like, like, very, very hot. And here, Chile is 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, like, this big group. So it's like a good advice to know that every country is different. And so making deals and business with people from different countries, from Latin America is different and independence of 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 the Latin America. Well, let me thank our sponsor once Again, Nearshore Direct. Go nearshore direct.com Great way to find talent all across Latin America. I'm Brian Sampson, your host. Thank you again, Sophia, for being here.

Thank you. Thank you. I enjoy being 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 Meoshore Cafe podcast Cast. Tune in next week for a new episode featuring another special guest.