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LAVCA in the News

Why the Pope’s Hometown Is Blooming With Startups

25 September 2015

(Inc.) Buenos Aires, Argentina, the hometown of Pope Francis, has been garnering much praise from the start-up community. Argentina’s capital (and largest city) has long fostered the entrepreneurial spirit thanks to its prominent universities, affordability, and a currently rising number of venture capital investments.

Known for its night life and bustling atmosphere, Buenos Aires is a lively metropolis. It also ranked as a runner up on this year’s list of top 20 global startup ecosystems by Compass, a research firm. (The only Latin American city to make the list was São Paulo, Brazil.)

Despite the country’s depressed economy, its stock market has started to see a slow resurgence. Presidential elections slated for next month have the business community feeling more optimistic. Nearly 60 percent of Argentines (ages 18-64) say they consider entrepreneurship as a great career choice, and more than a quarter actually intend to start a business.

“Every candidate running for the new government is proposing changes — some more radical, others small fixes — but all of these candidates’ proposals are more market friendly than the policies applied by the current government,” says Gabriel Marcolongo, a social entrepreneur based in Buenos Aires.

Marcolongo is the co-founder of Incluyeme, an online portal that connects people with disabilities in Latin America to steady employment. The company partners with corporations such as IBM and Accenture.

Incluyeme connects people with disabilities in Latin America to steady employment
To date, Incluyeme has raised about $130,000 in funding from investors like Startup Chile and 500 Startups. While there are plenty of networking opportunities available to Marcolongo in Argentina, he notes that the current economic climate made it nearly impossible to raise capital from home.

A wealth of business resources are available to entrepreneurs in Buenos Aires, ranging from networking events to startup accelerators and research from institutions like Torcuato di Tella University. What the city lacks in funding, it makes up for in outlook.

Here’s a quick look at why small businesses tango — even when the economy can’t — in Argentina’s capital city:

1. Inexpensive access to tech talent. Buenos Aires houses a number of strong universities, including the University of Buenos Aires, and the University of Palermo. The Buenos Aires Institute of Technology (ITDBA) is frequently regarded as one of the best engineering schools in Latin America. The school graduates about 200 students each year.

Marcolongo notes that most of his students at the National Technology University, where he also teaches a course on entrepreneurship, are already working part-time for local businesses. Roughly half are also preparing to launch their own startups.

“There’s a lot of talent coming from the local universities, and this talent is very well-appreciated globally,” he says. Argentine developers make a sizeable salary compared to tech hires in other developing nations.

Tech-savvy talent in Buenos Aires comes at a cheaper price point than it would in, say, in Silicon Alley. Overall, Argentina’s floundering economy makes the capital city affordable for entrepreneur, where you can launch a business with fewer than $300 U.S. dollars (2,500 Argentine pesos).

2. The number of VC investments is rising.
Venture capital is on the rise in Latin America, peaking at about $7.9 billion (VC and private equity combined) over 306 deals in 2014, according to recent data from the Latin American Private Equity & Venture Capital Association. That’s a 31 percent increase in the volume of deals, though an 11 percent decrease in the amount invested since 2013.

Though plenty of firms based in Buenos Aires, like NXTP Labs and Kaszek Ventures, are investing in Argentine startups, the country’s VC scene is paltry compared to its Northern neighbors (namely, Brazil). It accounts for just 8 percent of fund managers in the region, while Brazil heralds more than half (53 percent.) Last year, just over $32 million was invested over 26 deals in Argentina.

“Argentina is a very contrarian and complex market. From a macro-economic perspective, it’s one of the most difficult places to invest in,” says Cate Ambrose, LAVCA’s president and executive director. Despite the challenging economic climate, however, she says that Argentina has seen more tech innovation than any other country in Latin America.

Mercado Libre, for example, is viewed as the eBay of Latin America. After going public on the NYSE in 2007 (eight years after launching in Buenos Aries), the company has redefined e-commerce in the region. Today, Mercado Libre still runs strong; in the second quarter of 2015, it raked in net revenues of more than $154 million.

Business owners are increasingly optimistic that the next administration in Argentina will spark a change. What’s more, Ambrose notes that entrepreneurs in the country are by far more creative than any of their Latin American neighbors.

Hot sectors in Buenos Aries include financial technology, mobile gaming, and e-commerce. Ambrose is confident that as the infrastructure to support these ventures grows, so too will investments and exit values.

3. An extremely supportive community.
Startups receive a considerable amount of support from the local community. In 2014, the city of Buenos Aires invested as much as $28 million pesos ($3.5 million USD) in nascent Argentine companies. Funds went into local accelerators, rather than select businesses.

“The idea is a pilot test with a seed capital program to make investments. The model is Israeli and has been copied in other countries, where the state doesn’t decide which projects to invest in, but instead supports the decision of someone with more know-how,” said Mariano Mayer, the general manager of entrepreneurs at the city of Buenos Aires government, in an interview with PulsoSocial last year.

Accelerators like Startup Buenos Aries, Palermo Valley, Endeavor and Wayra were created to help entrepreneurs get their companies off the ground.

The risk-taking spirit is infectious in Buenos Aries, arguably, because it has to be. “We are very used to a changing environment,” Marcolongo tells me. “We are prepared to take risks.”

Argentine entrepreneurs also possess remarkable grit. They launch companies with the aim of going global as soon as possible to avoid being stymied by the national economy. Already, just two years after launching in Argentina, Incluyeme operates in eight countries.

The potential payoff has worth it for Marcolongo. Roughly 50 million people have disabilities in Latin America and the Caribbean, and as many as 80 percent are unemployed or outside of the workforce, according to the World Bank.

So far, Inclueyme has succesfully employed roughly 200 people. Marcolongo estimates that the figure could be far higher, since many companies won’t disclose how many employees with disabilities they’ve hired.