Author: Benedict Mander

Publication: Financial Times

Link to the original article

Argentina: home to the majority of Latin America’s tech unicorns

A global mindset among its entrepreneurs has made Argentina a natural home for fast-growing tech start-ups.


Few economies have performed as poorly over the past century as crisis-plagued Argentina. The nation even has the unique distinction of losing a tenure, albeit a brief one, in the early part of the 20th century as one of the world’s 10 richest nations to become just another developing country.

But Lino Barañao, Argentina’s minister for science, technology and innovation, says a chronically dysfunctional economy has — perversely — almost been beneficial for start-ups. Often having to struggle with double-, sometimes triple-digit inflation as well as all manner of economic controls, necessarily financially savvy Argentines have been forced “to find ways to dodge the rules”, says Barañao. “In many ways that is negative, but it can be good for innovation.”

“There is a rebel spirit in Argentina,” he says, arguing that this has been instilled by waves of ambitious immigrants from Europe and beyond. This has given rise to a diverse and creative population that has benefited from an excellent public education system, as well as some 40 universities and more than 30 research centres.

Barañao was the only minister asked to stay on from the previous administration. In the past decade he has overseen a cultural change in which Argentina’s universities have been shedding a solely academic focus on producing research papers. Students are increasingly encouraged to make prototypes and investigate the feasibility of setting up technology companies. State funding is available for the best proposals.

Indeed, a lack of financing opportunities from the private sector has so far presented one of the biggest challenges. But that may be changing as interest from US venture capital companies grows, thanks to a regulatory system that is more agile than that of the US.

And, after years of a complicated climate for businesses in Argentina, the new government has made important moves in its drive to “normalise” the country. Moreover, says Barañao, “for the first time there is strong co-ordination between the national and city governments”, both of which are focused on promoting Buenos Aires as a technology hub.

The market in Argentina itself is relatively small, but that has bred a more global mindset among its entrepreneurs than in countries such as Brazil or Mexico, where they concentrate on servicing their own huge markets. Perhaps it is unsurprising, then, that four of Latin America’s six “unicorns” — tech start-ups now valued at more than $1bn — emerged in Argentina.


Founded 2003
Genesis Four friends came up with an idea in an Irish pub in central Buenos Aires after they lost their jobs in the 2001 crash
Value $1.7bn

Globant develops software for big companies mainly in the US and the UK. Its exclusive focus on emerging technologies, as opposed to traditional IT companies, has driven rapid growth and earned the company a reputation as one of Latin America’s most innovative businesses.

The company aims to build and improve what it calls “digital journeys” for consumers, enabling its clients to engage better with their users through highly targeted and fast-evolving technologies such as big data.The domestic market is relatively small, but that has bred a more global mindset.

Globant’s first client was UK travel website and in 2006 it became the first tech company to secure a contract with Google, helping it to build an impressive client portfolio that includes Coca-Cola, Disney, LinkedIn, Fifa and NatGeo.

In 2014, Globant became the region’s first software company to float on the New York Stock Exchange. Since then its share price has quadrupled. Based in Buenos Aires, it has offices across Argentina and in 12 countries.

Chief executive and co-founder Martín Migoya, who likes to call his 5,200 employees “globers”, says he is following in the tradition of Silicon Valley’s most successful companies to combine engineering, innovation and world-class design with scale.


Founded 1999
Genesis Co-founder Marcos Galperín delivered his pitch to John Muse, a private equity fund founder he was driving to the airport. Muse had just given a talk to Galperin’s class at Stanford University
Value $6.5bn

MercadoLibre, Latin America’s answer to eBay, is the region’s most visited ecommerce website. A household name across Latin America, it is the region’s only internet company listed on Nasdaq.

After surviving the 2000 dotcom crash thanks to co-founder Marcos Galperín’s ability to raise financial support, the company swiftly caught the attention of eBay. The US giant acquired a 19.5 per cent stake in exchange for its Brazilian subsidiary pledging not to return to Latin America for at least five years.

That cleared the way for MercadoLibre’s rapid expansion, executing a timely initial public offering in August 2007, helping it to weather the global financial crisis that was setting in at exactly the same time.

Now one of Argentina’s biggest companies and with a market capitalisation of more than $6.5bn, each year MercadoLibre matches 30m buyers and sellers (about 5 per cent of the region’s population) of anything from computers to cars. The site boasts a gross annual merchandise volume of some $8bn.

But Galperín, who is MercadoLibre’s chief executive and its biggest shareholder, reckons this is “minuscule” compared with the growth he expects in the next 20 years, as more and more Latin Americans gain access to the internet and broadband penetration deepens.

Founded 1999
Genesis After meeting at Fuqua business school in the US, the founders put together the Despegar idea via email
Annual revenues $4bn, from the verb “to take off”, is Latin America’s largest online travel agent and the fifth-largest in the world, operating throughout the region, as well as the US and Spain. Its biggest market is Brazil, where it has an important subsidiary,

The site allows leisure and business travellers to research and book airline tickets, hotel rooms, rental cars, holiday packages, cruises and tourist attractions., the world’s biggest online travel agent, paid $270m last year for a 16 per cent stake, deepening a commercial relationship in which the two companies already shared customers.

Co-founder and chief executive Roberto Souviron recently announced plans to launch an IPO on Nasdaq by 2017, selling about 10 per cent of the company’s shares.

Sales of $4bn are expected this year, but Souviron believes they could double over the next five years and triple over the next 10. Only a fifth of airline tickets are currently sold online in Latin America, compared with about half in the US. Like MercadoLibre, the company stands to benefit from increased and faster broadband access in the region.

Alec Oxenford says OLX took the ‘Martian approach’, targeting foreign markets before the Argentine one.


Founded 2006
Genesis The co-founders first talked about the business while hiking Argentina’s Perito Moreno glacier

OLX is one of the world’s leading online classifieds companies. Like its Craigslist inspiration, OLX — the initials stem from “online exchange” — connects people buying and selling second-hand goods, as well as job- and home-hunters. Only a fifth of airline tickets are sold online in Latin America, compared with half in the US.

Co-founder Alec Oxenford has described the company’s growth strategy as the “Martian approach”: launching first in foreign markets perceived as having the fastest growth potential — India, Brazil and Kenya, for example — leaving the Argentine market for several years later.

In 2010 South African media conglomerate Naspers acquired a 67.8 per cent stake in the company, since increased to 95 per cent. When Naspers consolidated its online classified services in Indonesia, Thailand, the Philippines, Poland, Bulgaria and Romania under the OLX brand, OLX became one of the world’s biggest internet brands developed outside Silicon Valley.

The online platform for consumer-to-consumer trade is now used in more than 45 countries — mostly emerging rather than developed markets — and boasts more than 300m users every month.

Laurie Aoustin

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