With a lackluster U.S. economic recovery, a limping Europe, (and a backsliding southern Europe), and Asia slowing down - Latin America is one the brightest spots in the global economy. In particular, one group of countries—the Pacific-facing ones (Panama, Colombia, Chile, and Peru) - are doing great, and one sector (technology with its entrepreneurial start-ups) is contributing to that growth. Chile has garnered most of the attention with Start-up Chile, a government program that invests $40,000 in entrepreneurs from all over the world that move to Chile to develop and launch their endeavors. But neighboring Peru is also as an emerging hotbed of innovation that is often overlooked by observers.
For most people, Peru is associated with natural resources, tourism (think Machu Picchu), and gastronomy. Yet Peru is coming into its own in fostering an ecosystem of start-ups, joining those in Argentina, Brazil, Chile and Colombia.
In a recent interview in Lima, Juan Francisco Rosas, executive director of Wayra Peru, reports that: “Technology entrepreneurship is experiencing a highly favorable climate for access to venture capital. The past 18 months have seen the emergence of incubators like Wayra that provide $50,000 for each startup we select, as well as government programs like Fidecom and Fyncit.” There is, indeed, an awakening among VCs that high risk investments can also yield very high returns.
Universities are doing their part as well, with entrepreneurship centers, engineering and computing programs, and labs, and long-standing incubators like Lima Valley and organizations like Startup Academy are fostering many more.
Central to Peru’s strategy to grow its tech startup sector is adapting the winning practices of other countries, particularly neighboring ones like Chile and Colombia. From the former, a key success factor is “co-investment” — private capital matched or often doubled from the public sector. This condition, while necessary, is insufficient by itself. As Wayra’s Juan Rosas notes: “Countries like Chile, Peru and Colombia are relatively small for attracting venture capital and private equity. These three nations should think about an integrated ‘regional’ zone for tapping investment, given the competition from large single markets such as Brazil and Mexico.”
In doing so, a number of obstacles must be recognized. Peruvian higher education needs to improve quality, access, and physical infrastructure — especially labs — and faculty and the private sector need to develop a much closer relationship, one that meets the needs of local and multinational technology firms. The availability and ease of access to funding for start-ups are other areas that most be addressed. Finally, the lack of angel investors (there are only ten at present!) must increase by a factor of ten to make a real impact on the entrepreneurial ecosystem in technology.
Nevertheless, Peru indeed possesses some very significant advantages. These include first-rate IT talent, high growth among industries that place a premium on technology and innovation, and a favorable geographic position with neighbors Chile and Colombia that are also faring very well economically and have cultivated excellent talent for their knowledge-based industries.
Peruvian tech startups, valued at over $3 million, were unimaginable 5-10 years ago. Today, notable startups like Cinepapaya, Plaza Points, Arte Manifiesto, Face Me, and Ando Ayudando are garnering attention from investors and consumers and making their mark in the marketplace. Cinepapaya – a website that displays movie times and allows visitors to buy tickets online - has been a particular darling of investors. Presenting at FIU’s third Americas Venture Capital Conference and the first Wayra Global Demo Day — both held last December — Cinepapaya has raised funding from 500 Startups and has its eye on markets beyond its border.
As is common with other nations, government plays an important role in Peru, as well. Late last year the Ministry for Industry announced plans to allocate $20 million for a fund to assist technology startups get off the ground. Peru hopes that spreading the word on campuses (targeting science, math and engineering students) and promoting Peru’s technology ecosystem regionally and globally will achieve the intended results.
For technology startups in Peru, the future is bright – as it is for the economy overall. One can only hope there will be many more Cinepapayas on the horizon. Start-ups and later-stage firms will emerge and thrive in South America’s nascent but fast-growing technological environment. Peru will surely be a major player.
Jerry Haar is associate dean, professor, and director of the Pino Global Entrepreneurship Center in FIU’s College of Business.