There's a particular troublesome characteristic plaguing the entrepreneurial community: most of us entrepreneurs are all positive thinkers, and this leads us to see big opportunities in every corner. And yes! sometimes, those opportunities could mean a lucky hit. However, they could also mean that it is very hard to achieve success.
But, what makes Latin American entrepreneur's pursuits different from any other enterprise around the world? Well, after four years riding the ups and downs of the roller coaster of administrating our start up-ceca in Latin America, it is impossible not to live and suffer in your own flesh what works and doesn't work over the long haul to pursue the Latin American dream. To highlight the peculiarities of this sub region of the Americas, we explain four important facts you need to be aware of before starting-up such a crazy path:
- Immaturity of the market
- Low Internet penetration
- Lack of trust on e-commerce
- Lack of risk capital
These facts seem to be the basis that has been drawing the scenes of Latin America over the past 5 years. The few exceptional companies that made it were those created outside the region with seed capital and growth capital from institutional investors in the US and this is not just a coincidence.
If we took a look at Brazil, Mexico, Argentina, Chile, Colombia and Peru 5 years ago, there was not much in terms of funding for startups, but the good news is that over the last 2 years we have seen a raise in the number of accelerators and over $35M were invested in 2014 according to fundacity. Nowadays, there are approximately 3 or 4 per country; all of them invest in the range of $20K to $50K.
Let's see the most successful cases: Mercado Libre started with a business plan and $5m and Despegar with a business plan and $1m, thus any new start up need to understand that 30K, 50K or 100K that he/she could raise will not last long on their race to conquer the LatAm Dream. In my experiences with our company-ceca you always need more money than what you think. A new entrepreneur could start with an angel investor or try the 3F formula, but with so few cases of success and the high costs of opportunity for the moneylenders it will be very hard to raise money with a decent valuation.
Apart from these particular threats that only Latin American undertakers identify with, there are some other factors that can lead any entrepreneur to fail:
Give up: Risk takers never chicken out. A sense of resilience is a straight way to success. Even if you get a lot of "no's", avoiding the negativity can make the difference between success and failure.
No guide: Don´t ignore the advice of mentors. Although it's fine to avoid negative comments, it is important to be open-minded and take the advice of those entrepreneurs who have more experience than you.
Erroneous team: bringing the wrong partners can lead to failure. The members of your team should be as passionate as you about the business. They should know that being part of a startup implies moving fast. As Aaron Goodin said in the articleThe Secret to Building a Successful Startup? Finding the Right Team, in a startupeveryone moves quickly and just a few are doing the job of many, so you need to build a team that can work together for the greater good.
Well, so far we described some negative aspects about starting up a business in Latin America. Don't panic. There are some good news: if you make it, you will be one of the few, and from what we see in those who made it, it seems that this side of the world has the doors always open. Those who made it became sort of kings and they, by default, became part of most of the new prominent start-ups.
My learnings in my entreprenurial venture-ceca is that being an entrepreneur is about taking risks. These are hard facts to absorb. However, because of the 588 million people on this side of the world, it is really worth the challenge. At the end, it is all about to PROOF (Perseverance, resilience, obstinacy, obsession and faith) to yourself and to others that you have what it takes to make it work, no matter how hard or how long it takes.