As recently as the turn of the century, conventional wisdom had it that the tropical, Andean nation was on the verge of becoming a failed state. Fast forward to the present day and Colombia already boasts one of the region’s stronger startup ecosystems, with huge potential upside still waiting to be explored.
By 2018, the government hopes to have 63 percent of the country connected to broadband. And according to 2013 GSMA mobile economy figures, there are already 43.9 million mobile connections and 24 million mobile users in a country whose 47 million people give it the third largest population in Latin America and third largest Spanish-speaking population in the world.
These and other figures are highly encouraging for people looking to tap a rapidly growing market, and it follows that a stronger internal tech culture will also form the groundwork for Colombia’s own aspirations in the field of innovation.
Laying the Foundation
The first stage of the government’s concerted campaign to rebrand Colombia as a technology center involved drawing in IT services with tax incentives and professional training programs. A $6.8 billion industry has taken strong root as a result, with 1,800 software development and IT service companies registered in the country. Looking forward, the hope is that IT, and the investments that went into promoting it, can diversify into a broader innovation ecosystem.
With that in mind, the government has spurred a number of public initiatives to address the lack of venture capital in Colombia, currently the biggest ceiling on startup growth. Founded to support and promote tech innovation and new ventures, iNNpulsa awarded three grants of up to $800,000 in 2013 to investor groups establishing operations in Colombia.
Apps.co is another, more tech-specific, government initiative. By the end of 2014, it’s expected to have awarded $33 million in funding to accelerators and university partnership programs, according to the Atlantic.
Where once there was nothing of the sort, there are now 38 private equity, venture capital or seed funds in the country.
These and other efforts have succeeded in convincing big names like Facebook and Google that a favorable labor market and budding consumer base are worth investing in, with both companies opening permanent Colombian offices in recent years. Where the government’s strategy has so far fallen short, however, is in replicating that sort of international success for homegrown Colombian companies.
Examples of Colombian startups making a similar leap, or achieving sizable exits at all, are few and far between. .CO is easily Colombia’s biggest startup success story, having been acquired by Neustar for $109 million in 2014. But after that, the field gets noticeably thin.
PagosOnline, an online payment platform, and Click Delivery, an online delivery service, have probably come closer than anyone else to following in .CO’s footsteps, and even so, the acquisitions went for a rumored $10 million and $15 million, respectively.
The problem is that, while the startup scene is maturing, the investment economy backing it is still in its beginning stages.
“It’s good to see that the government is willing to stand behind innovation and recognizes that entrepreneurship is the motor of a successful economy,”Michael Puscar, a successful venture capitalist, explains. “But everyone, including the government, recognizes that public funding can’t replace private initiatives in the long run, and especially not in a fast-paced business climate like the kind startups live in.”
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