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How Startups Can Best Ride the “VC Wave” in Latin America

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How Startups Can Best Ride the “VC Wave” in Latin America

RagiBurhum, CEO and Cofounder of AmigoCloud, the first collaborative mapping platform, offering intuitive cloud-based dashboards and data collection mobile applications. Ragi has served as a judge for Startup Perú, an initiative by the Peruvian government to propel the startup ecosystem, and continues to be an active participant in both the LatAm and US tech scene.

A tech investment wave is hitting the shores of Latin America, spurring numerous startups to paddle out and ride it.

With a GDP of around $9.5 trillion, bigger than that of India, coupled with a maturing digital and startup ecosystem, the region has recently attracted record levels of venture capital investment, hitting an all time high of $1.1 billion last year – double the amount from 2016.

The new breeding ground for VC activity has even lured in the once-timid players from Silicon Valley and Asia. Twenty-five global VC firms, including Softbank and TPG’s The Rise Fund, made their debut investments in Latin America in 2017. And other top investors, including Govtech Fund, Andreessen Horowitz, Sequoia Capital and Accel Partners, have recently taken their first steps into the region, too.

With VC presence in the region starting to swell, Latin America’s young tech community is faced with an opportunity to carve out a path towards market success. As a Peruvian founder in a tech company which recently acquired $3 million in funding here’s how I believe startups can best take advantage of this primetime to ride the VC wave:

Make the most of local startup ecosystems

The answer to Latin America’s thriving tech scene stems largely from the huge amount of support thrown its way by governments and local universities. Accelerators, incubators and government policies have helped scale up startups across the region from Puerto Rico to Arequipa. However, these platforms have also caught the attention of outside investors. Startups seeking funding and growth avenues would therefore benefit from connecting with a local hub.

There is no shortage of government-run accelerator programs and support systems for startups in Latam. Examples include Start-Up Peru, Brazil’s BNDES, Mexico’s Fund of Funds and Argentina’s IncuBAte. And it’s not just the economic leaders of the region offering these platforms – the tiny Caribbean island of Puerto Rico is a haven for entrepreneurs thanks to a series of tax incentives, and the presence of Parallel18 – a startup accelerator backed by the government and Sebastian Vidal, founder of the renowned Start-Up Chile. It’s five month acceleration program acts as a springboard for innovators and quality startups to connect with local and international VCs.

Events coordinated by local incubators, accelerators and government initiatives are other pathways into courting VCs. Earlier this month, nearly 1,000 entrepreneurs, investors and corporate and government representatives met in Lima for the Peru Venture Capital Conference – the county’s largest entrepreneurial capital event. This, in fact, is where we announced our recent $3 million deal from a private investor, and where many other startups had the opportunity to secure revenue deals, too.

Address a local problem

Investors with their eyes set on Latin America are often drawn to tech startups using fresh ideas to fix problems the region has faced for decades. Startups tuned in to education, sustainable growth or using tech to close the region’s inequality gap are particularly popular among large investors.

Fintech startup Nubank recently raised $330 million from six seed funding rounds. In 2014, Nubank was Sequoia Capital’s first investment in Brazil when it led a $14.3 million round. Now one of the leading fintech companies in Latin America, this Brazilian digital and branchless credit card company is offering traditional financing, with no fees, to the unbanked. Almost half of Latam’s population remains unbanked which has fostered a huge structural demand for financial services. Fintech startups addressing the regions informal economy has drawn in significant investments – almost $600 million last year.

Educational startups, specifically those cultivating coding and computer science skills to close Latin America’s skills gap have also been riding the investment wave. Laboratoria, a Peruvian startup which teaches coding courses to low-income women has recently expanded into Mexico and Chile. More than 1,000 women have graduated from the program and gone on to work in technology. One alumni, in fact, is now working for AmigoCloud as a UI Designer in our Peruvian office. Laboratoria has received recognition from Barack Obama and Mark Zuckerberg and last year secured a $750 thousand round led by Google.

Startups that don’t actively tackle a social problem in the region are, of course, not excluded from the arms of investors. Remedying business operations, poor infrastructure, agricultural productivity or simply creating more jobs in local communities can also warrant investment interest.

Rappi, for example, is a food delivery service operating in Colombia, Mexico and Brazil and is well and truly riding the LatAm VC wave. This year, DST Global led a $200+ million financing with participation from existing investors in the company Sequoia and Andreessen Horowitz. Rappi employs thousands of couriers who are able to make as much as double the minimum wage (below $300 a month in Colombia) thanks to such high delivery demand.

Hire local talent

Startups that focus their resources on bringing in outside talent or crossing into new markets immediately will not necessarily entice VCs. Instead, investors are more inclined towards startups with a set of competent and demanding local clients as well as a strong base of local employees.

There is an abundance of tech talent in Latin America, so much so that the region has become a number one destination for offshore services. Not only is this talent cheaper, but hiring local employees accentuates the startup’s culture and ensures the whole team is extremely aware of the local market and tuned in to the problem the startup is trying to solve. At AmigoCloud we have benefited hugely from Peru’s local tech talent and have a team of top notch software engineers in Arequipa and Lima. Peruvian, and South American universities in general, have created world class Computer Science Programs, allowing startups in the region to hire the same level of talent, and who hold the same amount of skills and knowledge as those graduating from American and European programs.

Besides the founding of two venture capitalist firms, VOX Capital in Brazil and NXTP Labs in Argentina, Latin America has long been ignored by investors. Now, we are seeing a shift as VCs approach the regions numerous promising startups. Even China has turned its capital towards various Latin American countries – Didi Chuxing participated in a $200M funding round for Brazilian rideshare 99. A maturing entrepreneurial scene and boost in accelerators and incubators has created a fertile ground for these VCs to enter into Latin America with ease. As the appetite to invest continues to grow, startups should consider these three areas to make the most of this burgeoning opportunity.

Business

Running boom to help Puma recover after slow start

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Running boom to help Puma recover after slow start 1

By Emma Thomasson

BERLIN (Reuters) – German sportswear company Puma expects the financial impact from coronavirus lockdowns to last well into the second quarter, but believes global growth in running should help to support a strong improvement after that.

“We clearly see a running boom in the whole world,” Chief Executive Bjorn Gulden told journalists, noting that yoga and other outdoor activities are also doing well. He expects the healthy living trend to continue even after the pandemic.

Gulden said his optimism is underlined by the fact that orders for 2021 are up almost 30% compared to a year ago, with bookings for running products particularly high.

However, there is still uncertainty about when lockdowns in Europe will end, with about half of the stores selling its products currently closed in its home region.

For the full year, Puma expects at least a moderate increase in sales in constant currency, with an upside potential, and a significant improvement for both its operating and net profit compared with 2020.

Shares in Puma were down 2.9% at 1100 GMT.

“The wording on outlook looks softer than we had anticipated, even by Puma’s cautious standards,” said Jefferies analyst James Grzinic.

Gulden noted that a shortage of shipping containers bringing products made in Asia would impact margins, with freight rates likely to double in the next 12 months.

Puma will put a stronger focus on the women’s market in future, Gulden said, creating shoes better modelled to female feet for running and soccer and capitalising on partnerships with celebrities like singer Dua Lipa and model Cara Delevingne.

Gulden admitted Puma had been slow in creating its own app, but it plans to launch one towards the end of the year, further supporting online sales, which grew by 63% in 2020.

Rival Nike in December raised its full-year sales forecast after demand for outdoor sportswear drove an 84% surge in online sales.

Gulden said he is hopeful that the Olympics will go ahead in Japan and the European soccer championship will also take place after both were postponed from 2020.

($1 = 0.8226 euros)

(Reporting by Emma Thomasson; Editing by Mark Potter and Keith Weir)

 

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion 2

(Reuters) – Exxon Mobil Corp said on Wednesday it would sell its non-operating interest in its UK and North Sea exploration and production assets to private-equity fund HitecVision for more than $1 billion.

Exxon has been looking to sell its oil and gas assets since late 2019, seeking to free up cash to focus on a handful of mega-projects.

The deal includes ownership interests in 14 producing fields operated primarily by Shell as well as interests in the associated infrastructure. Exxon could also receive about $300 million in contingent payments based on a potential for increase in commodity prices.

Exxon’s share of production from these fields was about 38,000 barrels of oil equivalent per day in 2019, the company said.

Exxon said it would retain its non-operated share in upstream assets in the southern part of the North Sea as well as its interest in the Shell Esso gas and liquids (SEGAL) infrastructure, which supplies ethane to the company’s Fife ethylene plant.

HitecVision, in partnership with Eni, had bought Exxon’s Norwegian North Sea assets for $4.5 billion in 2019.

Initially, Exxon hoped to raise more than $2 billion from the sale, which was planned for late 2019. In June 2020 sources told Reuters that the portfolio was more likely to fetch $1 to $1.5 billion given the oil price weakness last year.

(Reporting by Arathy S Nair in Bengaluru; Editing by Anil D’Silva)

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JPMorgan’s blockchain payments test is literally out of this world

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JPMorgan's blockchain payments test is literally out of this world 3

By Anna Irrera

LONDON (Reuters) – Stuck in space with bills to pay? Don’t worry, the satellites could take care of it.

JPMorgan Chase & Co has recently tested blockchain payments between satellites orbiting the earth, executives at the bank told Reuters, showing that digital devices could use the technology behind virtual currencies for transactions.

The so-called Internet of Things (IoT), where devices connect to one another, is most associated with consumer electronics, including smart speakers like Amazon Echo and Google Home, and banks want to be ready to process payments when these smart devices start doing transactions autonomously.Umar Farooq, the CEO of JPMorgan’s blockchain business Onyx, thought space was a cool place to try it out.

“The idea was to explore IoT payments in a fully decentralised way,” Farooq said. “Nowhere is more decentralised and detached from earth than space.”

“Secondly we are nerdy and it was a much more fun way to test IoT,” he said.

To run the space experiment, the bank’s blockchain team did not send its own satellites into space, but worked with Danish company GOMspace, which allows third parties to run software on its satellites.

Farooq said the satellite test showed blockchain networks could power transactions between every day objects.

The test also showed it could be possible to create a marketplace where satellites send each other data in exchange for payments, as more private companies launch their own devices into space, Tyrone Lobban, head of blockchain launch, at Onyx said.

Back on earth, examples of IoT payments that could become a reality sooner include a smart fridge ordering and paying for milk on an ecommerce site, or a self-driving car paying for gas Farooq said.

Blockchain, which first emerged as the software underpinning cryptocurrencies, is a shared digital ledger of transactions. Financial companies have invested millions of dollars to find uses for the technology hoping it can reduce costs and simplify more complex IT processes, such as securities settlement or international payments.

But so far, blockchain has yet to have widespread impact in financial services.

JPMorgan has been one of the most active banks in blockchain, announcing it had created its own distributed ledger called Quorum in 2016, which was sold to blockchain company Consensys last year. The bank also developed a digital coin called JPM Coin and in 2020 created Onyx.

Onyx has more than 100 employees and its blockchain applications are close to generating revenues for the bank, it said.

Among the division’s applications is Liink, a payments information network involving more than 400 banks, a project to replace paper checks and IoT experiments, Farooq said.

(Reporting by Anna Irrera. Editing by Jane Merriman)

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