Back in 2019, I noticed what felt like a new phase for the tech industry out here: startups that emerged to service the needs of other startups.
Take Valiu, a startup created to facilitate payments from Colombia to Venezuela. It exists because of the explosive success of Rappi. The mass migration of Venezuelans to Colombia, many of whom work for the platform, meant that there was a delivery driver diaspora looking to send hard-earned money back home. Valiu fit the bill.
Well, it used to: Valiu folded this month. Its Venezuelan founder, Simón Chamorro, said the company was unable to adapt to his home country’s dollarization and wider adoption of crypto.
The disruptors are becoming disrupted. This is clear across Latin America, leading me to believe that we’re amid another watershed moment defined by three sorts of startups:
The “Obsolescents”: A name for companies like Valiu, the great promises of yesteryear that failed to adapt to the changing of the times. It’s not just about faltering amid massive structural changes. It could be a lack of access to markets and capital, as was the case with that Grand Old Startup from Bolivia, Yaigo, which got snapped up by its more heftily financed junior, Yummy.
The Nu Establishment: In a sense, this is another, more sinister type of obsolescence: Companies that replaced terrible services and have now become the new establishment. That’s not to say that these companies are bad or that they provide a worse service than their predecessors (which some are and do). Rather, these Nubanks, Rappis, and MercadoLibres of the region are enormous, unwieldy, and, more often than not, ripe to be disrupted themselves.
This is chiefly because, when a startup becomes the establishment, it’s time for its VC backers to cash in. Long gone are the days of subsidized services. So, with the competition safely killed off, the likes of Uber can now have no qualms with making you wait hours and charging you triple what they used to. This sets the scene for new solutions to outcompete the old ones — or for old ones to rise from the ashes. (If you want to know more, here’s a preview for you newsletter readers: keep your eyes peeled for our forthcoming piece on Rio de Janeiro’s unexpected Uber killer.)
Disruptors 2.0 — Latin America is in the midst of a tech company boom. But the jig is up; consumers are now far savvier than companies give them credit for. An e-wallet’s claim to be “democratizing finance” or an e-commerce’s claim that they are “revolutionizing the way people consume” just won’t fly anymore. Latin Americans are emerging from the pandemic poorer than they entered it, and they want quality, efficient, and cheap solutions to their problems.
So, where should we look for these disruptors? Maybe not where the big tech players are telling you to look.
SoftBank’s alliance with Latin American VCs may have been a clever idea to hone the Japanese investor’s regional knowledge, but it has skewed local investors’ (and the media’s) interests disproportionately toward big series B+ investments. The result is a race to provide strange solutions that no one really asked for.
If you really want to be ahead of the curve, keep your eye out for the cohort of smaller investments and smaller startups coming out of less expected cities like Bahia, Querétaro, Lima, Córdoba … (and that’s coming from a Chilango).
That’ll keep you updated … for now. Valiu, the symbol of the previous revolution, was established in only 2018. It lived, thrived, disrupted, and was disrupted all within four years. After all, it’s hard to see around the bend.