One of the interesting side effects of the Covid-19 pandemic and its ensuing lockdowns was the internationalization of Silicon Valley. Before, startup founders from around the world were practically expected to make a pilgrimage to tech’s self-proclaimed most sacred site or risk not being able to raise the money needed to grow. With everyone locked in their homes, it made little difference if you were in Palo Alto, California, or Palo Alto de Abajo, in the Mexican state of Guanajuato. The webcam was the great geographical equalizer, and Silicon Valley started investing in earnest across the world.
But the transition to remote work was not universally good for fundraising. Iván Araiza, the Colombian co-founder and CEO of Mexican logistics startup, Cargamos, mentioned to me in an IRL meeting that local fundraising had become tougher. Why? Because Latin Americans put a special emphasis on meeting people face to face and building interpersonal relationships before doing business. Araiza reckons that local investors will invest three times less if recruited over a computer rather than cocktails.
That back-of-the-napkin estimation has found real traction, as founders exercise their lockdown-cramped social skills again. Rob Ryan, a Californian with close ties to Latin American tech and business, pivoted strongly with the pandemic after he realized that many of the startup execs he worked with were too concerned with the internal affairs of their companies to do the important work of backslapping with potentially important (and lucrative) externals. His company, GrowthHax, now makes a good deal of its money from what he calls “relationship capital” — putting cups of coffee between busy people with no urgent or immediate use for each other, to force them to engage and build relationships, to their long-term mutual advantage. We both agreed that this was, above all, a U.S. spin on a very Latin American practice.
But there are other, less attractive Latin American practices that could prove a return to the bad old prepandemic days. The most problematic is the one Zoom seemed to solve for Latin American entrepreneurs in Silicon Valley but not within the region itself: hypercentralization.
Take, for instance, Mexico, where the funding glut of the past couple of years has seen the biggest companies ditch Mexican VCs for wealthier foreign outfits, as shown by a recent report by the Monterrey-based business publication, Whitepaper. That same report noted that out of the top 10 companies in the country, nine were based in Mexico City. It shows that, though Mexicans are getting more money from around the world, the Mexicans in question are very much in the same old places.
But the pandemic-enforced remote work did start to show some inklings of easing Latin America’s extreme centralization of talent and resources. Tech in previously promising medium-sized cities like Campinas, Córdoba, Querétaro, Cali, and many others got a new, if tenuous, lease on life. A return to old-school hyperlocal relationship capitalism would be a disaster for these smaller but burgeoning tech hubs.
Some might find issue with commoditizing human interconnection under the banner of “relationship capitalism,” but people have been doing it for millennia — there’s a reason why we call the closely knit group of founders that emerge from a single massive unicorn a “mafia.” Rather, here’s to hoping that a new form of more evenly distributed interconnectivity can arise among the region’s tech entrepreneurs, workers, and investors, balancing the overheating centralization and the chilling effects of remoteness.