Why you should start a company in South America - brnd.ws
A few days ago I talked to CNN Money about the benefits and drawbacks of starting a business in South America compared to the United States. This post is the full version of our discussion, but you can read a short version here and here.
I see competitive landscape and talent as the main differentiators between the US and South America, the latter benefiting the US, and the former South America.
There is no question that the South American is way less competitive for tech companies. When I talk about competition I speak in broad terms; not just your direct competitors but also all those who cater the same target market. Do you build product management software for small enterprises? You compete with everyone trying to sell software to that target market? Do you build loyalty tools for local business? You compete with everyone selling stuff to local businesses, from Groupon to Open Table. South America offers a much less cluttered competitive landscape, both in terms of direct competition and overall space clutter. Clutter is bad for business, especially when you don’t have a huge marketing budget. The best part of this equation is that for the most part, the opportunities are still there for the taker. Smartphone penetration is high, tech infrastructure is very decent, and there are 400 million people eager to try new technology.
There is one problem with talent in the US – it’s freaking expensive. However, you can’t argue about the depth and breadth of the talent pool in the US. That’s a problem in South America. The talent pool is small and less experienced. The depth problem comes from a risk-averse culture where a lot of people see government and big corporate jobs as their ultimate career goal. The breath problem comes from anemic startup ecosystems, where you won’t find a lot of true experts in key fields for tech companies (I don’t like to blame the education system as I don’t think the US can exactly boast about its own education system). The result is that you will find yourself improvising a lot more, wearing more hats, and subcontracting more. There is one benefit though, and that is price.
Besides these two large elements, there are a few other differences that I don’t think are relevant enough.
Capital. Many people put a lot of emphasis on the lack of access to venture capital as a main drawback of starting a company in South America. I dissent. Sure local funds are fewer and smaller than the US, and entrepreneurs are more exposed to free riders like this or this. But I argue that capital is fairly fluid these days, funds worldwide are increasingly open to investing anywhere (especially South America, and especially if you have a great product/market combo), and you also have less competition (for a smaller pool, granted).
Support Community.If you are the kind of guy who needs external validation to pursue a business opportunity, South America sucks. If you like python meetups, network events with free pizza, and big startup conferences, South America sucks. Then again, I don’t think most entrepreneurs need any of that. They could use good mentors, and they will find more (and more engaged) in the US. They could use a strong peer-support community to help them solve everyday issues, and they will find a better and stronger one in the US (particularly Silicon Valley). An entrepreneur in South America will be lonelier, but there are good mentors and good experts, it just takes more work to find them.
Bureaucracy. I’m not the guy to sugarcoat bureaucracy issues in South America. I’ve been frustrated plenty of times with long lines, inconsistent rules, arbitrary decisions, and lengthy impenetrable forms. It sucks! It slows you down. But at the end of the day, it hasn’t stopped me from building a business. Plus, I can argue that legal, tax, and accounting in the US are equally impenetrable and way more expensive.
The United States are a great place to start a tech startup – arguably the best in the world when you weigh all factors – but South America offers great opportunities, a growing enthusiastic startup community, and a bit of the explorer feeling.