in Latin America t h e s t a r t u p e c o s y s t e m Fostering

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INDEX

INTRODUCTION_____________________1TALENT__________________________4DENSITY_________________________16CULTURE________________________24CAPITAL_________________________31REGULATION______________________39

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Great projects are found everywhere in the world, and you don't need to be in Silicon Valley to turn your ideas into great companies. Latin America is no stranger to this: a number of stud-ies have rated Latin Americans as one of the most entrepreneurial populations in the world. What is missing, then, so that the next u nicorn comes from Latin America?

Structural deficiencies in the links between the various countries in Latin America (and within each country) make it difficult to talk about the region as a homogenous block. For example, whereas Internet access in countries like Chile, Argentina, and Colombia exceed 50%, in coun-tries like Haiti and Nicaragua, these percentages are no more than 15% . Besides, there are cul-tural differences between countries, some subtle, some not so much, that make this region as rich and diverse as any in the world.

INTRODUCTION

However there is more that brings us together than what drives us apart, and in terms of the conditions needed to develop a thriving entre-preneurial ecosystem, the fact is that there are a number of ingredients that place Latin Ameri-ca at a historic opportunity to create wealth and development through entrepreneurship.

First of all, with the exception of Brazil and some Caribbean countries, a common language unites the region: 400 million people speak Spanish as a native language. If we add Spain and the Hispanic community in the U.S., we have a base of over 280 million Internet users who speak Spanish , and more than 13 million new users arrive every year, a trend which grows year after year .3 All of the above illustrates both the reality and the potential market of users to scale up a success-ful enterprise focused on Latin American users .

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On the other hand, the history of ups and downs in the region’s economic cycles has helped tocement a sort of "entrepreneurial DNA" among the people of Latin America. The need to overcome the various economic crises and their impacts on employment have left a deep mark on the capacity of Latin Americans to adapt and overcome difficulties through cre-ative solutions.According to the World Bank the region stands as the second most entrepreneurial in the world .

Finally, countries in our region share certain obstacles faced by entrepreneurs in the ardu-

ous process to transform an idea into a business: lack of specialized talent, access to

financing, and absence of modern and consistent regulatory frameworks throughout the

region, among others. The main challenge for governments in the region is to work to elim-

inate these obstacles, facilitate entrepreneurship, and produce the structural conditions

that promote a startup and innovation ecosystem throughout Latin America.

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This document aims to analyze these possible lines of action in five dimensions: talent, density, culture, capital, and regulatory environment. The ideas and examples included here arise from discussions held in nine cities in the region car-ried out during 2015, and involving members of the business community for each city. To start the discussion, these workshops relied on the document "Fostering a Startup and Innovation Ecosystem" . Interviews were conducted to 11 figures in the business ecosystem to comple-ment the information gathered during the work-shops. Organizing these activities wouldn't have been possible without support from Google, the entrepreneurs, facilitators, and public officials who generously participated.

The information contained here aims to be a representative reflection of what works and what doesn't in our region, and a first step towards en-

gaging Latin American entrepreneurial communities in policymaking discus-sions needed to strengthen and pro-mote the already vibrant entrepre-

neurial ecosystem in our region.

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TALENT

TALENT

Having adequate talent is a necessary condition to develop entrepreneurship. Countries in the region must invest in human capital to produce a workforce with the necessary skills, not only to cover the needs of the entrepreneurial ecosystem, but also for the development of technology innovation and en-trepreneurship in the future.

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Produce more specialists

One of the main problems encountered by entre-preneurs in the region when assembling their teams is the lack of specialized talent. This includes mainly new talent, not only in programing, but also in design, and data visualization and analysis, g rowth hacking, and digital marketing, among others.

The gap between the educational system and the needs of the entrepreneurial ecosystem can be drastically narrowed by incorporating specific sub-jects in the curricula from an early age, as well as fostering participation in technology university and technical careers, such as engineering and comput-er science.

Program.AR is an initiative by the Argentinean Govern-ment that seeks to bring Computer Science teaching and learning to schools, as well as raising awareness in soci-ety about the importance of this discipline in today's world. Their website has teaching materials for teachers and games for students .

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Supporting the creation of venues and opportu-

nities for education outside the formal system,

complementing traditional education, is another

pathway towards more specialized education.

Dev.F, for example, works as a community since

2014, and aims to bring software development

techniques to Mexico, by promoting "hacker"

culture (in the positive sense) towards program-

ming education programs . There are also

instances of continuous education provided by

entrepreneurial communities, like UX Nights ,

JavaScript or Google Developers Group .

Internet also democratizes access to education.

Elearning tools and platforms, with specific contents

on areas of specialization, facilitate knowledge

transfer to those who, for economic or geographic

reasons, cannot access educational establishments

(formal or informal), that normally concentrate in

major cities.

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Platzi is an online learning platform that con-tains IT and programming courses. It was developed in Colombia in 2013, and includes contents in multiple formats (text, video, source code, and discussion forums) . It cur-rently has over 80,000 users, and features courses in both English and Spanish . In 2014 it billed over one million dollars, and currently has more than 30 employees in Bogotá, México, and Mountain View, Califor-nia . They recently closed on an investment of USD 2.1 million .

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Produce more entrepreneurs

Aside from specialized talent, it's also necessary to work on promoting entrepreneurship as a way of life, understanding fail-ure as a stage along the learning process. Initiatives that foster greater engagement of the entrepreneurial ecosystem with educational institutions are a way to nurture and detect entre-preneurial talent within academia. In the dynamic entrepreneur-ship sector, talent must understand that multitasking and being flexible within the role that is offered are very important skills to have. Talent development must be focused on people who have the three essential qualities to respond to the dyna-mism of a startup: growth potential, versatility to shift between activities, and flexibility to adapt to uncertain and vol-atile surroundings.

For this, one must create syner-gies between the state, busi-nesses, and educational institu-tions at every level (not just universities) through, for exam-ple, internship programs in technologybased businesses, and by incorporating entrepre-neurship programs in educa-tional curricula.

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The Tegucigalpa Technical University (Honduras) Entrepreneur-ship Club (Hub UNITEC), functions as a physical space in which students can gather to work on projects, and to produce and share ideas .

With few exceptions, public schools and universities in

the region are still very far from the new trends related

to the creation of high impact businesses. Although top

institutions do have robust research and development

programs, graduates rarely has the necessary tools to

immerse themselves in the local entrepreneurial land-

scape. To achieve this, it is necessary to include entre-

preneurship subjects and programs in technology ca-

reers, by linking their programs to economics, business,

and design schools.

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The Medellin (Colombia) School of Management, Finance and Technology (EAFIT) is a

pioneer in incorporating a culture of entrepreneurship in their academic programs.

Since the year 2002, entrepreneurship subjects are taught alongside technology pro-

grams, leading to the creation of the Centre for Innovation, Consulting, and Entrepre-

neurship (CICE) in 2006 . For example, the Computer Engineering program has com-

plementary subjects such as Business Development, Initiative and Entrepreneurial Cul-

ture, Business Plan, among others .

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One of the main difficulties for many startups is talent retention. The difficulty in creating a "sense of belonging" to startups, and the presence of more competitive offers abroad, or by more consolidated companies, all play against talent development within startup enterprises. Many startups are forced to invest resources in early employee training only to see that talent migrate to other horizons. To retain talent, startups can employ horizontal struc-tures that provide more freedom and responsibilities to employees. Providing employees with interesting challenges can contribute to a sense of importance within the company.

Attracting and Retaining Talent

Other types of monetary incentives are possible

once the company has enough capital (for example

with company stock, or fringe benefits). Public pro-

grams to finance the incorporation of specialized

human resources to startups can help maintain a

critical mass of talent within the ecosystem.

At the macro level, talent retention in the region can also be incentivized through repatriation scholarships or seed capital for Latin American entrepreneurs who reside abroad and wish to create and grow their busi-ness in their country of origin. It is also important to promote the arival of foreign entrepreneurs who import knowledge and experience and contribute to the buildup of a critical mass of talent that is lacking in less developed communities.

La generación de retos interesantes para los

empleados puede con-tribuir a un sentimiento de importancia dentro

de la compañía.

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StartUp Chile is a program created by the Chilean Government in 2010 that offers entrepreneurs a temporary visa for one year to develop their projects for six

months. Since its inception, over 1200 startups and 3000 entrepreneurs have

joined the program. The most successful projects have been able to raise over 135

million dollars, and created more than 1400 jobs .

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Produce more women entrepreneurs

Latin America follows the global trend in rela-tion to the lack of diversity in the business ecosystem in general, and more specifically in relation to the number of women involved in technology enterprises. This is also a reflec-tion of the low proportion of women following technology careers in college .

In events such as S tartup Weekend the number of female participants doesn't exceed 24% of the total attendance. This gap is con-sistent with the entrepreneurial sector as a whole, where the gap between male and female entrepreneurs in the region is 24%, ac-cording to the World Bank .

Promoting workforce diversity is import-ant, since studies affirm that businesses with a woman founder perform 63% better than those founded only by men. On one hand, it is necessary to begin by incentivizing technology careers for women from an early age. Identifying and promoting success stories of women en-trepreneurs can inspire new generations of engineers, programmers, and founders of tech companies.

Laboratoria is a social technology company that seeks to empower young women by giving them access to education and work in the digital sector. With presence in Peru, Mexico, and Chile, they aim to become a fulcrum to leverage efforts seeking gender equality and female empowerment in the region, addressing the lack of available quality education for women through a payment model derived from students’ earnings after obtaining stable em-ployment .

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Inclusive participation of more women in com-munities and specific incentives for business-es led by women is another possible pathway to support greater diversity in the ecosys-tem. Initiatives such as E picQueen, W eX-change, and W omenWhoCode, which are growing in several countries in Latin America, are playing a crucial role in fostering entrepre-neurial conscience among this demographic.

The S Factory i s a preacceleration pro-gram at Startup Chile that focuses on supporting tech projects led by women. Funding for this project is CLP 10,000,000 (around USD 15,000), in addition to the chance to use work-space and have access to experienced mentors .

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DENSITY

Aside from specialized talent, it's also necessary to work on promoting entrepreneurship as a way of life, understanding fail-ure as a stage along the learning process. Initiatives that foster greater engagement of the entrepreneurial ecosystem with educational institutions are a way to nurture and detect entre-preneurial talent within academia. In the dynamic entrepreneur-ship sector, talent must understand that multitasking and being flexible within the role that is offered are very important skills to have. Talent development must be focused on people who have the three essential qualities to respond to the dyna-mism of a startup: growth potential, versatility to shift between activities, and flexibility to adapt to uncertain and vol-atile surroundings.

Big ideas transform into great projects when they're shared. Exchanging experiences, knowledge, and ideas among entrepreneurs and creators acts as a catalyst for entrepreneurial success. Governments can support the formation of venues and opportuni-ties to reach a certain density of startups, a key factor for the potential success of many businesses.

DENSITY

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Supporting the growth of clusters and coworking spaces.

nnovation is born out of the confluence of great minds. A community spirit is key when it comes to laying a fertile ground for entrepreneurship and innovation. The concept of c luster, referring to an ecosystem of alike businesses supported by the vigor and success of all of its participants in a limited geographical area, can not only reference and position the area in relation to a spe-cific product, vertical, or rubric, but also enables regular, facetoface contact that nourishes the dialogue between competition and collaboration, fundamental for the characteristic dynamism of the entrepreneurial ecosystem.

Next to the idea of a c luster, which has a broader geographic horizon, we can highlight that of coworking spaces, physical spaces where several companies, not necessarily related, share facil-ities and workspaces every day. The fact of sharing physical space not only enables novel ap-proaches for problemsolving, nourished by the different perspectives contributed by every proj-ect, but also creating the necessary conditions to attract investors, as well as new business and financing opportunities. In many cases, these spaces transform into landmarks of the local en-trepreneurial culture, as is the case with I mpact Hub in Antigua, Guatemala; or A tom House in Bogotá and Medellin, veritable communities for work and entrepreneurship..

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Atom House is a coworking space found in Bogotá and Medellin that includes 24/7

access to meeting rooms, auditoriums, workstations, and leisure and entertainment

areas. It's also a venue for workshops and courses of interest to entrepreneurs .

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At the macro level, talent retention in the region can also be incentivized through repatriation scholarships or seed capital for Latin American entrepreneurs who reside abroad and wish to create and grow their busi-ness in their country of origin. It is also important to promote the arival of foreign entrepreneurs who import knowledge and experience and contribute to the buildup of a critical mass of talent that is lacking in less developed communities.

t's important to develop these spaces in urban centers that aren't necessarily great hubs for

entrepreneurship or traditional economic centers for a country or region. For example, in the

city of San Juan, Puerto Rico, Piloto 151 has been the spearhead for the development of an

entrepreneurial community in the island, where the main agents converge to work with local

startups. Similarly, Hacker Garage in the city of Guadalajara, the second major city in México,

has positioned itself as a meeting point for the city's hackers, and also as the place where

more than 40 developer and programmer communities gather to discuss a collaborative

agenda to assemble the necessary density of available talent in the region.

The creation of coworking spaces and communities in cities

that don't yet have them can act as fuel for recent start-

ups to find the necessary momentum to scale up in interac-

tion with their peers.

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Building the voice of the community

Exchange and synergy between various actors are two of the fundamental pillars of a dynamic entrepreneurial ecosystem. The benefits of startup density don't just lie in creating the conditions for successful ideas to flourish or for projects to grow, but also to find a common voice that expresses the interests of the entrepreneurial community. One example of this is Meetroopers in Gua-dalajara, an organization born out of the idea to group together leaders from the technology, innovation, and entrepreneurial communities in order to build a culture of collaboration in the region and improve rec-ognition and visibility of these communities within the innovation ecosystem.

These "communities of communities" must speak for the needs, but also the advances and success sto-ries of each entrepreneur-ial ecosystem. They can also take the stage as rep-resentatives of a united front before business, industry, government, ac-ademia, and the media, conveying the messages needed for the ecosystem to flourish.

From a government stand-point, it is important for governments to promote the spread of success sto-ries in the entrepreneurial environment in order to shift the cultural perspec-tive around entrepreneur-ship and to create a condu-cive environment for reaching critical densities. Attraction and repatriation of entrepreneurial talent also helps with this objec-tive.

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Linking these actors of the entrepreneurial ecosystem

A robust entrepreneurial ecosystem's foundation lies not only in the development of innovation

and the new projects that arise from it but also the relations with which other sectors nourish

and propel it, such as investors, business and industrial sectors, universities, and governments.

They create networks that link those who wield the tools of technology

with the traditional business community who understand better than

anyone the problems that plague the various productive sectors in the

region, and may serve as a gateway to dialogue and to new entrepreneur-

ial solutions to old problems. One example of a bridge between traditional

business sectors and tech enterprise is A gave Labs , from Guadalajara,

who get in touch with CEOs to discover ways to aid them through a d hoc

technology solutions under the commitment f rom the company that it

will employ the technology once it is developed. In this way, they not only

provide a novel and effective outlook on existing problems but also

manage to hedge their risk at maximum . A similar connection between

public research institutions and the industrial sector is possible with gov-

ernment sponsorship in the way of technology engagement programs.22

The S Factory i s a preacceleration pro-gram at Startup Chile that focuses on supporting tech projects led by women. Funding for this project is CLP 10,000,000 (around USD 15,000), in addition to the chance to use work-space and have access to experienced mentors .

On its part, the construction of spaces where investors can share their experience around new tech-

nology enterprises is of vital importance to raise awareness on the challenges and opportunities of the

sector, redirecting capital that would otherwise end up in more traditional, less risky enterprises. Suc-

cessful examples are the Venture Club of Panamá, or G uadalajara Angel Investors Network (GAIN) ,

local entities that seek to gather angel investors in both cities.

These associations aim to develop an innovative entrepreneurial culture among individuals who are in

condition to invest in startups, but that have historically created wealth through traditional invest-

ment instruments. Other international initiatives, such as S tartup Angels, have found in Latin America

an opportunity to identify, recruit and train investors in the region to invest in the early stages of tech

based businesses.

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CULTURE

CULTURE

Develop and maintain an entrepreneurial culture is no easy task in communities that traditionally don't value failure as a necessary step on the path to success, or entrepreneurs as role models. Within the communities, the relevance of teamwork and the focus on providing solutions to local problems are also critical elements of a culture of entrepre-neurship.

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Promote a work ethos in the communities

Culture around an entrepreneurial eco-system must be open, inclusive, and transparent in order to generate and transform ideas into successful business-es. However, many times entrepreneurs forget their gregarious essence and give themselves to the individualist impulse, influenced by the fashion and illusion that the value of enterprise lies in the entre-preneurial act, rather than in the value that they add to the communities they are a part of.The road to a vibrant entrepreneurship ecosystem begins with events in which its actors meet each other, exchange ideas and experiences, and begin to act as a community.

This gives way to more ambitious initiatives,

such as hackathons or coworking spaces, in

order to finally reach more sophisticated

scenarios like an incubator. The successful

entrepreneur's recipe can't do without a

community and the organic growth it pro-

vides.

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Community interactions must not be limited to entrepreneurs, but should also aim to create solid

relationships with the private and public spheres. To strengthen a culture of entrepreneurship it

is vital to adequately disseminate and value successes that sprout from the community, with a

special emphasis on stories that reflect teamwork. Building the reach necessary to highlight the

virtues of entrepreneurship at a societywide level requires a joint effort between entrepreneur

communities, governments, the media, and academic institutions who transmit the message and

create the necessary conditions for a culture of innovation to flourish.

Moreover, it must be recognized that the reasons that can lead to a startup failing

to take off can be independent from the fact that there may be a great team

doing a great job. Matters of context, users, or a given market's saturation can

throw a wrench on what appeared like certain success A potential exit to these

"dead ends" can be the merger of startups and work teams, which shouldn't nec-

essarily happen as a purchase of one by the other, but also through alternative

models such as share transfer by the better positioned company to the one that

is less so in exchange for joining forces. This can be done even without the need

for dilution among the startups, which can in all respects be beneficial for both.

An example of it in the region is the merger of Easy Taxy (Brazil) and Tappsi (Co-

lombia) in 2015 . 27

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Promoting failure as part of the recipe for success

The mantra "fail often, fail fast" is the corner-

stone of entrepreneurial culture in Silicon

Valley. Now, this doesn't necessarily resonate

in our region. The undue fear produced by the

possibility of failure isn't just an obstacle en-

trenched in Latin American culture, it is also

crystallized in business regulation, such as the

administrative procedures that regulate bank-

ruptcy.

Discussing the week's errors in a company meeting

or sharing experiences of failure among entrepre-

neurs helps to turn these events into sources of

learning. One great example of positive awareness

raising about failure are what are known are Fuckup

Nights, born in Mexico as an initiative by 5 friends

who sought a space to speak openly about entrepre-

neurial failure. It has grown into an international

community spanning over 150 cities in close to 50

countries, providing a more realistic outlook on the

process of failing as an entrepreneur.

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The de-stigmatization of failure shouldn't be limit-

ed to entrepreneur communities, but should be ex-

tended to the rest of society, in particular children

and youths who will become future generations of

entrepreneurs . The ultimate objective is to

showcase entrepreneurship as a way of life that is

possible.

Failure is nothing other than the other side of risk,

which is the main engine of innovation and entre-

preneurship. Whether it happens or not, it is

always a possibility. Only entrepreneurs who can

understand the possibility of failure as a stimulat-

ing challenge rather than a hindrance will achieve

their goals. After all, if there’s no risk, there is no

prize.

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They create networks that link those who wield the tools of technology

with the traditional business community who understand better than

anyone the problems that plague the various productive sectors in the

region, and may serve as a gateway to dialogue and to new entrepreneur-

ial solutions to old problems. One example of a bridge between traditional

business sectors and tech enterprise is A gave Labs , from Guadalajara,

who get in touch with CEOs to discover ways to aid them through a d hoc

technology solutions under the commitment f rom the company that it

will employ the technology once it is developed. In this way, they not only

provide a novel and effective outlook on existing problems but also

manage to hedge their risk at maximum . A similar connection between

public research institutions and the industrial sector is possible with gov-

ernment sponsorship in the way of technology engagement programs.

In Latin America, one can see how many startups seek to emulate the objectives and business models of

others that have already triumphed in more developed markets. This isn't necessarily bad, but it often fol-

lows from the fact that in the region there isn't yet a strong culture of taking risks and seeking disruption.

Innovation is essentially disruptive, but disruption doesn't rest exclusively in novelty, in what nobody

thought of before, but it also embodies thinking about traditional problems from a new perspective.

The c opycat phenomenon is understandable insofar as instinctively we associate innovation with imitation

of what has worked elsewhere, and also less by its impact on the population that benefits, but by its eco-

nomic success. Innovation in Latin America, and everywhere in the world, shouldn't focus on finding a new

Google, Facebook, or Uber, but in seeking novel solutions to real problems in the communities. It is important

for governments, which often have the most complete information about the real problems and needs faced

by their populations, to approach entrepreneurs with technology competencies and to work in ways to link

entrepreneurs, universities, and other governments to develop disruptive solutions.

One clear example of how to face traditional problems with novel solutions is S ocialab, a nonprofit NGO that

seeks to produce positive social impacts by seeking support for sustainable, disruptive startups at an early

stage. It seeks to promote a social and economic development model focused on solving community prob-

lems through initiatives .

P r o m o t i n g c r e a t i v e s o l u t i o n s t o l o c a l p r o b l e m s

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CAPITAL

Access to cap i ta l has been one o f the ma in obstac les fo r s ta r tups i n Lat i n Amer i ca to g row and compete a t a g loba l sca le . Fund ing i s c r i t i ca l fo r a company to g row and sca le i t s bus iness a t any s tage o f deve lopment .

CAPITAL

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Fostering access to smart capital

The reality appears to be that the problem isn't always a lack of capital,

but rather the different expectations between entrepreneurs and inves-

tors, which sometimes prevents an adequate flow of capital. Whereas early

stage startups don't have easy access to funding from banks, various

public programs operate as seed financing (ranging from USD 50,000 to

500,000) and can be very useful in attracting private investors. Public

funds on their own cannot finance an enterprise, and generally, amounts

above 500,000 focus on different expectations and maturities for the

projects to be invested in. Normally, venture capital is concerned about

short term results, with little consideration for the long term potential of

many projects. Maturing the ecosystem requires a thorough understanding

of the nature of tech startups: higher risks, but also higher returns on

investment.

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Culture around an entrepreneurial eco-system must be open, inclusive, and transparent in order to generate and transform ideas into successful business-es. However, many times entrepreneurs forget their gregarious essence and give themselves to the individualist impulse, influenced by the fashion and illusion that the value of enterprise lies in the entre-preneurial act, rather than in the value that they add to the communities they are a part of.The road to a vibrant entrepreneurship ecosystem begins with events in which its actors meet each other, exchange ideas and experiences, and begin to act as a community.

Weaving investor networks that, among other things, help to document and make visible the

experiences and lessons, is a first step towards evangelizing other investors in the region and

draw them to the tech startup ecosystem.

he La Latin American Private Equity & Venture

Capital Association (LAVCA), brings together

more than 170 investment firms, from global

investment funds to local managers, con-

trolling assets exceeding USD 60 billion. The

process of information transfer between the

members facilitates the capture of best

investment practices .

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Moreover, it must be recognized that the reasons that can lead to a startup failing

to take off can be independent from the fact that there may be a great team

doing a great job. Matters of context, users, or a given market's saturation can

throw a wrench on what appeared like certain success A potential exit to these

"dead ends" can be the merger of startups and work teams, which shouldn't nec-

essarily happen as a purchase of one by the other, but also through alternative

models such as share transfer by the better positioned company to the one that

is less so in exchange for joining forces. This can be done even without the need

for dilution among the startups, which can in all respects be beneficial for both.

An example of it in the region is the merger of Easy Taxy (Brazil) and Tappsi (Co-

lombia) in 2015 .

On the other hand, "counterpar-

ty capital" models promoted by

governments are an option for

international venture capital to

invest in local startups. Under

these schemata, governments

match the amount invested by

a private investor, serving as

additional incentive

pulsa, in Colombia, has matching grant initiatives

for venture investors in Colombia to improve the

culture of investment and to leverage resources

with cofinancing programs where the investor

contributes a certain amount, and the program

matches this amount for the investor to invest in

local companies, increasing the return expecta-

tions for investors and developing new investors

who contribute to the system .

In-

n -

n -

n -

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Finally, investment funds normally function better when their teams include people who have been en-

trepreneurs with firsthand knowledge of the real challenges faced by startups o n their path to consoli-

dation. Kaszek Ventures is an investment fund owned by Hernán Kasah, cofounder of Mercado Libre,

the etrade leader in Latin America, created in 1999 . Since 2011 it has made 36 early stage invest-

ments, making it one of the most active funds in the region. Their investment portfolio includes suc-

cessful investments such as Netshoes, PedidosYA, and Restorando .

Create new crowdfunding platforms

Collective funding models, or c rowdfunding, allow many startups to find the capital

needed to start a business by tapping large numbers of people. C rowdfunding isn't

just a way to gather funds for earlystage projects, but also includes other, nonfinancial

benefits, such as product validation, information on market segmentation, and inputs

on potential customers prior to the first product sales.

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There are currently several crowdfunding platforms, the best known at a global level being Kickstarter and

Indiegogo. Over 99,000 projects around the world have been funded with more than USD 218,690,000 on

Kickstarter. In Latin America, Ideame has presence in more than 5 countries in the region and the United

States, managing to consolidate, together with other initiatives in Latin America and elsewhere, a movement

that has started a discussion about the need for more transparent regulation on c rowdfunding as a financing

vehicle, in order to facilitate, rather than hinder, its use by entrepreneurs in the region .

Fiscal incentives can facilitate considerably the capaci-

ty to start businesses and attract venture capital. Gov-

ernments can design and implement special fiscal

incentives for tech startups to promote the growth of

the ecosystem.

Harmonize the tax burden to foster greater investment

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Moreover, given the global nature of digital enter-

prises, it is important to seek fiscal harmonization

between countries that permits expansion into

new markets, and for investors to allocate capital

to the best projects, independently of the country

where they are based. Governments must also

avoid imposing economic barriers to startup ex-

pansion, such as currency restrictions.

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REGULATION

REGULATION

Governments play a fundamental role in the

creation of stable and predictable regulatory

environments that allow entrepreneurs to ma-

terialize innovative ideas and for investors to

allocate capital safely.

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Easing bureaucratic procedures for opening and closing a business

The complex mire of bureaucratic and administrative procedures existing in the majority of coun-tries in the region for starting a business is one of the main barriers to the creation of tech start-ups. For early stage startups, it is common for the entrepreneurs to have few resources for navi-gating the bureaucracy.

Regulatory burdens don't only affect the opening of new businesses, but also their closing, impos-ing extremely high costs to failure. Simplifying these processes shouldn't only help to start busi-nesses, but also to close them if they fail, so entrepreneurs can metabolize this experience faster, learn from their failure, and start over.

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Promoting a modern regulatory frameworkon l iabi l ity for intermediaries and copyright

Digital businesses need a modern regulatory frame-work, adapted to the digital economy, providing a safe and predictable environment to operate. Safe port laws, l imiting l iabi l ity for Internet intermediaries for usergenerated content, guarantees that as long as certain conditions are met, a platform shal l not be held l iable for such content. This model, conceived in the United States through the C ommunications Decency Act Section 230 a nd the Digital Mil lennium Copyright Act, h as al lowed Si l icon Valley companies to create products and services with sufficient clarity about which material they are and aren't responsible for. In Latin America, Brazi l has the I nternet Civi l Framework, whereas in Chi le there is an Intel lectual Property Law, both are examples safe port legislation .

Furthermore, a modern copyright

law, i n addition to l imiting the l iabi l-

ity of platforms, must create f lexi-

ble l imitations that al low creators

and entrepreneurs to make legit i-

mate uses of protected knowledge

to produce innovative contents, and

continuing to drive creativity on the

Web. On the other hand, the avai l-

abi l ity of new platforms for users to

have legal access to contents de-

pends on modern copyright laws,

and has been proven to be effective

in reducing piracy.

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Promote alternative means of payment

The avai labi l ity and diversity of means of payment is a key

component for the growth of technology entrepreneur-

ship. To reach more users and increase their income,

startups must be able to offer payment alternatives for

the services and contents they offer their users.

The most common method for onl ine purchases is a credit

card, but, with the exception of Brazi l , countries in the

region have credit card penetration under 50% among

their populations . Therefore, a portion of entrepreneurs

in the region are focusing on developing onl ine payment

platforms, such as PayU , providing alternatives to Inter-

net users, fundamental ly for those who don't have access

to a credit card .

$enviar

43

48

48

47

49

These new means of payment being developed in the region are oftentimes forced to adapt to

means of payment regulations from the 19th and 20th centuries. Governments can work to mod-

ernize their f inancial regulation in ways that al low for more options, particularly for users with-

out bank accounts who cannot access tradit ional means, and are excluded from contents and

services offered on the internet and from ecommerce.

Involving startup communities in pol icy dscussions.

The entrepreneurial ecosystem in Latin America is in constant growth. The more Latin

Americans turn to entrepreneurship as a way of l ife, the more their importance wil l be rec-

ognized as creators of wealth and employment. Entrepreneurship is not an easy activity,

and governments must endeavor to develop smart pol icies and the r ight conditions to faci l-

itate, or at least not to stand in the way, of innovation and entrepreneurship .

44

50

Fiscal incentives can facilitate considerably the capaci-

ty to start businesses and attract venture capital. Gov-

ernments can design and implement special fiscal

incentives for tech startups to promote the growth of

the ecosystem.

Thus the importance, on one hand, of engaging governments and startup communities in

pol icymaking debates that affect them directly. On the other hand, entrepreneur commu-

nities can harness existing opportunities for interaction to discuss these issues and reach

consensus on posit ions that represent them as a sector towards pol icymakers. Entrepre-

neur associations such as ASECH in Chi le, or ASEA in Argentina, or specif ic startup associ-

ations l ike Engine Advocacy in the United States, are examples of institutions that repre-

sent entrepreneurs.

Engine Advocacy is an association of US startups seeking to active-

ly participate in decision-making processes of publ ic pol icies that

directly impact the ecosystem. Its main activit ies are to generate

information (what is the impact of startups in the economy, how

many jobs are created); connect startups with governments to pro-

mote debate (through events, round tables, demo days); work on

different pol icy issues that impact the ecosystem (intel lectual

property, privacy, access, immigration reform, among others).

45

SOURCES

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