Some win, others lose. The global economy continues to contract due to the social distancing measures requested by health experts. Many companies that depend on the public report losses and there is a historic increase in unemployment.
But as the saying goes: there’s good fishing in troubled waters. Technology-based industries have known how to survive this uncertain scenario. Although at first, it seemed that it would be affected by the disruption of the production chain in China, the situation seems different now that people locked up at home must adapt their lives to digital channels.
Streaming services have been one of the sectors that have smiled the most in the face of a turbulent time for the global economy. Yesterday, Spotify said it reached 130 million paying subscribers in the first quarter of 2020, 31% more than the previous year, while Netflix reported historic growth for the company.
Changes in tastes
The growth of Spotify subscribers is striking due to the change in the habits of its customers. Now they are no longer the drivers who go to work every morning with background music. Car, laptop, and web platforms decreased, while the audience that prefers to consume their service from television or video game consoles increased more than 50%.
Spotify continues to add users at a rapid rate, but those listeners don’t spend as much time on Spotify in countries affected by the coronavirus, the company said.
In the Spotify quarterly report, the Swedish company also mentioned its progress in the world of podcasts. They recently made a $ 196 million acquisition in the last quarter of The Ringer, a company focused on sports content.
So far so good: 19% of monthly active users participated with podcast content, up from 16% last quarter.
Searches for “relaxing” and “instrumental” playlists also increased, as two out of five consumers reported listening to more music than usual to control their stress.
Bottom line: Spotify’s first quarter puts it alongside its streaming friend Netflix as a rare bright spot in an otherwise bleak consumer environment.
Spotify reached 130 million subscribers at the end of March, 31% more than the previous year, the music streaming company said on Wednesday. The report places Spotify alongside Netflix subscription streaming service as a rare and prosperous sector when most industries are struggling with the closure of the coronavirus pandemic in much of the world.
“Based on our data, it is clear that morning routines have changed significantly. Every day now looks like the weekend, ”Spotify said in its first-quarter earnings report on Wednesday, echoing Google’s YouTube sentiment about changing patterns in its viewers.
For the first quarter, Spotify, based in Sweden, made a profit of € 1 million ($ 231 million) from a loss of € 142 million the previous year. On a per-share basis, the loss was reduced to 20 cents a share from 79 cents. Revenue increased by 22% to € 1.85 billion in the quarter.
Netflix has a rebirth
Investors were highly doubtful about the future of the Netflix streaming platform. The segmentation of the sector and the entry of a heavyweight in the creation of content such as Disney with its Disney Plus product did not augur a good start to the year for the platform.
However, Q1 is telling a quite different story. Netflix added more than 15.77 million new subscribers in the first three months of the year, breaking a record that will serve as a benchmark for how subscription video streaming can work during the coronavirus pandemic.
Netflix’s audience now reaches 182.86 million in total, the company reported in an earnings report this month. According to Thomson Reuters, that was Netflix’s January double guide for 7 million new members and analysts’ expectation of consensus of 7.5 million member additions.
While the year has been a good one for streaming services in general, Netflix is positioned as a Top Performer. The company is confident that it will be able to maintain the production of new programs and films that would be integrated into its catalog in 2021, a different situation than what happens to its competition.
Netflix’s remote post-production locations allow the company to wrap up the shows and movies it is developing, such that all of its releases for this year are already filmed and in the final touches phase, which is what its team is up to. You can make it from the comfort of your home.
This way of working has shown that Netflix’s competitive advantage is not in its streaming platform but its mode of production. For new live streaming services like NBCUniversal’s Peacock and AT&T’s HBO Max, their exclusive original release lists were reduced to a fraction of what they originally planned. Traditional networks, relying more on live programming like sports and talk shows than Netflix, are struggling to figure out how they can get fresh footage in front of viewers.
“Almost all filming has stopped globally, except for some countries like Korea and Iceland,” said Netflix. The company has been able to move more than 200 post-production projects to continue remotely. And some of your production teams can also produce new jobs remotely. Within two weeks of the social distancing calls in Los Angeles, the majority of Netflix’s animation production team was working again, now from home.
Netflix Chief Content Officer Ted Sarandos stressed that the company is not going to need to adjust its premieres, at least in 2020. The fourth season of its historical drama The Crown will be released in late 2020, while the promising animated film Over the Moon, directed by an animation legend. Glen Keane is in the final stages.
Amid growing demand, Netflix said it has been dealing with a “significant disruption” in customer service during the surge in demand, which it has been able to cope with by adding 2,000 customer service agents working from home. He has also had to retrieve some of his alternative language dubs.
Netflix is also acquiring ready-made movies made by other companies that are now stuck without theaters to release them.
At the annual BayBrazil 2019 conference Fabricio Bloisi, Founder and CEO of Movile, talked about how Brazil’s startup ecosystem has grown in recent years to the point that today the country is increasingly seeing unicorns.
Currently, ten Brazilian companies have reached the title of unicorns, which means that their value exceeds one billion dollars. Of these companies, five of them reached the title of unicorns in 2019, an indicator of the maturity of the startup ecosystem in Brazil.
Venture capital has played a crucial role in Brazilian startups to achieve this value. Both Latin American investment funds and Kaszek Ventures to large corporations such as Softbank have injected capital into Brazilian startups, which has allowed them to compete globally.
Learn more about the unicorns made in Brazil in this talk by Fabricio Bloisi.
This 2019 was a dream year for Brazilian startups. The Japanese corporate Softbank has supported mainly the startups of this country, which has meant a significant increase in investment for these companies.
These advances do not mean that Brazil is a paradise for startups. These companies still have to deal with the lack of financing, and many of them will have to pivot to survive in the market. This article is a brief overview of Brazil.
November, investment month for Brazilian startups
In November alone, startups raised $ 334 million in investment, according to the District innovation platform. That represents almost double the 180 million raised in October, although concentrated in fewer companies.
Among the most outstanding investments of November, was Neon Pagamentos, who received $ 97 M in investment from Banco Votorantim and the General Atlantic fund.
Neon Pagamentos funds will be injected to accelerate the growth of the company and increase the density of the brand in the capitals beyond Rio de Janeiro and Sao Paulo. They will also serve to expand product offerings, including the development of credit and investment alternatives for customers. Finally, the money will be used for technology, advertising campaigns, and contracting.
The VTEX e-commerce platform has already raised a contribution of $ 140 million. The investment was led by the Latin American Fund created by the Japanese conglomerate SoftBank. Gávea Investimentos and Constellation Asset Management completed the contribution.
According to the statement, VTEX will use its resources for research and development (R&D) and accelerate the company’s global expansion, which stands as a platform that accelerates the digital transformation of complex operations through e-commerce in the cloud.
Thanks to Neon Payments and VTEX, the financial services and retail sectors moved the most substantial amount of venture capital resources in November.
Investments in Brazil will continue in 2020
After making ten contributions to the new Brazilian companies throughout 2019, the Japanese group SoftBank will continue to invest in the country during 2020, but at a slower pace. According to André Maciel, leader of the company’s Brazilian operation, the conglomerate’s Latin fund will make fewer investments next year but will bring more extensive checks to those who decide to support.
According to the executive, the Latin SoftBank Fund has already made 19 investments, but only 14 of them were disclosed in the market. “We have contributed between $ 1.4 billion and $ 2.4 billion so far,” Maciel said at an event held yesterday by the company in Sao Paulo. It is only a fraction of the $ 5 billion that the company has allocated to its Latin fund, presented in March.
According to the executive, there are resources for new investments in startups that are already part of the fund’s portfolio. “It is the best type of investment because it generally means that companies already have a proven model and only need more capital,” he said.
According to Maciel, SoftBank has analyzed more than 300 companies in the Latin market. Of these, 15 reached a more in-depth analysis, but could not close an agreement with the Japanese group. During the event, Maciel admitted that “we have already made our most obvious contributions, but we have not yet done our biggest checks.”
“We still don’t know what the portfolio will be like because we have five years to invest. We expect the mortality of some companies, which is natural, but we will keep pace with investments,” he said. According to him, the company generally enters with up to a third of the rounds in which it participates, making checks between $ 7 million and $ 350 million for new businesses.
The biggest round in which SoftBank participated was the $ 1 billion in the Colombian startup Rappi, held in April this year. Also, the group has invested in the Brazilian companies Loggi, Creditas, QuintoAndar, Gympass, Buser, Olist, Vtex, MadeiraMadeira, Volanty, and Banco Inter, as well as in Mexico Clip and Konfío and the Argentine fintech Ualá.
According to the executive, a challenge that the company needs to overcome is the lack of experienced developers and programmers in Brazil. “We were able to find novice professionals, but those who support the construction of a company’s technological architecture are missing,” said Maciel. Also, attending the event, the CEO of Gympass, Brazil, Leandro Caldeira, agreed: “We created our artificial intelligence center in New York because of this.”
New investment funds are created in Brazil.
Canary, a startup investment fund in the initial stage, has a second fund. The Canarian Fund II has financing of $ 75 million to participate in the initial and Series A rounds of Brazilian startups.
The initial stage investment fund has invested in 57 startups: 51 of them in Canary Fund I and six in Canary Fund II. The objective is to approach the 50 startups invested in the second fund, which began to be collected in July of this year.
Combining its two funds, Canary has $ 120 million under management. Co-founder Marcos Toledo said in a statement that the first fund is “working beyond initial expectations.”
Some of the companies invested are Buser, Docket, EmCasa, Facily, Gupy, IDWall, Loft, Mimic, Sallve, Spin Pay, Trybe, and Volanty.
Canary also has five outings (startups that have already held a liquidity event for the fund, such as a sale): 1M2, Creditoo, Decorati, Gamersclub, and Spry.
Created in 2017, Canary has as its differential the contact with investor-entrepreneurs. Among its creators are Julio Vasconcelos, from Peixe Urbano; Florian Hagenbuch and Mate Pencz of Printi and Loft; and Marcos Toledo and Patrick de Picciotto, from M Square Investimentos.
Canary companies have captured more than $ 400 million in subsequent rounds and generated more than 1,400 jobs.
Less than 10% of startups in Brazil receive financing from the industrial sector.
In industry 4.0, the collaboration between factories and startups is essential. Both can benefit from a business relationship. While startups have added technology and agile work methodologies, the giants have a scale and a large consumer market. However, in practice, this collaboration still does not happen, as revealed by the “Startup Map + Industry” study conducted by the accelerator Spin and the innovation consultant A2C. In this study, analysts found that only 8% of Brazilian startups receive industry investments.
After consulting 295 startups and 55 industries in the country, the study showed that 66% of young companies are financed with the own resources of entrepreneurs, while 13% receive funds from angel investors. The majority of new companies (94%) also pointed to Brazil as the source of financial resources. “The industry does not have the habit of investing in innovation horizontally and partnering with new companies. This traditionalism is very bad because the industry does not reinvent itself, and young companies do not receive any investment, “said Beny Fard, CEO of Spin.
With a lack of investment and guidance, only 11% of the startups evaluated are in operation. That is, they abandoned the prototype phase and already offer their services and products. “Many startups don’t advance because they skate or don’t have money. The industry often does not trust suppliers with little time in the market, to make matters worse, “Fard warned.
However, the industry’s low investment in young and innovative companies is gradually declining, Spin CEO reflected. ABDI (Brazilian Agency for Industrial Development), for example, is one of the institutions that promise to connect these links. In the first edition of the National Connection Startup Industry program, created in 2017, ten young companies and ten factories were connected, generating R $ 1 million in business.
“Another 17 startups were able to sell their solutions to industries based on relationships established during the program. As we obtained excellent results with the project, we decided to expand it this year,” said Igor Calvet, president of ABDI.
The leading agency of the Brazilian industry CNI (National Confederation of Industry) declared that SENAI (National Service of Industrial Learning) has the principle of innovation to finance the development of innovative solutions for the Brazilian industry. “The program has already been supported by 1,000 projects, more than 800 companies served, and more than $ 500 million invested in innovative projects.”
Three out of four Brazilian startups will pivot.
“Pivoting” is the term used in the entrepreneurial ecosystem when a startup, for some reason, needs to change its business model, approach, or even the service or product it offers. It is the “intermediate change.” And what a Visa study revealed last week is that it is not uncommon: 77% of new businesses have already turned.
The number, published in the traditional Fintechs Map, provided an overview of the Brazilian entrepreneurial ecosystem from data and information collected during registration for its acceleration program. It is worth mentioning that the number of “pivots” is more restricted to the profile sought by Visa: mature startups focused on finance.
However, it is a striking and striking show.
“It is widespread to change paths in this innovative environment,” says Beatriz Montiani, innovation manager at Visa do Brasil and responsible for the acceleration program. “And here in Brazil, after all, there are more factors that influence. Many ideas, for example, end up without investments since the contributions, although growing, remain very concentrated.
A startup that recently pivoted was Hisnëk. The company began its journey in 2014 with a business model to sell healthy snacks by subscribing to the final consumer. Today, Carolina Dassie’s business has taken a completely different face: Hisnëk has placed a meal under a much larger umbrella.
“At the beginning of this year, we began to listen to corporate human resources and to understand that there was a bigger problem than good nutrition. There is a tripod to take care of in companies, which is mental health, physical health, and nutrition,” explained the businessman. “Then we extend our attention to these areas. We want to help the company have healthy employees. “
Therefore, Hisnëk today has artificial intelligence that helps HR in the prevention and early detection of employees with health problems, especially mental ones. “The employee even feels comfortable asking for a gym, nutritionist. But not to ask for therapy, “he says.” We make this bridge and help both sides of the equation. “
Today, snacks are a possibility among several services offered by the startup. After all, nutrition, diet, and exercise help improve mental health.
Transforming ecosystem
For Carolina Dassie, the “pivot” was more than positive. Even with customers at the time of the subscription of healthy snacks, he approached the companies and realized that changing his product could gain even more market. And those who were already their customers would remain loyal, consuming new products and increasing profits.
She, however, points out that it is necessary to feel if the start moment allows the “pivot.”
“Each case is a case. But I think that to know if he can swing, nothing better than talking with his client and understanding the moment of his company, “says the businessman.” Here in Hisnëk, for example, we got a very strong traction. Today, I don’t know if I could pivot. But to be sure of that, I would talk to customers. “
Also, several programs for startups and organizations try to support pivoting.
In Sebrae-SP, there is support for the startup to find its error as soon as possible. It fails tech, a conversation between entrepreneurs that helps in the process. “Pivoting must be fast, controlled. It can’t cost a lot of money, it can’t take long, it can’t leave the beginning behind, “says Fábio Zoppi, state manager of Startup SP
Already in the Visa acceleration program itself, the duration will increase to help the entrepreneur in the process of understanding what his startup is. “We are extending the program from 4 months to 6 months. We will have intermediate steps so that the entrepreneur is sure of his business,” says Beatriz Montiani of Visa.
In recent days, Google’s parent company, Alphabet, signed a deal with Telefónica to bring high-speed Internet to the Amazon region of Peru. The service would begin operating in 2020, once the permits to work in the area have been resolved. A detail attracts the attention of this deal: stratospheric balloons will be responsible for providing the service.
The CEO of Internet para Todos in Peru, Teresa Gomes, recalled that the company was born to connect millions of people in Latin America, including 6 million Peruvians, without an adequate Internet connection.
Today, everyone accepts that providing Internet connection in the most remote regions of the world is a necessity to combat the digital divide and offer more development opportunities to the people who live there. Likewise, governments accept that the Internet is essential to boost the development of nations. And technology companies recognize that extending connectivity in the world is the only way they have today to expand their market.
However, rugged geography is imposed as an impediment to the development of a telecommunications infrastructure capable of bringing the Internet to the most remote parts of the world.
The race to bring the Internet to the last corner of the world
Overcoming the natural barriers that are imposed to extend Internet services to the most remote population has required creative solutions from Silicon Valley companies. With the purchase of Ascenta in March 2014, Facebook opted for drones charged with solar energy to send Internet connection from the stratosphere to remote areas.
After acquiring Ascenta, Mark Zuckerberg commented on the suitability of drones to connect to remote places. The Facebook CEO said that thanks to the efficiency and duration of high altitude drones, they could remain in flight for months or years. “They have greater durability than globes, and their location can be controlled more precisely,” the executive said.
Google relies more on balloons than drones. The tech giant also acquired an improved drone company with solar panels: Titan Aerospace. The company purchased in April 2014 to take an Internet connection to remote locations. However, in 2017, Google abandoned the project.
The epic of Loon: Icarus and Daedalus
The Loon project, responsible for carrying the Internet through balloons, began in August 2011. The first balloon built in the Google X Labs – the division that develops the craziest projects of Google, such as Google Lens or autonomous cars – was called Icarus, while Daedalus was the name of the team that worked on its development.
Thus began an epic story. Like Icarus, the first balloons developed by the company fell sharply. Imperceptible leaks prevented the balloons from staying long in the air, while the team had to seek experts in areas ranging from textiles to aerospace engineering to better prototype.
In this way, Loon began to improve his balloon management standards. The team had to walk with special socks to avoid holes, and the sutures were strengthened. Perseverance soon rewarded the efforts.
A balloon trip to connect the world
After years of work, the Loon project managed to create a balloon that remained up to 187 days in the air and went around the world nine times, a milestone that even Jules Verne never imagined. The aircraft were included with GPS to make them easier to recover, as well as solar panels and lithium batteries.
At present, each globe is capable of providing the Internet with a 4G LTE connection in a diameter of 40 km. A connected globe network can, in turn, cover 5,000 km2. With this infrastructure, it is possible to offer a connection of 15 megabytes per second (Mbps) to a mobile phone, while a MiFi device can connect at 40 Mbps.
While Zuckerberg is right that it is more difficult to control the position of the balloons in the air, Loon has known how to solve this problem through Big Data. With data related to the wind and forecasts of the National Oceanic and Atmospheric Administration (NOAA), Google’s project has been able to develop algorithms that allow predicting and simulating wind patterns.
Stratospheric balloons also take advantage of the fact that in the stratosphere, the wind blows in one direction at a height and another in a different direction. In this way, it is possible to control better the direction in which the balloons move.
Loon in other regions of the globe
Alphabet’s alliance with Telefonica in Peru is not the first of the Loon project in the world.
In July 2015, Google announced that Sri Lanka would be the first country to have an Internet network through its stratospheric balloons. This project did not prosper because the radio spectrum requested by the company was already in use for other purposes in the country. In December 2016, the project was abandoned.
Loon had better luck in Oceania. In New Zealand, the company allied with Vodafone, while doing the same with Telstra in Australia. In these countries, the company helps mobile operators to cover the areas they cannot reach, such as most of the rural areas.
As in Peru, Loon has already signed an agreement with Telkom Kenya to bring the connection to the rural areas of the African country.
In Brazil, Loon worked with operators Vivo and Telebras to offer connections to areas with no Internet service in the country.
Loon has proven to be an effective solution in emergencies. After the passage of Hurricane Mary in Puerto Rico in 2017, the company collaborated with AT&T and T-Mobile to restore communications.
Loon has also been doing tests in Peru for a while, and since 2017 he has helped in the disasters. When the tremor was in May 2019 and in collaboration with CenturyLink – the company with the permits to manage the E-band in Peru -, Loon provided an Internet connection to the areas that were held incommunicado by the cataclysm, as it also did after the floods that the country experienced in 2017.
The executive president of Telefónica in Peru, Pedro Cortez, mentioned that both companies collaborate since 2014 to test the technology.
Loon Alastair Westgarth CEO stressed that the company would not be where it is without Peru. “After years of testing in the country, we have achieved many programs that prove that our technology connects people in need and accelerates the growth of our business.
So far, permits have been the main problem Loon has faced to spread. Alliances with mobile operators have allowed him to overcome these problems, and he is now at a critical moment to demonstrate the viability of his project.
Greater connection, the key to higher growth
According to analysis, increasing Internet coverage by 10% increases the Gross Domestic Product of a country by 1.4%. For this reason, the rapid expansion of a telecommunications network is one of the priorities of Latin American governments.
Loon and Alphabet’s efforts in Peru are not isolated. In Mexico, President Andrés Manuel López Obrador declared his intention to extend the Internet to the most remote areas of the country using the fiber optic of the Federal Electricity Commission. Facebook has set its sights on Mexico and Brazil to boost its satellite Internet initiative.
As Teresa Gomes mentioned, the challenge of connecting millions of Latin Americans includes reaching areas of difficult access with innovative and sustainable technologies that allow us to overcome geographical, technological, and economic complexities.
With the arrival of 5G, the connection in rural areas will be even more critical. A reliable infrastructure will be necessary to boost Agrotech and meet the goals of sustainable development for all. Crazy ideas from High-Tech companies like Loon are required to achieve these goals.
In Latin America, venture capital funds are developing. Last year they accounted for only two billion dollars, a small portion compared to the 50 billion dollars that move worldwide.
The contribution of risk capital to the Gross Domestic Product (GDP) is also minimal in the region. In Latin American countries, it makes up only 0.04% of GDP, ten times less than in the United States, where it is 0.43%, and eight times less than in China, where it represents 0.33%, according to a report by McKinsey & Company.
The creation of a Softbank’s fund with five billion dollars exclusive to Latin America in 2019 represented a revolution for startups in the region. However, more than six months after the entry of the Japanese conglomerate, not everyone is pleased with how this investment fund operated by Marcelo Claure works. And in Latin America, Softbank has imposed different rules for the region.
Softbank’s investments have risen doubts
In recent months, financial analysts have questioned the talent of the Japanese conglomerate for risk investments. The WeWork case has been the cause of this crisis of confidence within the company.
From the beginning, several investors questioned that WeWork’s business model was innovative and suspected that the company was only one company plus real estate. Despite these doubts, WeWork was preparing to go out to the public until a scandal halted the company’s ambitious plans. Besides being just another real estate company, WeWork lacked a long-term sustainable model and was running out of funds.
Adam Neumann caused the insolvency of his own company. The WeWork founder rented buildings that were in his name to the startup while placing family and friends in key positions. This behavior did not go unnoticed, especially since it was an eccentric entrepreneur who did not pity showing off his excesses.
Neumann’s mishandling caused many to consider that Softbank gave too much freedom to the managers of the startups that it helped finance. Also, plans to create a more ambitious risk fund than the scandal now pauses its Vision Fund.
In Latin America, Softbank tells a different story.
Softbank announced its investment fund for Latin America since the beginning of years. In the beginning, it seemed that the Japanese conglomerate would do the same thing it did with other startups: inject large amounts of money so that in a short time, they monopolize most of the market.
At first, the strategy seemed hugely successful. Softbank was one of Uber’s first investors and one of the majority partners, as well as its Chinese competitor Didi.
In the region, Softbank has done the same with companies such as the Rappi home delivery service, to which it allocated one billion dollars, which represented more than a third of the region’s venture capital investments in the first half of 2019.
In smaller proportions, the Japanese fund has directed resources to different companies in Brazil, Colombia, and Mexico, such as Ayenda, Clip, or Creditas. However, analysts have questioned this same strategy with the discouraging exit to the market of Uber and the great collapse of WeWork.
Perhaps motivated by a change in strategy, or perhaps by the characteristics of risk funds in Latin America, Softbank has changed the way it invests in the region.
Venture capital is a very young sector in Latin America. Softbank investments are an opportunity to boost innovation for technological ventures that are already in the late stage of development. So far, these have been the main objective of the Japanese fund.
How SoftBank is putting its stamp on LatAm's venture capital scene
SoftBank usually puts money directly into startup companies but in Latin America has targeted venture capital funds in a departure from the Japanese conglomerate's global approach. https://t.co/OTbwZDoDqU
However, the Japanese conglomerate has also decided to invest in risk investment funds in the region, which has caused some discomfort for some investors due to the conditions Softbank imposes at the time of financing, anonymous sources related to the industry told Reuters.
One of the main disagreements is that Softbank requests the right of first refusal – to have priority in the investment round – if one of the companies of a specific investment fund decides to invest extra money or be put up for sale.
This condition would give Softbank a decisive advantage as a potential investor in future rounds, in addition to offering the conglomerate an advantage over investors in the same fund.
Reuter’s sources point out that Softbank’s desire to take this position in a fund bothers other investors in the fund who wish to co-invest.
Two Brazilian venture capital funds have rejected Softbank’s proposal due to the condition of the terms, according to two sources that knew the subject.
Softbank also asks venture capital firms to invest in accepting a clause that gives priority to the Japanese conglomerate when interested in investments in startups in the early stages.
Softbank mentioned that it would direct about 500 million dollars in third-party risk investment funds; however, it has not been said how much has been invested so far. In September, the Reuters news agency mentioned that Softbank had closed deals with at least two venture capital firms: Brazil’s Valor Capital and Argentina’s Kaszek Ventures, who recently announced that they had obtained 600 million in new capital.
Valuation matters
Part of the conflict with Softbank’s conditions for investment funds is related to the valuation a company receives after successive rounds of investment in startups. Investors within a venture capital firm are the ones who usually lead the investment rounds. One of the sources indicated that this was considered the best practice for both venture capital funds and other investors to allow different actors to have a higher weight in the valuation of their efforts.
The failure of WeWork in its attempt to go out to the public shows why investors disagreed with the valuation of 47 billion dollars established after their last private round.
Columbia University professor Donna Hitscherich sees the demand to lead successive investment rounds as a fundamental requirement of an investor or venture capital fund that bet on a company from the beginning.
Softbank has not yet participated in successive rounds of investment in any Latin American company, as its fund directed to the region began barely this year.
Los tutores que participan en el Google Launchpad Accelerator México comentaron su experiencia en el programa que está enfocado en ayudar a startups de toda Hispanoamérica.
El programa de aceleración del gigante tecnológico ayuda a los emprendedores a crear productos y tecnologías atractivas, escalables e impactantes. Hace una semana, Google le dio la bienvenida a diez de los emprendimientos seleccionados, provenientes de México, Argentina, Colombia y Chile. Estas compañías recibirán durante tres meses apoyo y programas de capacitación para superar sus desafíos en materia tecnológica. De esta manera, los emprendedores latinoamericanos tendrán las herramientas para poder convertirse en la próxima gran innovación.
En una serie de videos, el canal de Google Developers Latam en Youtube presentó a cada uno de los líderes que Google escogió para guiar a la próxima generación de la aceleradora de Google. Estos son:
Pablo Celsi, Head of UX de Despegar.com.
Celsi explica que su objetivo en la aceleradora es enteneder las necesidades de las startups y guiarlas para que cumplan con los estándares de la industria. Celsi recomienda a todos los integrantes del equipo de una startup entender el aporte que ofrecen en la empresa y, después, comprender el impacto de ese aporte. Por último, les recomienda la resilencia, que es la habilidad de recuperarse de la frustración del día a día.
Lesly Ross, fundadora de Quantified Ardor.
Ross menciona que la pasión hace funcionar a los negocios, pero son los números los que los hacen crecer. El trabajo de Lesly consiste en enseñarlas a las startups a guiarse por los datos. Ella menciona que no es suficiente observar todos los datos, sino que también es importante identificar los insights que tienen más repercusiones en la empresa en todos los niveles: compañía, equipo e individuos. Esto ayuda a la empresa en convertirse en una compañía más efectiva, más eficiente y a crear un ambiente de constante aprendizaje que permita el crecimiento.
Eran Paz, líder del equipo de ciencia de datos de MDGo
Eran Paz es un experto en Inteligencia Artificial y Aprendizaje Máquina. Él ha sido mentor en Google Launchpad por más de cinco años. Paz menciona que las compañías son cada vez más consientes del valor de sus datos. Sin embargo, estas no invierten mucho tiempo en colectarlo, o incluso ignoran qué deberían colectar. Sin una estrategia para colectar datos, las empresas deben hacer lo siguiente: 1) Empezar a colectar. Si no saben qué colectar, lo mejor es colectar todo lo que puedan. 2) Pensar a la largo plazo, como en el tipo de productos que pueden ofrecer en los próximos tres o cinco años.
Will Koffel, Head of Startup Ecosystem, Google Cloud Americas.
Koffel es desarrollador, emprendedor serial y CTO. Él trabaja en tecnología para el desarrollo de productos. Cuando su primera startup fue adquirida por Google Cloud, Koffel tuvo la oportunidad de trabajar en Google Cloud, pero con el ecosistema de startups. Google Cloud ofrece a las startups una de las plataformas más confiables, seguras y amigable para los desarrolladores para que puedan construir su infraestructura innovadora. Las startups del programa de Google reciben descuentos, créditos y soporte técnico para utilizar la plataforma. El servicio de cloud computing de Google ofrece una serie de herramientas para Big Data, implementaciones de AI y ML y mobile.
Crecer con Google
Las startups que participarán en el programa de aceleramiento de Google tendrán la oportunidad de aprender con líderes del sector cómo ayudar a crecer sus emprendimientos y cómo aprovechar las herramientas que tienen disponibles para mejorar las operaciones de sus compañías.
Jorge Morales took control of his life early. He studied Computer Systems Engineering to develop video games.
But the industry in Mexico was in diapers, and none of its teachers knew the subject. This issue did not discourage Jorge. He began his adventure with a Web development company without losing sight of his mission. There he tried to create video games without success. He understood that to move to the next level, and he had to drop the Yoshi: he sold the company, and with the money, he created Larva Game Studios (LGS).
In its incubation stage, Larva Game Studios accumulated experience points by allying with Immersion Games. Together they created Lucha Libre: Heroes of the Ring (2010). Since then, LGS has completed 22 different projects. Night Vigilante (2015) is his first intellectual property development and in the freemium model.
From premium to freemium
LGS develops games or parts of games for clients in Mexico and abroad.
They have already tried the commercialization of premium games on the App Store with Spirit of springs (2014), created in partnership with Minority Media Inc. They participated in 35% of the development and investment.
Kedoo advised them on marketing and sales strategies to develop Night Vigilante, a videogame with a freemium business model. You get it for free, you get addicted, and it sells you something as soon as you love it.
In Night Vigilante, the user can customize the game and buy supplies to improve their performance.
Goal in freemium
Larva Game Studios’ new projects are aimed at the development of educational applications and more freemium games.
The alliance with the marketing company of Giovani Dos Santos produced Street Gol Gold Edition (2015) with a development cost less than Night Watchman. Quality and short freemium games are now the goals of Jorge Morales.
The freemium era
Freemium games dominate the app market today. Both the PlayStore and the App Store remain in the top revenue.
App Annie observed a market less and less focused on mobile games. These changes can mean a business opportunity for independent developers such as Larva Game Studios.
But returning a profitable game is not easy. Obtaining a large number of downloads, offering a value proposition to have a high conversion rate (percentages of users who buy premium) and returning to the apostle users of the app are some of the pending tasks, noted Vineet Kumar of Harvard Business School
Returning a profitable game is not easy.
LGS continues in the game
The LGS experience allows them to know some effective combos. Now they will seek to make the company more profitable with low-risk developments.
They must deal with a competitive but growing market. Observing quality is essential in an area where competition offers its product for free.
Retaining talent is another challenge, considers Jorge Morales. The industry in Mexico requires maturing to offer more competitive salaries, improve working conditions, and initiate attractive projects.
Making video games is not the same as playing them. Jorge Morales knows it and prepares for the next level.
Google designed the FoundersLabs based on the experience that the company has accumulated for years. This initiative is now available to Latin American entrepreneurs. One of the last problems addressed has been how to form successful teams within a company.
FoundersLab is a one-day workshop developed by Google Developers. The company has spread the initiative in different cities in the region, such as Buenos Aires, Bogotá, Quito, Cali (Colombia), and Mexico City, always with the support of allies from incubators local. Events are usually made by invitation, but on the last occasion in Buenos Aires, an open call was made to the A3 business community, one of the local allies of Google. Google Developers hopes to replicate this model in more cities in the region.
How to form a successful team?
Building a successful team seems simple: if you put the best professionals to do their best work, the result will be the best possible product. Although the idea makes perfect sense, Google experts found that the equation was more complicated.
The magic formula is really to train managers to do their best work. In this way, it is possible to improve the performance of the work teams significantly. The Google People Analytics team reached this conclusion after years of work, where they investigated the performance of the groups within the organization.
All this accumulated knowledge supported not only by the experience within the company but also by the academic research of some of the best organizational psychologists in the world is now available to Latin American entrepreneurs thanks to Google FoundersLab.
In the FoundersLab workshop, the teams participated in several dynamics of interpersonal problem solving, communication, and coaching techniques that helped them focus on one of their main tasks as entrepreneurs: managing their teams. In the end, each of the founders took a series of functions to implement in their daily routines with their equipment.
“Focusing on the task and the product 120% of the time is a mistake because you have to focus on the human factor. And all the people who make up your startup have their problems, depressions, errors, etc. – explains Francisco Solsona, leader of Google Developers in Latin America. It is important, then, to understand them and be there to help them more comprehensively.”
The human factor, key to the success of a venture
The human factor depends mostly on your success or failure as entrepreneurs. According to a survey of risk investors published in 2013, 65% of startups that fail do so due to “problems with people,” while only 35% of these failures are due to product or market problems.
65% of startups that fail are due to problems with people
In addition to learning about Google’s experience in team leadership, workshop attendees also exchange experiences and ideas with each other. In a segment of the workshop, they all expose a problem they have in their startups and receive solution ideas from the rest of the group.
“One would think that, as they have just met, they would only bring trivial problems to the table. But we have to see that they discuss super personal problems or sensitive issues of their organizations, and the advice given is incredible,” says Solsona.
It is not only a moment to refine the interpersonal skills of the founders, but also with a better knowledge of who they are and what they are looking for as entrepreneurs and as people. As Tomas Lakub, founder of Simpleat, says, “the course made us give ourselves one day to think of ourselves as founders, think of the team, learn and think in the medium term.”
At three o’clock on Wednesday, September 25, the National Banking and Securities Commission closed the window. At that time, the deadline for the platforms operating under the eighth transitory of the Law to Regulate Financial Technology Institutions (Fintech Law) to request its regulation expired. Not all did.
The American company PayPal send a message to its users in Mexico. They reminded them that from that date, they would automatically transfer to their bank accounts all payments received. The measure had already been announced in advance. The message begins with large white letters on a blue background:
Now your money will always be available.
The company summarized in three points the changes in its platform:
All payments will be automatically transferred to the user’s primary bank account.
Recharge balance will no longer be available.
The balance remaining in the PayPal account can no longer be used to top up balances.
The company did not mention in the mail nor in the extra information the reasons behind the changes: the law published since March 8, 2018.
Now everyone will follow the rules.
A public company with extensive resources such as PayPal preferred not to request authorization from the CNBV to operate as a wallet. “This tells us that the law is no small matter,” says Gerardo Obregón, CEO and founder of Prestadero, the pioneer platform for crowdlending in Mexico. As of September 20, the Prestadero team submitted their application to be authorized as a Collective Financing Institution (IFC), the legal name for Fintechs in Mexico).
The CNBV received the first applications in February of this year. The crowdfunding platform for real estate development M2Crowd was the early risers. At that time, M2Crowd CEO Simón Dalgleish said that, since they began operations, they turned to the Fintech regulation in the United Kingdom to anticipate the requirements that could be demanded by the Mexican authorities, published on September 2018.
In some sections, the Fintech law is quite severe, in consideration of Gerardo Obregón. Cash restriction is an example. IFCs are imposed on measures for the prevention of money laundering on stricter occasions than other financial institutions. Although for fintech, it is a minor problem, since most of the payments they receive are digital since they are institutions that were born in the digital world. However, it limits the payment options of the users.
Obregón also considers that the restriction on bank accounts is another problem. With the current regulation, users can now only transfer money to accounts in their name. The director of the Prestadero makes an analogy with online purchases, where one can buy a product that will be received by another person to explain the inconvenience. This option should also be available when sending money.
This video explains Fintech law in Mexico (in Spanish).
Clear rules make long investments.
In Mexico, the fear of fraud is one of the main reasons that stops people when paying online. This fear is justified if we consider that the country ranks second in digital fraud in Latin America, after Brazil. The figure is surprising, but it is also a logical consequence. Mexico represents the second-largest e-commerce market in the region after the South American nation. When you face with higher transactions, you take higher risks.
Specific regulation for the sector offers guarantees to both entrepreneurs and platform users. Gerardo Obregón is so in agreement with this that Prestadero was one of the companies that promoted the elaboration of law for Fintech. Although “Like any regulation, it is still perfectible,” he said.
In 2012, distrust of digital platforms was more significant than now. The director of Prestadero says that when the startup started operations, not only investors showed suspicion of putting their money. Credit applicants also raised their eyebrows in disbelief.
Why would a stranger on the Internet offer me credit with more favorable rates?
A natural reaction. Financial institutions have been specialists in hiding Leonine conditions among the small letters. The Journalist Michael Lewis told in The Big Short that investor Danny Moses once asked the seller of a transaction that seemed perfect: I just want to know one thing, How are you going to fuck me?” Fintech is also a business with profits and losses. Nothing can be so good to be true.
Banks are specialists in offering loans with high rates for applicants, while investors receive returns at penalties above inflation. In fintech, this is different. At present, the Prestadero’s gains are an average of 14% per year, – after considering the commissions and overdue portfolios -, while applicants with the best score can obtain rates from 8.9% per year. The competing IFCs give similar conditions to applicants and investors. For example, the Yotepresto platform offers higher returns to investors. Although the rates are higher than in Prestadero, they are lower than in the banks.
Prestadero solicited authorization for operating in CNBV
If you have some experience with financial products, you want to know what the trick is, or in the words of Moses, how are you going to fuck me?
Fintechs arise outside the boxes
Fintechs have two characteristics that have allowed them to break into a field where banks maintained an unquestionable hegemony: technological innovation and peripheral vision. With technological innovation, IFCs reduce operating costs and have greater possibilities for expansion. The peripheral vision allows them to think about new financial products.
Sometimes, good ideas come from outsiders. The Brazilian unicorn Nubank emerged when Colombian David Velez noticed that in Brazil, banks treated customers as if they were doing them a favor. They did that because there were few competitors. The brasiñelos told him that he could never win against them. Sergio Furio received similar comments when he founded Creditas, a startup that has recently acquired investment from Japanese corporate Softbank. This company was born in response to the high interests of Brazilian banks.
Gerardo Obregón is also an outsider, a foreigner in a nation of bankers. Many venture investors would have refused to issue a check, not because of the business model, but because they lacked market experience. He studied chemical engineering and before Prestadero, he worked in areas that had nothing to do with financial institutions. For him, that was a fortune.
In one of his first works, he was soaked with knowledge about technology. Then he undertook with a meat distributor. One day, when Obregón noticed a worried employee, the man told him that he had trouble paying a loan he had requested for ten thousand pesos. After paying one thousand pesos promptly in six months, I still owed more than eight thousand.
Gerardo was impressed with how such a modest credit could damage a person’s economy. For that reason, he thought of financing alternatives.
Gerardo investigated business models. During this period, he discovered that these alternatives already existed in countries such as the United States and the United Kingdom in a model known as P2P Lending. In 2005, Zopa began operations in the United Kingdom. They’re one of the pioneers in this area. In 2006, Prosper started operations in the United States.
These companies had to learn in a hard way and in one of the worst times for finance. Larry Ludwig, the founder of Investor Junkie, mentions that Prosper’s risk management model was horrible. He said that “the platform allowed anyone with a pulse to get a loan.” The overdue portfolio was alarming, a situation that worsened with the economic crisis.
Although there were references abroad, P2P Lending, now known more as crowdlending, was a diaper model. Around him, Gerardo heard that that could not work in Mexico because “the Mexican does not pay.” Despite this, Gerardo jumped into an industry he was beginning to know, with an unproven business model in the country.
“An entrepreneur must know everything,” said Gerardo, explaining how he leaped chemical engineering to financial innovation. He investigated the requirements demanded by Mexican law, prepared a business proposal, and hired a lawyer to check that everything was in order. He also worked closely in the development of the platform. “I am aware of the Front-End and the Back-End.” About software development, he only knows how to make queries in databases, but he understands enough to specify what changes it wants in the platform. Gerard uses to make suggestions to its team about how it can be improved.
Does regulation kill innovation?
Gerardo Obregón admits that, with the current regulation, he would not have been able to start with Prestadero.
Rigid legislation is a concern not only in Mexico but also in countries such as Chile and Brazil where the desirability of a specific regulatory framework is recently discussed. This situation will have repercussions on the ecosystem. Estimates indicate that only 40% of the institutions required by law to request authorization did so. However, the CNBV has not yet given official figures.
The legislation also offers a legal sandbox to test new models. This part of the law gives space to innovation. The Prestadero’s team asked the CNBV if his PrestaPal product would enter into this scheme, an alternative so that people without credit history or with a bad history can request family and friends credits with rates of 0% to 35% per year.
In Mexico, most loans are informal. In other words, between family and friends. This fact means that their credit behavior is never reported to the credit rating entities. Therefore, they can never apply for a loan with more favorable conditions or of a higher amount. At the same time, the main problem of collective financing platforms is finding applicants who meet the profile to be subject to credit. The same mechanisms that protect investors from losses constrain their opportunities for expansion. A space for innovation is necessary to create new opportunities.
At this time of regulation, the CNBV will analyze each of the authorization requests for companies operating under the 8th transitional. Within three to six months, the agency will offer a response and, if necessary, other institutions such as Banxico or SHCP will provide feedback. If they are rejected, they must stop operating.
After a multi-week selection process involving more than 120 startups in Latin America, Google chose the ten companies to support in the winter edition of Launchpad Accelerator.
Launchpad Accelerator Manager for Latin America Francisco Solsona announced the names of these startups last Friday in the Google Developers blog. These newly created companies come from Argentina, Chile, Colombia, El Salvador, Mexico, and the United States.
Diversity in market segments
The diversity of the ten selected companies not only resides in their country of origin. These startups belong to different market segments such as banking and finance, professional services (legal, insurance, accounting, human resources, marketing), hospitality, automotive / transportation, retail, electronic commerce, construction / real estate, among others.
123Seguro (Argentina): A digital insurance agent that offers a combination of insurance comparison, transparency, and advisory services. It is the leader of the Argentine market and is available in Chile and Colombia.
AI Turing (Colombia): Supervises the commercial strategy for PPC companies through AI models, and helps them strengthen their business strategies.
Apli (Mexico): A recruitment automation solution based on conversational AI.
Casai (Mexico): Properties fully furnished and designed with the best services and operations for the client, is marketed through Airbnb.
DevF (Mexico): This EdTech Startup promotes inclusion and accessibility. They use agile education programs that develop digital + soft skills, and then connect these people with job opportunities in the technology sector and industry.
Hugo (El Salvador): Hugo is a technology, delivery, and transportation company based in El Salvador that operates in Central America and is rapidly expanding in LATAM.
Jetty (Mexico): Jetty is a private collective transport application with routes optimized to bring people from home to work and back. They offer an income and operations management platform and works to improve the travelers’ experience while they travel.
Jüsto (Mexico): This startup is a 100% digital supermarket. The company works to lead the transformation of the supermarket industry and give Mexican households access to higher quality products with time and money savings.
Odd Industries (Chile): This platform helps its clients obtain, decrypt, and distribute information. They create data using proprietary hardware, such as robotic cameras in situ, process images along with other data sources. They use machine learning algorithms to generate metrics that help make decisions in real-time.
TransparentBusiness (USA): Platform designed to help its clients increase the productivity of freelance collaborators, allow coordination and monitoring of the workforce and provide real-time information on the cost and status of all tasks and projects
Launchpad Accelerator Winter Edition
The winter edition of the Launchpad Accelerator, a program focused on startups in the growth stage from throughout Latin America, will last three months. This acceleration program will take place from October to December 2019.
“The selected companies have passed a rigorous evaluation process of more than 120 startups throughout Latin America.”
Francisco Solsona, Manager of Launchpad Accelerator for Latin America
The ten startups will now have the opportunity to prioritize and solve problems of their companies and products. They will receive the support of dozens of mentors and speakers on business issues; marketing, branding and public relations; organizational culture, artificial intelligence, and machine learning, Google Adds, Google Cloud and Android Play, among other technologies. Also, they will have the support of different Google teams, which will help them boost their growth, infrastructure, management, and leadership in a short and intense time.
“The ten selected companies represent the best of the talent, ability, and willingness of Latin American companies to solve problems in the region,” said Solsona.
Entrepreneurs participating in the program will have the opportunity to learn from the best to scale their products, overcome technological challenges and establish a connection with entrepreneurial networks in the region and Silicon Valley, to consolidate the growing generation of innovators in Latin America.
This initiative, developed in partnership with Centraal and TheVentureCity, responds to the need to consolidate a robust ecosystem of Latin American startups for the rest of the world. This task brings significant benefits for the community, such as the creation of new jobs, as well as a positive social and economic impact.
Hispanic entrepreneurs: from the United States to Argentina
“To carry out this program for all Spanish-speaking countries from Mexico to Argentina, including the Latino community in the United States and the Caribbean; It feels like a dream come true, because it gives us the opportunity to attract attention to the great work that Latin American entrepreneurs and developers are doing, ”said Francisco Solsona, manager of Google Developers in Latin America.
With the support of Google, these teams will have the opportunity to work with international experts, exchange experiences with local entrepreneurs, and recognize market opportunities over three months. They will have three weeks of face-to-face work, or bootcamps, to be held in Centraal Ciudad de Mexico, Google Argentina in the city of Buenos Aires and TheVentureCity campus in the city of Miami.
At the end of the program, these startups will be part of the prestigious international alumni group of Google Launchpad Accelerator, where they will join other Latin American companies of global scale such as Quinto Andar, Telemedicine Portal, Creditas, Platzi, Konfio, Ualá, La Haus, Kichink, Compare Online, Cloud Store, and Miroculus, among others.
