Munich Startup: Chile and Argentina are likely to be the most Startups aren't at the forefront when it comes to international expansion. What are they missing out on?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): South America isn't necessarily a top priority for companies either. Therefore, the Bavarian Representatives are available to Bavarian companies and startups as German-speaking local contacts, providing market information and contacts, and thus supporting them in developing new export markets or establishing and expanding sales structures abroad. The Bavarian Representative Office for Chile, Argentina, Colombia, and Peru also offers a support program for the internationalization of Bavarian startups, enabling them to gain in-depth insights into the Latin American market. Selected Bavarian startups also have the opportunity to use a free workspace on site for up to three months.
In our countries of responsibility, Argentina, Chile, Colombia, and Peru, the economies are well developed, and Chile, Colombia, and Peru have experienced strong economic growth on average in recent years. Argentina and Chile in particular have seen an increasing number of startups with highly innovative capabilities, and the startup landscape has grown significantly. This is also due to the fact that Latin America has recognized the importance of supporting the startup landscape, as it is a key driver of technological, economic, and social change, and therefore also of employment, growth, and long-term prosperity.
Latin America has a great need for innovation and technology
Business opportunities in Latin America are very interesting and diverse because of the great demand for innovation and technology. The digitalization sector presents very exciting opportunities for Bavarian startups. The advantages for startups in Latin America include lower labor costs than in Europe, greenfield opportunities, a pent-up economy, world-class industries, and a dynamic startup landscape.
Munich Startup: What can startups expect from this market? What distinguishes it?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): The South American markets, especially those of Chile, Colombia, and Peru, are very open and largely unrestricted. Market access is open to companies worldwide, meaning Bavarian startups have the same opportunities as local companies. On the other hand, this also means that international competition is present locally.
The business landscape is particularly well developed in the raw materials industries, such as agriculture, oil, gas, and mining, but there is also a strong service sector. According to a study by the LADW (the Latin America Committee of German Business, editor's note) According to the study, innovations and technology are particularly in demand in the areas of raw material extraction and processing, energy technology, healthcare, manufacturing and transport.
“Startups with solutions for industry have good chances”
Munich Startup: Which startups would be particularly interested in entering the region?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): There is a diverse need for innovation in Latin America's rapidly growing markets. Innovative solutions in the fields of raw material extraction and processing and agriculture have traditionally been strong and are therefore particularly in demand, but energy, water, and environmental technologies are increasingly also in demand. The latter are a particular focus, as the region is already feeling the effects of climate change and is seeking solutions in these areas. Startups with solutions for industry, i.e., startups with a B2B focus, have good prospects. Particularly noteworthy here are the areas of IoT, (digital) health, smart grids, and smart cities. Mining 4.0, for example, is a local goal, and the Bavarian economy is precisely the right partner for this. There is therefore interest in topics such as Industry 4.0, smart production, AI, mechatronics, robotics, power electronics, environmental technology, sensor technology, etc.
Munich Startup: What are the experiences of local companies with startups? Have they already become accustomed to working with them?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): It varies; several local companies already work with startups. In recent years, the number of company foundings has risen sharply – startup ecosystems are developing particularly in the metropolises. The number of collaborations between companies and startups is also rising sharply at the moment. In South America, over 2,000 startups already work regularly with established companies, for example, with the help of "open innovation programs." Acceptance in South American companies is particularly high when existing collaborations are successful. Furthermore, similar to Europe, there have been successful government efforts for years to bring startups and existing companies together. Successes are already noticeable here, too.
Santiago and Buenos Aires are among the largest VC centers on the continent
Munich Startup: What does the investor landscape look like in South America? How cross-border do they operate?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): Some investors operate in the respective countries or regions. Santiago and Buenos Aires are already among the largest VC centers on the continent, and their numbers are continuing to grow. However, in recent years, the number of large venture capital firms viewing all of South America as a potential investment area has increased significantly, particularly with regard to Industry 4.0 and digital services.
Large companies with an interest in specific technologies and solutions are also certainly exciting potential investors. More than half of the 100 largest companies in South America are active in corporate venture capital and invest in innovative startups.
In the mining industry, there are also government-supported open innovation programs to introduce innovations into this sector. For example, the Expande innovation program in Chile was launched to promote the innovation ecosystem in the mining sector. See current open innovation calls. here.
Munich Startup: Are there any financiers that Munich residents should keep an eye on?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): Similar to Europe, VC funds in South America invest in startups based locally. Therefore, it is important for German startups to enter into collaborations with Latin American startups or companies. For example, Bavarian startups can access public funding from the Central Innovation Program for SMEs. www.zim.de and similarly, the South American partners on site will have access to funds from the initiatives there. In Argentina, for example, if an accelerator wants to finance a project, the amount can be doubled through the Fondo de Aceleración program of the Ministry of Production; Chile finances through Startup Chile national and international startups; in Colombia, the Colombian government agency INNpulsa supports startups' innovation and financing processes; and in Peru, the Innóvate Perú program has been financing projects on business innovation and productive development since 2014.
Matching between Bavarian and South American startups
The Bavarian Representative Office in South America supports this matching between Bavarian and South American startups or companies. Since 2013, we have supported foreign trade activities, location marketing activities, and contributed to fostering partnerships with Argentina, Chile, Colombia, and Peru. A key focus of our work is networking and maintaining contacts at the political level and with key interest groups in Latin America, such as the business community and local startup and venture capital landscapes. For example, a virtual venture capital delegation from Latin America was organized to Bavaria in October 2020. Several contacts have already been established. The Bavarian Representative Office will also hold a workshop for startups and venture capital firms from Bavaria and South America in 2021.
Munich Startup: How does a startup from Munich find the right business partners in the region?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): To establish contacts, both the AHKs in the respective countries and the local Bavarian representative offices, which have in-depth knowledge of local companies and economic opportunities and needs, are available. Bavarian companies can contact us directly through us, the Bavarian representative office for Argentina, Chile, Colombia, and Peru. Our office is open specifically to Bavarian companies and has excellent networks in all four countries.
The WENGAN program for Bavarian startups in Latin America
For Bavarian startups we have specifically developed the WENGANprogram. This accelerator program is aimed at Bavarian startups developing innovative, digital solutions for industry. Selected startups are provided with a co-working space in South America, allowing them to tap into a new Latin American market directly on-site, develop (or further develop) a suitable business model, and establish contact with potential partners.
Munich Startup: In addition to Argentina and Chile, WENGAN is also active in Colombia and Peru. How big are the differences between the four countries?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): Of course, there are differences between the countries. Chile is currently the most developed economy of the four, although Colombia and Peru have had very good economic growth in recent years. All three countries have a free trade agreement with the EU, which means that the tariffs for imports from Europe for most products are 0%. There are also differences in the economic activities of the countries. The oil and mining sectors, as well as agriculture, are among the traditional industries in Colombia. But other industries that have growth potential include infrastructure (including the new metro line in Bogota, regional train connections and e-mobility), logistics, tourism, environmental technology, renewable energies, software & IT, and healthcare. Peru, on the other hand, offers exciting opportunities, particularly in mining, healthcare, transport, energy, logistics and agriculture. We are happy to advise companies on business opportunities in these countries.
“Unfortunately, English is still a challenge for many people”
Munich Startup: Are there any special features when negotiating with potential partners?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): In Latin America, people are focused on the short term; unfortunately, English is still a challenge for many people, and the distances and travel times in Latin American megacities should not be underestimated. All Latin American countries are different, and so are their business cultures.
Munich Startup: What are the differences in corporate culture between Germany and South America?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): It's difficult to say this in general terms. Certainly, there are differences, for example in time management (the famous German punctuality) or personal interaction (many South Americans avoid openly rejecting plans and are quick to use informal language). However, most misunderstandings are quickly resolved.
Munich Startup: Are there important customs in the business world that Munich startups should definitely pay attention to?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): Meal appointments (lunch or dinner) are important. You should be punctual, even if you sometimes have to wait a long time; patience is an added value. Great importance is placed on personal contact, so you should definitely visit customers. A key difference between the European, and especially the German, business world and the South American one is a company's time orientation. German companies usually maintain a relatively long-term horizon and act very proactively. In Latin America, business is often short- and medium-term.
Don't tar all of Latin America with the same brush
Munich Startup: Which no-go should you absolutely avoid?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): You have to adapt to the conditions of each market; you can't copy everything 1:1. Even cross-border Latin American companies have a different business model for each country.
In general, one should avoid comparing Latin American countries in conversations and instead focus on the positive aspects of the country one is currently visiting.
You can't immediately start a conversation with a business topic; after the greeting, a few personal words are very important to get to know each other better. You have to take the time to do this.
Munich Startup: Do you have a special tip for Munich startups?
Bavarian Representation for South America (Argentina, Chile, Colombia and Peru): You should invest in long-term business relationships, have an understanding of cultural differences, not underestimate the issue of language and, above all, you need a local partner at the beginning.
