Lessons From Successful Companies When ExpandingBy Vincent Speranza | Wed, 04/27/2022 - 16:55
Between 2017 and 2021, venture capital investment in Latin America saw an 18x increase, which facilitated the expansion of technology companies. In 2021 alone, due to the effects of the pandemic and digital acceleration, the total money received by expanding companies was US$16 billion, a figure that represents 43 percent of venture's historical investment capital in the region in the last 10 years.
In other words, Latin America has become a niche for investment and expansion of technology companies thanks to the breadth of infrastructure and the adoption of technology.
At Endeavor, we have accompanied our entrepreneurs along this path for 20 years and we have seen how they have opened the doors to expansion within Latin America. Cases like Kavak, which is present in Mexico, Argentina and Brazil, Clara and Bitso, both with recent expansion to Colombia, the first present in seven more countries in the region and the second in four, speak of companies that have already crossed the border limits successfully and that have begun to create a legacy.
Aware of this recent phenomenon, Endeavor, through our “Soft Landing in Latin America” review, carried out together with our strategic partners Google, Mastercard and General Atlantic, undertook the task of understanding and compiling the expansion lessons and good practices of companies in the region to serve as a guide for the ecosystem to achieve a "Soft Landing."
Expansion Not Always the Right Answer
Before starting an expansion, it is crucial to know if it really is the right next step for your company. Do I have the real business capacity to carry out an expansion? Have I identified the market? Is it really worth allocating resources to expand into other markets or should I invest more in the region that has given me results? These are some key questions that arise in an expansion process and are summarized in the section, What is the opportunity cost for the company?
For this, it is necessary to anticipate the adverse scenarios that may arise in the new region. Being clear about these scenarios will make the decision to expand assume a reasonable measure of risk, supporting the challenges of hiring local talent, adapting the business model to the local market, cultural nuances, regulations and standards, among others.
Also, is important not to go it alone on this path but to have local, strategic partners for headhunting, legal advice and venture capital. The former will help find the right people to solve immediate challenges and allow the team to focus on other more pressing tasks; the second will provide knowledge about the laws, regulations and compliance needs in the target market; and the third, by having shares in the company, the VC will do everything possible to facilitate market entry.
Finally, when expanding, it is important to be flexible in terms of strategy. Several of the leaders of this process shared with us that no matter how much previous research is done, when leading the expansion process, you mainly learn as you go. There is no outlined or standardized path to carry out a successful expansion; however, current cases provide us with valuable lessons that we must certainly take into account.
The doors of the main markets in Latin America — Argentina, Brazil, Chile, Colombia, Mexico and Peru — are open and can provide market opportunities that take advantage of widespread digital adoption, the growth of human capital and a flourishing ecosystem of partners and allies. We hope that with this new tool, our entrepreneurial ecosystem will be strengthened in the regional and global environment.