One of the most common questions I get asked about the Peru startup ecosystem is, “What is missing?,” It’s a fair, well-intended question, but it’s challenging for me to respond adequately. The conversation typically devolves into a circular argument around which inputs to the startup ecosystem – capital, talent, knowledge or business ideas – are missing.
Fortunately, the necessary inputs of capital, talent and business ideas do exist in Peru. The challenge is that significant amounts of patient capital are directed to other asset classes, talented professionals work in corporate roles or find work abroad, and good business ideas rarely get off the ground.
So, if the inputs exist, what’s to be done? I find it more productive, and accurate, to ask a different question. Rather than trying to find what is missing, we can ask: What needs to happen to make the startup ecosystem more vibrant? What are the activities and intangibles that can get us to the next stage?
We need to activate the inputs by fostering the intangibles that really drive startup ecosystem growth. These intangibles include, among other things, frictionless connections, storytelling, international validation and success stories.
Frictionless connections inside and warm intros outside. Local startup meetups and accelerator programs are necessary to build a critical mass of interactions. Events are great ways to facilitate connections within the community. UTEC Ventures has consistently served this role as a great meeting place for founders. Warm intros are also valuable in order to connect founders with capital that is not actively searching for opportunities in Peru. These connections also provide the all-important trust factor. Seed stage funds like AVP Ventures, B Venture Capital, and Winnipeg make intros to other investors to help founders raise additional capital outside of Peru.
Effective storytelling. Ultimately, founders and investors need to do a better job sharing our stories. This includes the passion of why we are building and also the details of how we will do it. It involves having a top-notch pitch deck and communicating effectively the same level of what the market expects from U.S. startups. Each level of the ecosystem needs to do their part to share the investment case for Peru and Latin America. This positive storytelling can be accomplished by joining forces among startups and funds. For example, a roadshow in which Peru-based founders and investors travel together to meet investors.
Validation by benchmarking internationally. When Peru startups raise money they compete for capital with their peers across the globe. Because of this, it is essential to demonstrate that they compare favorably with startups in other markets based on a standard criteria. As this happens, it will provide positive signaling to potential investors in Peru and prove-out the investment case. Fortunately, this benchmarking has been achieved by Peru startups who have entered global programs, including Y-Combinator, Techstars, and Endeavor.
Success stories. Discussing case studies of successful growth stories and exits is another key intangible to drive ecosystem growth. We can share about the diverse range of founders who have achieved significant milestones in their startup journeys. We can highlight that scaling out of Peru is normal, M&A exits are possible through multiple routes. For example, the sale of Culqi to BCP is a testament to founder Amparo Nalvarte’s ability to navigate complex transactions and achieve a positive outcome for investors. These stories of past success will get investors’ blood flowing to motivate them to invest.
While daunting, all of these activities are things we can do with the ecosystem inputs Peru has now. These actions will reinforce what we have now and get more people and money on-board.
An example of these intangibles in action is the 2022 investment round of uDocz, a Peru Edtech startup. The main entry point into the startup community was the UTEC Ventures accelerator program, a common, frictionless contact that led to other connections. In part due to the support of this program, uDocz had the right storytelling with a credible fundraising strategy. Subsequently, local Peruvian venture capital fund, Salkantay Ventures showed interest in investing and vouched for the company when it made a warm connection with GSV, a top global Edtech fund. This validation eventually led to a successful investment round that combined a mix of local and international funds investors. uDocz used the funds raised to execute a regional expansion strategy.
The uDocz case shows a round for further developing Peru’s startup ecosystem. Our focus should shift from identifying missing factor inputs to enhancing the soft skills and intangibles that activate the inputs of capital, talent and business ideas. We can establish the connections and trust that is needed for the startup community to reach the level of its true potential.
Ruta Startup 