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Latin American tech in 2020 and beyond

I’m on stage. The Cemex Auditorium is packed. Countless faces of the Stanford GSB community are staring at me in silence. I look around and I’m the only person on stage. If not a panel, maybe a mistake? I think. Maybe something special happened to me? Unlikely. I feel the warmth of reflectors hitting me. I touch my face to check if I have one of those cool skin-colored mics on me. I don’t. Only my Airpods. Weird. I realized I’m not standing but seated on my desk, my hands on my computer. I’m typing. I’m writing this post.

As I slowly start to recognize former students and classmates, other GSB entrepreneurs and investors, the crowd starts booing. The noise gets stronger and stronger. It reminds me of that fiasco debate for class president of ITAM in 1996 when one of my jokes bombed and caused an angry roar. My hands are cold. Suddenly, a student with a red cap stands up, points at me angrily, and yells: ‘cut the bullshit!’.

The flight attendant gently touches my shoulder to wake me up. The plane is about to land.

Yes, predictions may seem like the ultimate BS from a VC. Maybe we would deserve a packed auditorium booing every time we hit publish to those predictions. Yet, we love to read these wishful lists. Fred Wilson submits this yearly ritual forces him ‘to get out of his comfort zone and imagine new and different things.’ and he publishes them to keep himself honest.

Surely my predictions are not as insightful as Fred’s, but it’s fun to write them and allows me to tell you about my dreams.

The Simpsons predict the future better than most VCs. — HipCityReg

Predictions for next year

We’re at that moment in the current business cycle, the longest economic expansion ever registered since 1900, where predicting a downturn is the most sensible stance for any serious fortuneteller. The probability of a global economic crisis starting next year is too high to ignore.

One negative economic scenario starts on November the 3rd. The Democratic Party wins a historic election. Rich of political capital, the new president announces a national reconciliation agenda focused on inequality and sustainability. The prospects of higher taxes and more regulation hit the international financial markets just as China and India’s slow down consolidates. Europe and Latin America economies are on a standstill. Still drained by the prolonged monetary stimulus of the previous decade, central banks around the world can only watch the recession coming.

However and whenever the next correction starts, I expect the venture and tech industries in Latin American to continue on the same 2019 trajectory with sufficient fuel and momentum to face next year’s uncertainty.

Today is a new day, today is a new day… — Chicken Little

Regional VC trends

  1. With nearly two billion dollars committed, regional and local VC firms in Latin America will have enough dry powder to support entrepreneurial tech’s current growth.

  2. Brazil, Mexico, and Colombia will consolidate as the leading entrepreneurial ecosystems in the region. Silicon Valley firms will continue investing as they diversify within the region.

  3. While working on Vision fund 2, Softbank will go upstream participating in smaller rounds and focus on helping portfolio companies launch in the region.

  4. Following a record year, highest-profile startups will close mega-rounds led by a diverse group of investor including more Chinese capital entering the region.

  5. The largest technolatinas fundraising this year will have a harder time as late-stage valuations face pressure globally. We may see one or two mega-mergers.

Some random sector notes

  1. It will be a confusing year for Fintech. Some verticals like wallets and lending will feel saturated, others, underinvested. M&A activity will add noise to the year.

  2. Latin American consumers will mostly ignore Superapps. They will buy, order food and bank where they find the best experience. The market will reward focus over bundles.

  3. As unbranded products inundate brick and mortar retail, entrepreneurs will build major brands around unique omnichannel experiences.

  4. Spanish speaking Latin America will catch up to the US with innovative property tech platforms. Traditional real estate investors will plunge in this trend helping the sector soar.

  5. While Saas will continue to lag Consumer tech, several B2B companies in logistics and financial services will silently build large footprints in the region.

The next decade — what won’t change.

I very frequently get the question: ‘What’s going to happen in the next 10 years. I almost never get the question: What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two… because you can build a business strategy around the things that are stable. — Jeff Bezos

As we enter the third decade of this century, I will follow Jeff Bezos’s advice and tell you what I think will not change. The following bullets will be buried on this digital time capsule to be opened in 2030.

  1. Consumers will continue to enjoy and visit malls and supermarkets. Branding, dining, and entertainment will merge to provide offline experiences unavailable online.

  2. People will go to hospitals for health care and attend campuses for education, including, of course, coders and entrepreneurs.

  3. Protected by national regulatory environments, major financial institutions will mostly prevail in Latin America. The best will complete their digital transformation leveraging M&A. Others will provide infrastructure services.

  4. Brazil tech will continue to be a beautiful, hopefully, very green island within our continent. Tech national champions will do very well but fail to conquer the region.

  5. As it looses economic and moral leadership around the world, the US will cling to its influence in Latin America. Big American tech companies will invest sufficiently to fend off Chinese.

  6. VC asset class will remain structurally similar. More data-driven for sure and certainly faster. The major firms in the region born last decade will still be around.

  7. Silicon Valley will lose its venture capital advantage but not its magic.

Before you go, there’s one thing I would like to predict, something that I see changing in the next decade. The twenties are going to be more female and more entrepreneurial than ever. Generation Z will need to get involved before it’s too late. We will experience a younger and kinder world. The earth will be ok.

Change is coming, whether you like it or not. — Greta Thunberg

I wish you all a happy decade, full of adventures and love.

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I write about my work as an investor, a lecturer, and a mentor. In general, musings about Latin American tech, VC and life.

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