SaaS_Business_Latin_America
Digital Goods

Latin America’s Status as Worldwide SaaS Business Hub

In a tech-centered world, no region has experienced the potential surrounding technological advancements like Latin America. Since the region consists of emerging markets, the worldwide capability of the web gives businesses a particular edge they wouldn’t ordinarily have available.

What makes that edge possible? Software-as-a-service (SaaS) business technology that brings costs down and shoots consumer accessibility up.

This sector is the hottest market in technology right now. Its appeal to entrepreneurial and enterprising businesses alike have made analysts predict its rise at 24.79%, annually. Latin America’s top billing as a desirable market for SaaS businesses to invest in is no surprise.

Here’s why.

The Big Tech Environment in Latin America

A thriving tech culture in Latin America is not as surprising as it may seem. Though much of LatAm consists of emerging economies, technology offers a low expense way to reach the entire world. The rise in industry is so strong, that, according to NASDAQ.com, despite Brazil’s recent recession, the tech industry continued to thrive.

Local initiatives concentrating on the field are supported by government programs. The result is that countries that were previously viewed as unstable to the rest of the world, are becoming valuable locations. This new status as global destination for technology investment has created a boom in available talent. According to Forbes, worker ambition is strong because this kind of opportunity hasn’t existed before, it’s changing lifestyles. There’s an exceptional talent pool of people who want to work, and work hard.

What does this have to do with SaaS? Plenty.

LatAm countries are big in startups ventures. Unlike America’s Silicon Valley, where there’s a significant cost risk, in Latin America the countries are able to work at a lower cost, thus creating a high success rate. But to make these startups thrive, they benefit greatly from SaaS platforms.

The result is expected – SaaS business soars in Latin America.        .

What’s Driving the Technology and SaaS Business Boom?

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Ariel Lambrecht, one of the founders of the Brazilian unicorn “99”. Photo: IstoÉ Dinheiro

Not only one, but two major industries that are causing the need for so much tech and SaaS support: startups and fintechs. Latin America is the fourth largest regional online market with 438 million internet users in 2018, according to Statista. That’s why the new solutions offered by startups are so welcome between Latin Americans.

By the other hand, the bank’s solutions in Latin American countries still being traditional and bureaucratic, this can seem like a big obstacle but turns to be a huge opportunity for fintechs. Aiming to reduce bureaucracy and update financial business in the region, fintechs are winning the market. One of the main targets of these companies is the unbanked population. In Mexico, about 42 million people don’t have a bank account. In Brazil, the average overdraft percentage is 190% per consumer. At the same time, credit card rates are in the triple digits.

Fintech corporations hamper many of the financial problems regarding banks and credit cards. Companies like Nubank, which brought in $80 million in December of 2016 through Series D funding (one of roughly 244 fintechs in Brazil alone), are taking banking to the smartphone, and using the technology that’s accessible and trustworthy.

According to MarketWatch, the SaaS market in Latin American countries will grow at a CAGR of 24.79% from 2018-2023. The local businesses who increase their competitiveness and cutting-edge reputation use SaaS – it’s a resource that allows these companies to compete with the rest of the world. The need for enterprise-level infrastructure that doesn’t exist locally is a major benefit of the SaaS business for emerging markets.

What’s more, SaaS directly pays into on-demand economies – original business models, and reliable, up-to-date subscription services that keep customers in the loop with of-the-moment software functions. SaaS accomplishes just this task, making it desirable to consumers and startups alike.

Where are the Prime SaaS Business Locales?

Brazil, Mexico, Colombia, and Chile all hold strong places in the SaaS and technology markets.

Brazil, the powerhouse in Latin America, has had staggering success in the startup world. In November, the delivery service iFood generated more funds alone than what the whole of Latin America raised in the year 2016. Unicorns are now roaming Brazil, the first of which was the rideshare app 99, which was snapped up by Didi Chuxing in January 2019.

Latest news about the startup market in Brazil: “Foreign investments in Brazilian startups grow 51% in one year”

While Colombia and Chile are smaller markets than Brazil and Mexico, these two countries are major players in the SaaS business sector. The entrepreneurial spirit in Colombia is strong, and the startup culture is fierce. Colombia is predicted to become one of the three most innovative economies by 2025. Currently, there are 507 startups in Colombia. Heavy hitters include Rappi, the get-anything online delivery service, Mercadoni, an online grocery delivery service based in Bogota, Platzi, an online learning platform, and Farmfolio, an online crowdfunding site targeted toward farming projects located in Latin America.

More news about Rappi: “SoftBank’s First Move Marks a Great Debut for Latin America

Colombia holds its annual Andicom, an event that attracts both Colombian and foreign industry experts in an effort to share and collaborate on what’s hot in the industry. President Ivan Duque is championing the sector, making efforts to grow through proposals that include cutting regulations, creating artificial intelligence centers, use of telemedicine, and a variety of offering incentives regarding new technologies.

Chile has also soared in the tech industry, much in part from its Start-Up Chile program. For nearly a decade the government-sponsored event attracted entrepreneurs to invest up to $40,000 USD, with no equity. The program allows foreigners interested in starting a business in Chile to obtain a year-long visa.

Santiago, or “Chilecon Valley,” is thriving off the efforts, with more than 800 accepted applications from 65 countries. Many companies do not leave Chile once their Start-Up term is complete – they stay, bringing in $26 million from investment capital. Santiago is considered one of the Global Cities of the Future.

The Big Guns – The Global Companies Investing

The start-ups are one thing, but corporate acquisition is really where the big plays are happening. Because of SaaS business, great ideas are found all over the world. That means big paydays for LatAm countries.

One of the biggest headline-generating acquisitions in late 2018 was when Walmart bought Cornershop, a Latin American startup. The $225 million USD acquisition caused ripples in the sector. Like others who’ve received success, the founders are supporting their home and generating the money locally, growing the thriving scene even more.

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Softbanks’ CEO. Photo: Reuters

SoftBank Group out of Tokyo is funding $5 billion USD in LatAm tech startups. Their focus is on mid-late stage business models. The draw? A smaller market, with less competition and less cost, makes it incredibly appealing. Of course, to become a mid-late stage business, a startup must have some kind of infrastructure, making the need for SaaS even greater.

SoftBank isn’t the only Asian entity interested in all that LatAm has to offer. Venture capitalists in China have invested $1 billion USD since early 2017. The nation once set the standard for tech, but now they’re finding they can learn from Latin America.

According to Bloomberg, China moves include:  “Hangzhou-based Tian Ge Interactive Holdings Ltd., which wants to build an internet finance platform in Mexico. Phonemaker Transsion Holdings is preparing to set up operations in Colombia. China Mobile Games & Entertainment Group plans to distribute mobile games in Mexico. Ofo, the Beijing-based bicycle sharing service, is preparing to make its first Latin America foray by entering Mexico, said Chris Taylor, who runs its U.S. operations.”

SaaS is a major factor in the LatAm tech surge. Without it, venture capitalists and enterprising corporations wouldn’t be able to access these great, small businesses with powerful ideas.

The industry is still growing; the rise is only going to continue, making now a great time to invest in LatAm tech and SaaS industries.