Latin America Under the SaaS Radar
Some insights from the first Latin American edition of SaaStock, main global event of the industry, that took place in São Paulo, April 23-24.
WhatsApp, Instagram, Uber, LinkedIn, Tinder… What kind of changes have these and other apps you use – some of them on a daily basis – brought into your life? They are now such rooted elements in our everyday routine, that sometimes we don’t even realize we are actually living in the future we started imagining years ago, isn’t that right? Well, just be aware that all of these services fit into a business model showing a strong upward trend going forward, as it has been generating billions of dollars in new investments, especially in markets such as Latin America.
A trend seen by many experts in the early 2000s as unlikely to scale, eventually – and coupled with modern public policies and major investments in the new economy – changed the perspective of how 4 billion people around the world would exchange messages, order food, go on a date and even switch on the lights in their houses. Not to mention the work environment.
Note that it is a mistake to think that access to these solutions is restricted to first-world markets. As the SaaS (software as a service) model entered emerging markets such as Brazil, Mexico, Colombia and Chile, it was not only a trigger to change people’s consumption behavior altogether, but also a driver for the development of several companies that, over time, managed to leave behind cultural complexes and are now constantly on the radar of new unicorns and companies with large VC contributions.
Here are some examples of Latin companies that are emerging as leading players in this market:
- 99 (Brazil-born rideshare giant was acquired by Didi Chuxing in Jan. 2018 at a reported valuation over US$1b).
- PagSeguro (Brazilian payments company raised US$2.7b in NYSE IPO in Jan. 2018).
- NuBank (Brazilian fintech raised over US$400m in 2018 at valuations of US$2b+ and US$4b+).
- Rappi (Colombian last-mile delivery service raised US$385m+ over two rounds in 2018, the latter at a unicorn valuation.)
- Ascenty (Digital Reality acquired a controlling stake in Brazilian data center/IT provider Ascenty at a valuation over US$1.8b in Sept. 2018).
- Arco Educação (Brazilian learning systems provider IPO’ed on the Nasdaq in Oct. 2018 and was valued at over US$1b by the end of the first day).
- Stone Pagamentos (Brazilian payments company IPO’d on the Nasdaq in Oct. 2018, raising US$1.1b for an initial market cap of ~US$8.7b).
- Ualá (Goldman Sachs led a US$34m investment in Ualá, an Argentine mobile banking app, with participation from monashees, Ribbit Capital, Jefferies Group LLC, Cohen’s Point72 Ventures and Soros’s family office).
- Gympass (Brazilian startup of gym subscription plans, Gympass closed a deal that could raise up to US$ 500 million, with investments led by Japanese group Softbank, becoming the country’s latest unicorn company).
- EBANX (Brazilian fintech received a US$ 30 million investment from FTV Capital in 2018. The startup has grown exponentially in recent years and is one of the Brazilian bets to enter the list of the country’s unicorns soon).
- Movile (A mobile tech services provider from Brazil, whose main business is the iFood app, received a US$ 124 million investment from Naspers and Innova Capital)
- Resultados Digitais (The Brazilian digital marketing startup received a US$ 19.2 million investment from TPG Growth. The fund is known for having ventured into startups such as Uber, Spotify and Airbnb.)
- RockContent (A content marketing startup, the Brazilian company received a total injection of R$ 6 million in 2015 from investors e.Bricks and Digital News Ventures. With recurring annual revenues of nearly R$ 40 million, they recently opened an office in Mexico).
And you know what’s the most interesting part? All these companies have grown on the strength and expansion of their own native consumer markets, but are now broadening their operations into other countries in the region.
Strategic players that are starting to place themselves in the region confirm such growth. And this is what the first Latin American edition of SaaStock, regarded worldwide as the most important event for the industry, was focused on addressing, April 23-24 in São Paulo. The event brought together leaders and investors to discuss the prospects of market expansion and also to share success cases for anyone willing to develop their SaaS business in Latin America.
The roadmap to success
Among the panels of the event, the one led by Eric Santos, CEO at Resultados Digitais, really stood out. “The rollercoaster to scale your business in Latin America” was its core theme. In addition to revealing very interesting insights into RD’s growth history, he also shared six steps to succeed in the SaaS industry in the region:
1 – Education: You need to educate the market about the value your solution delivers and become a content benchmark for the customer when faced with the type of problem you solve. E.g.: A professional that is learning about Inside Sales holds SalesForce as a reference.
2 – Product: Localizing your product is key to growing in Latin America. You must be well aware of the local markets’ needs to be able to develop an appealing product. In this respect, it is worth stressing the importance of language (Spanish is spoken throughout, except in Brazil, which is a Portuguese-speaking country), culture and, mainly, how your customer pays for your service (Latin customers prefer to pay using local payment methods and currencies).
3 – Partner Programs: It is essential to create an ecosystem where strategic agents are connected with the value generated by your business solution – both technically and commercially. However, it is important to understand how such value is grasped by these partners and to develop a program that makes them feel comfortable associating their brand with yours and distributing your solution.
4 – Invest in Customer Success: Customer success must be at the heart of your strategies. This has already proven to be effective and it is important to understand that this is not just about having a good after-sale, but about being attentive to the customer’s entire journey when in contact with your solution.
5 – Revenue: Investing in SaaS is nothing more than investing in the purest DNA of scalability. Exploring the latest in terms of revenue generation will help you break the myths on the need for local business teams to scale your business in Latin America. Inside Sales, Self-Services and Channels already represent the main distribution strategies for SaaS companies in Latin America.
6 – People: Despite the whole spectrum of the technology behind a solution, remember that your brand reflects the satisfaction of those who develop it. Disruptive solutions only escalate with disruptive teams.
There has never been a better time
It is no wonder that the SaaS industry radar is aimed at Latin America. Like any other emerging market, which has long been trapped in traditional consumer patterns, Latin America is today one of the most deprived markets for effective solutions to support its changing consumption and growth needs.
When compared to markets such as the United States or Europe, customer acquisition costs are lower – not only due to less competition, but also because of the availability of tools that allow the validation of these markets in a simple, fast and cheap way. The bottom line? It has never been so easy to expand into the region.