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Softbank Innovation Fund in Latin America: A Rising Opportunity for SaaS

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Masayoshi Son, Chief Executive Officer of Softbank. Source: Tomohiro Ohsumi | Getty Images

Technology, especially in the SaaS space, is in the spotlight. With SoftBank’s recent announcement of a $5 billion fund for technological growth in Latin America, there’s never been a better time to be a technology company in the region.

The increased focus on startups means that this already-hot market just became an incubator for development and innovation, fueled by the international attention and money that SoftBank’s investment brings.

Read more about it:
Why Are So Many Brazilian Startups Attracting International Investment Funds?
Find Out Which Brazilian Startups Are Putting the Country in the Spotlight

In addition to funding local Latin American tech businesses, this massive investment has the potential to open up the Latin American market to global SaaS businesses even further.

After all, more innovation means that these growing companies will need more support, and will have more money to invest in software to improve and grow their businesses. This rising opportunity for small and medium-sized businesses, and global SaaS companies is our focus today.  

What is the Softbank Innovation Fund?

Before we can explore how the SoftBank Innovation Fund could potentially impact Latin America’s technology marketplace, let’s explore why the 36th-largest company in the world set their sights there in the first place.

There is so much innovation and disruption taking place in the region, and I believe the business opportunities have never been strongerMarcelo Claure, CEO of SoftBank Latin America

This local innovation is likely due to the region’s growing middle class, which has shifted consumer behavior. According to Softbank, “more than 50 million people in the region have entered the middle class” since 2000. This has generated never-before-seen disposable income. More than 375 million people use the internet, and there are 250 million cellphone users, which has outstripped digital penetration numbers in the United States.

This fund, which will start with a $2 billion initial investment, is set to take advantage of this region that’s ripe for change.

How Small and Medium Businesses Can Benefit

Although the fund was only announced in March 2019, SoftBank is no stranger to investments in Latin American companies. The tech investment company has already invested $1 billion in Rappi, a delivery company that started in Colombia, and more than $100 million in the Brazil-based ridesharing app 99.

Latest news about Softbank’s investment and Rappi: “SoftBank’s First Move Marks a Great Debut for Latin America

With the bulk of the fund currently up for grabs, there’s no telling how many small and medium-sized businesses and startups in the fields of fintech, ecommerce, mobility, insurance, or digital finance could find themselves quickly catapulted to unicorn status.

SoftBank is committed to supporting companies that show an ability to rapidly deploy technology at scale, and who are pioneers of disruptive innovation. It hasn’t named all of the fund’s recipients yet, but even just the announcement has put more focus on the growing Latin America market than ever before.

With SoftBank in the vanguard, we can expect that many more investment companies will follow in their footsteps, in an effort to take advantage of Latin America’s incredible growing potential. In the banking sector alone, around 70% of Latin America’s 400 million population is unbanked or underbanked, which leaves a huge sector of that marketplace ripe for the first viable competitor. There’s never been a better time to be focusing on innovation and product development in Latin America.

Can Existing Unicorns Get Even Bigger?

Nubank-brazilian-unicorn
Photo: Nunbank, Brazilian unicorn. Source: ShutterStock

As local companies start receiving more international attention, it’s likely that even the existing unicorns of Latin America will get even larger.

After an investment from SoftBank two years ago, 99 now operates in more than 400 cities. Nubank, PagSeguro, Stone Pagamentos, and ArcoEducacao have all been admitted to the ranks of unicorns, and with increased global attention, these companies only stand to grow larger in a thriving marketplace- potentially making them competitive on a global scale.

Latest news about Nubank in Latin America: Nubank’s New Move Towards Mexico: What Does This Mean for the Country?

Currently, startups in Brazil and Mexico have captured the most global attention- and the most funding. In addition to SoftBank stepping in to the Latin American marketplace, other investors like Walmart, Ant Financial, and Tencent have contributed to and acquired the first generation of Latin American unicorns.

With this global funding, there’s no telling the limits of how far these Latin American companies can go.

How Global SaaS Businesses Can Benefit

With more small and medium-sized businesses stepping into the spotlight, there’s never been a better time for SaaS businesses to enter the Latin American market. With innovative new ideas, companies need to find innovative solutions to make them a reality.

This responsibility is often shared with SaaS companies, whose services offer the necessary infrastructure to keep these new businesses and startups growing along with the rapidly-expanding marketplace.  

The software-and platform-as-a-service market in Latin America is forecast to be worth more than $5.31 billion by 2022. That’s a composite growth of 29.1%. Many international SaaS businesses are starting to look at strategies that will help them penetrate this growing marketplace. Content localization, boosting their social media presence, and opening local offices are key steps to winning contracts with local businesses.

Read more about SaaS market in Latin America:
Latin America’s Status as Worldwide SaaS Business Hub
Latin America Under the SaaS Radar

Although they may already have a massive global presence, localizing their business is key if these companies want to be able to compete in Latin America. Offering a pay-as-you-grow solution can make a global SaaS company even more profitable. This way, they can adapt to the needs of consumers and grow at a rate that suits the marketplace.  

It’s increasingly important for SaaS businesses to make contacts within the Latin American business and startup community as soon as possible. With the increased global attention that the SoftBank Innovation Fund has provided, competition in this space will quickly saturate the marketplace, making it harder for individual businesses to stand out. There are lots of global SaaS businesses that have had success within this marketplace, but they’re facing increasing competition from local companies like Nibo (Brazil), Tienda Nube (Argentina), and Runa HR (Mexico). Everyone wants a piece of this booming market.

What’s the Next Step?

All the recipients of the Innovation Fund have not yet been announced, but just the announcement was enough to focus major global attention on Latin America. Small and medium-sized businesses and startups have started to take advantage of increasing urban density and digitization of daily life, and have started innovating solutions and products that require software and platform support.

Brazil alone is the 8th largest economy in the world, with a nominal GDP of $2.05 trillion. Mexico follows a bit behind in the #15 spot with a GDP of $1.15 trillion.

There’s never been a better time to enter the Latin American market as a global SaaS business- but don’t wait too long. This region is in need of solutions now- there’s no telling when the market will hit saturation.

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