Say “Peru” to a lot of people and what comes to mind? Copper, ceviche and Macchu Pichu.
Yet bubbling beneath the surface—and already emerging—is an ecosystem of startups that will soon hold its own in South America with those in Argentina, Brazil, Chile and Colombia.
A recent trip to Lima, to moderate a session at an international business conference, afforded me the opportunity to spend time with one of the panelists—Juan Francisco Rosas, executive director of Wayra Peru.
In his assessment, “Technology entrepreneurship is experiencing a highly favorable climate for access to venture capital. The past 18 months have seen the emergence of incubators like Wayra that provides $50,000 for each startup we select, as well as government programs like Fidecom and Fyncit.”
There is, indeed, an awakening among VCs that high risk investments can also yield very high returns. Universities are doing their part, with entrepreneurship centers, engineering and computing programs and labs, and long-standing incubators like Lima Valley and organizations like Startup Academy are fostering many more.
One of Peru’s strategies to grow its tech startup sector is to adapt the winning practices of other countries, particularly neighboring ones like Chile and Colombia. From the former, a key success factor is “co-investment”—private capital matched or often doubled from the public sector. However, that by itself may not be sufficient.
As Wayra’s Juan Rosas notes, “Countries like Chile, Peru and Colombia are relatively small for attracting venture capital and private equity. These three nations should think about an integrated ‘regional’ zone for tapping investment, given the competition from large single markets such as Brazil and Mexico.”
Recognizably, obstacles are present. The Peruvian higher education needs to improve quality, access and physical infrastructure—especially labs—and faculty and the private sector need to develop a much closer relationship, one that meets the needs of local and multinational technology firms. The availability and ease of access to funding for start-ups are other areas that must be addressed. Finally, the paucity of angel investors (there are only ten at present!) must increase by a factor of ten to make a real impact on the entrepreneurial ecosystem in technology.
Nevertheless, Peru indeed possesses some very significant advantages. These include first-rate IT talent, high growth among industries that place a premium on technology and innovation, and a favorable geographic position with neighbors Chile and Colombia that are also faring very well economically and have cultivated excellent talent for their knowledge-based industries.
Peruvian tech startups, valued at over $3 million, were unimaginable five to 10 years ago.
Today, notable startups like Cinepapaya, Plaza Points, Arte Manifiesto, Face Me and Ando Ayudando are garnering attention from investors and consumers and making their mark in the marketplace. Cinepapaya, in particular, has been the darling of investors. Pitching at Florida International University’s third Americas Venture Capital Conference and the first Wayra Global Demo Day—both held in December 2012—Cinepapaya has raised funding from 500 Startups and has its eye on markets beyond its border.
As with all other nations, government plays an important role in Peru, as well. Late last year the Ministry for Industry announced plans to allocate $20 million for a fund to assist technology startups get off the ground.
Modeled after Start-Up Chile that invests $40,000 in entrepreneurs from all over the world that move to Chile to develop and launch their endeavors, Peru hopes that spreading the word on campuses (targeting science, math and engineering students) and promoting Peru’s technology ecosystem regionally and globally will achieve the intended results.
The future is bright for technology startups in Peru and the economy overall. One can only hope there will be many more Cinepapayas on the horizon.
Jerry Haar is a professor, associate dean at FIU’s College of Business, and director of FIU’s Pino Global Entrepreneurship Center. The opinions expressed in this column are the writer’s and do not necessarily reflect the views or opinions of either FIU or the College of Business.
View all articles by Jerry Haar.
This column originally appeared in The Miami Herald on April 9, 2013.