Latin American tech isn’t really known for innovation; what it’s good at is spotting trends that have worked overseas and bringing them to the region. It’s why Latin America has such a vibrant startup ecosystem, full of proven ideas (albeit proven elsewhere).
It’s been so successful that even Latin America’s most traditional and innovation-weary companies have started to pay attention. As the startup ecosystem steadies itself after the collapse of SVB and the funding winter, bigger and more established local corporations have looked to fill the breach. These corporate innovators fall under three main categories.
The first is the most involved, with technological solutions incorporated in the companies’ existing products. Take Femsa: Founded in 1890, it’s one of the most powerful multinational corporations based in Mexico (and responsible for the world-famous Mexican Coca-Cola). Last year, it deployed a digital wallet via its network of ubiquitous convenience stores. Spin by Oxxo quickly blew most contenders out of the water, onboarding 3 million customers within six months. It took Mexico’s biggest digital bank, Nubank, around three years to reach those numbers.
Before, if you were a founder, your main question would be: Might Femsa launch a product like the one I’m working on? Today, the question is simply: How long have I got until Femsa launches this product?
But properly integrating new tech into larger institutions can be hard, so big companies take an alternate approach. This is the second type of corporate innovator — the type that prefers to launch a technologically focused spin-off. That’s what Banregio, one of Mexico’s biggest traditional banks, did when it created Hey Banco, a subsidiary set up to compete with other digital banks and appeal to younger clients.
The final type of corporate innovator is perhaps the most weary of getting their hands dirty, but keen to cash in. That’s where the corporate VC (CVC) comes into play. CVCs are the investment arms of global companies focused on old staples like paper (Brazil’s Suzano Ventures), cement (Mexico’s Cemex Ventures), or real estate (Argentina’s Shefa). These corporate funds not only encourage innovation and hope to make a profit, but may opt to acquire a startup outright if it ends up being a thumping success. Peter Seiffert of Valetec Capital, a CVC asset manager in Brazil, estimated that CVCs currently account for between 5%–10% of total local VC investments. He’s working to raise that to 25%–30%.