Tropical Gringo

When my friend, Jorge Pulido, from PriceWaterHouse invited me to a launch party, I never expected it to be such an impressive launch of an Internet company for the Colombian market. The company is called BrandsBag and it’s entering full speed ahead into the Colombian market with a flash sales site targeting women who love fashion.

What’s most interesting about this new endeavor is that it is a mix of impressive entrepreneurs from Brazil, Argentina and Colombia that have decided to start their Latin American strategy from Colombia.  As I mentioned previously in a NYTimes article, the Brazilian Internet market is on fire and more and more US VC’s are investing in that country.  Nevertheless, witnessing the impressive launch tonight of BrandsBag confirms our confidence in Colombia as a country from which to launch Latin American-wide Internet initiatives and funding these initiatives through our new Micro VC fund,  Tayrona Ventures.

I had the chance to meet the leaders of BrandsBag such as Diego Rodriguez and Delio Epaminondas (with me in the photo on the left).  These are sharp business people who are extremely serious about transforming the shopping experience in the region and see Colombia as an excellent lauchpad to achieve this objective throughout Latin America.  The country boasts a growing middle class, internet penetration and ecommerce increasing at above 40% and a market with overpriced fashion items (sometimes more than 100% markup above prices in other countries).

As Marc Andreessen mentioned in a previous WSJ article, software is indeed eating up industry after industry as digital innovation takes hold. In countries such as Colombia, the potential is even greater since competition in markets such as retail is much less ferocious allowing incumbents to charge an arm and a leg.  These types of companies are ripe for disruption and make Colombia an ideal market to provide new (digital) offerings that can be incredibly profitable and still undercut the established players.  BrandsBag is betting big on Colombia and in the process has a chance to showcase the potential of this country as a profitable gateway/launchpad to the rest of Latin America.

Today, I had the pleasure of meeting Ricardo Guerrero during his brief visit to Bogota, Colombia.  We’ll be seeing more of each other during South by Southwest (SxSW) next week, but it was great meeting in person.  We had an enjoyable breakfast and, afterwards, as I smoked my stogie and annoyed him with my cigar smoke, he talked about how he got into Social Media.  After creating a radio show in Texas and working at that for a while, among other things, he started working for Dell Computer.  Then, in 2007 after a visit to SxSW, he got introduced to Twiiter and found a way to use it to sell refurbished PCs for Dell Outlet. Now that’s digital innovation.

Ricardo has a new company called Stwittergy which is developing a tool to help businesses better use Twitter to achieve business objectives.  He also has his own agency aptly named Social Media Dynamo.  Nevertheless, he’s not completely disconnected from his Latin American roots and is working with colleague and friend Fernando LaBastida in setting up the first Americas IT Forum the day before SxSW (next week) in Austin.

I was able to record a small portion of our chat and here it is:

Yesterday, during a rainy afternoon in Bogotá, I interviewed the co-founders of Latin American Payments, Jose Velez and Martin Schrimpff, which offers a robust payments platform, anti-fraud system and payments collection all designed specifically for the needs of the Latin American market.  The company is PCI certified, have won international prizes for their platform and are already working with clients such as Sony, Amway, Harvard Business Review and Telefonica and are starting to speak with international retailers, gaming companies and travel players among others.

Latin American Payments is a division of PagosOnline, a Colombian start-up with almost 100 employees which counts Buscapé, the large Brazilian comparison shopping site, as it’s majority shareholder (75%).  As many know, the South African investment firm, Naspers, bought almost all of Buscapé’s shares for well over US $300M a couple of years back and is busy building it into a Latin American powerhouse (along with it’s satellite companies).

As the pictures below show, there’s quite a bit of hustle and bustle going on right now at Latin American Payments.  Jose and Martin are busy complementing an impressive team of developers and business people from top banks and international credit card companies as they go after a Latin American e-commerce market that is surging almost 40% annually to $21.8B.

It might seem strange to offer a Latin American solution from Colombia instead of Mexico or Brazil.  Nevertheless, it makes more sense if you consider that, unfortunately, Colombia is one of the most challenging regions for combating credit card and ATM fraud in the world.  Several years back, I was talking to a local bank executive who told me that ATM machine makers had to continually innovate in Colombia (some of these innovations found their way into the entire product line) because of the “creativity” with which some Colombians would try to “beat the system.”

Those Colombians are the bane of resourceful and entrepreneurial Colombians like the people at Latin American Payments who are using their ingenuity and hard work to make sure their clients are protected from losses.  Incredibly, as happens all around the world, when you are challenged to survive (and thrive) in such hostile circumstances, you come out stronger.  That’s one of the reasons that Jose and Martin are so confident about the future.

Nonetheless, there are competitors.  Paypal is working to penetrate the market further and local competitors are also developing their own solutions and expand to other countries.  Jose and Martin are conscious of this, but believe that 8 years of experience, constant investment in their platform and the ability of clients to collect payments from customers in a variety of ways (overcoming the low credit card penetration in the region) are key assets.

The final asset, they believe, which gives them an edge is the entrepreneurial environment they’ve fomented and the impressive team of young, knowledgeable collaborators they are assembling with the necessary chops to execute on the vision.  Finally, (and for disclosure purposes), I the company its sponsorship of the Founder Institute in Colombia (for which I am the director).

Latin American Payments from Tropical Gringo on Vimeo.

I had a great coffee the other day at one of the many Juan Valdez locations here in Bogotá with an entrepreneur named Daniel Dominguez.  His company is called i-Azul, which was focusing on QR codes in general, and is pivoting by offering a more complete ticketing solution with Tickqr.  It goes a bit further than ticketing solutions such as Eventbrite in that, among other things, it makes better use of mobile devices (sms or smartphones).

Daniel, who has a Masters in Robotics, is still in the process of pivoting his company.  Although, there’s still quite a ways to go, he’s shown persistence and tenacity in becoming a start-up entrepreneur as he’s been at this for a couple of years.  He’s got a great quality that I think will help him tremendously, which his interest in learning and getting guidance from the right places.  He’s been to Silicon Valley to get a feel for the start-up environment there and will be applying to the Founder Institute here in Bogotá.

There is definitely an entrepreneurial culture in Colombia, but what I feel has been lacking is the development of high impact businesses.  In other industries, there are some great examples such as BodyTech, Andres Carne de Res and others.  Nevertheless, I believe that this country really needs to connect with the rest of the world and expand its start-up and investor networks to include Silicon Valley and other places and that’s one of the things that I hope that the Founder Institute will help with.  Apply here.

Brazilian startup and investment activity just continues to heat up.  It’s not enough that, at the end of last year, Tiger Management and Accel partners invested US $30M in Vostu and Insight Venture Partners invested an undisclosed amount in Mentez, two Brazilian social gaming companies.  Now, comes news that none other than premier VC firm, Benchmark Capital, just invested in Brazilian social buying company Peixe Urbano.  Conclusion: Brazil is hot, hot, hot!

It was only six months ago that I wrote that article for VentureBeat and the NYTimes.com about the fact that US web companies are starting to look at Latin America for strategic acquisitions.  Now, VC’s are looking at countries such as Brazil, Chile and Argentina, but Brazil is, by far, the big blip on their radar screens.

It’s all part of a global trend whereby new players are disrupting established companies in industry after industry by incorporating the ever present web (mobile and otherwise) into their unique value proposition.  These new players enter markets with more competitive business models and start to take share away from traditional companies in industries such as retail, commerce, media, financial services, entertainment and more.

There are a number of reasons why Brazil is in the lead including the size of the country, the investments in infrastructure and the growing importance of that economy on the world stage.  Nevertheless, another reason is the Brazilians themselves (professionalism, creativity, world view, and ability to execute) and, here, other countries in Latin America can learn a thing or two (although, I think Chileans and Argentineans are keeping step nicely).

This Tuesday it was announced that Google CEO, Eric Schmidt’s, investment vehicle, Tomorrow Ventures, invested in a Chilean web event management company called Welcu. The company has already gartnered an impressive list of corporate clients from Coca-cola to BBDO.  The fact that Schmidt’s investment company chose a company in Latin America for it’s 22nd investment attests to the fact that this region should be on the radar screen of more and more investors.

It’s important to note that Welcu is not simply a clone of established companies such as Eventbrite and others, but provides some innovation by more thoroughly integrating a social layer throughout its event management platform. The company has an impressive list of previous investors including Oskar Hjertonsson who recently sold his company (along with his cofounders) to Groupon.

I’ve been so busy contributing to other publications that I’ve been falling behind in posting to my own blog.  Lately, I’ve been writing articles about companies such as Vivareal in Colombia and Compra3 in Brazil each with excellent prospects for the future. I’ve been psyched to see these articles published in the NYTimes and in Venturebeat.  There is such a tremendous opportunity in this region for setting up dev centers, targeting the region for products and services or both.

I just got back from a night of Salsa and Sushi with the Mrs. and, after waking up at 2:30am this morning should be hitting the sack.  Nevertheless, as if the day hasn’t been good enough, I just read Chris Brogan’s post on Colombia.  By now, I’m used to seeing fellow “Gringos” wowed by the life down here, but it’s so great to see someone who appreciates that aspect, but, more importantly, objectively, sees the tremendous potential down here.

That was just the cap to a truly amazing day where, aside from happy family times, I had some great meetings with top executives at two major multinationals down here, a financial services company and a friend who works at Twitter that I finally met in person (she’s down here).  Aside from all of this, Compra3 (amazing founders) had their production launch of their social commerce site, which I was able to write about to get the word out.

I should really back all of this up with more numbers and statistics, but I’m too tired tonight.  I’ll leave that for another post.

Conclusion:  there’s no doubt in my mind that Latin America is going through a transformation and that, within the next 5 years, the number of US VC/angel backed digital innovators with either dev centers or target market (or both) down here will explode.

A few days ago, I wrote a post about entrepreneur Ricardo Quesada who is the technical lead of the open source iPhone game development platform called Cocos2d. Now comes the news that Sequoia and some Angels have invested in Unity who “plays” in the same space. Interestingly, Unity reports less customers (325) than Cocos2d.

Sequoia and the Angels have most certainly laid out some funds because they see excellent growth in this space.  Aside from this, I’m sure they were favorably impressed with Unity’s offering and its management team.  Ricardo is hard at work at polishing his product, which is on it’s 0.82 release.  Nevertheless, as soon as he finishes this phase, it would be great if he could build a team (I’m sure he can build a capable one) and get one or more backers to fulfill the potential of Cocos2d. Go Ricardo Go!

A Conversation with Emiliano Kargieman, Argentinian, digital innovator and founder of Core Security Technologies

When you start a blog, everyone tells ya, it’s important to choose a topic that you’re passionate about.  I’ve got a number of hobbies (none, very healthy) such as smoking stogies, watching movies and laying on the beach.  However, I’m passionate about digital innovation in Latin America and that’s what I want to write about.  Part of the reason may be because I like thinking out of the box or I just like the underdog storyline and believe that something like creating world-class hi-tech firms in Latin America is possible.

This theory is all well and good, but there’s nothing like feeling of talking with and/or meeting someone who’s actually accomplished it.  That’s the sensation I got while talking with Emiliano Kargieman the other day.  Emiliano, a mathematician by training, wanted to focus on big challenges to flex his math and programming skills so, in 1996, he decided, at the age of 19, to get together with his buddies and build a security software company focused on the international market.  Though that age might seem young to some, Emiliano had already run three companies by this time and had been programming for nine years.

Emiliano’s self-deprecating humor belies a passion for competing in the global marketplace and half-jokingly adds that, thanks to the fact that none of the founders had an MBA, enabled them to break existing paradigms in Latin America and build a global software firm from Argentina.  I didn’t delve too deeply into this experience during my conversation with Emliano, but suffice it to say that Core Security Technologies today is a company with sales headquarters in Boston, millions of dollars in revenue, hundreds of customers around the globe and millions of dollars in Venture Capital investment.

The focus of my discussion with the Argentinean entrepreneur was more on the future.    As a result of his success with Core Security Technologies, he decided to create an early-stage VC firm, Aconcagua Ventures, with some of his colleagues.  One of the ventures that have come out of this initiative is Popego, Inc. a 12-person company focused on filtering the information on the web through the use of Artificial Intelligence and other technologies.   The company was recently named one of the most innovative start-ups of 2008 by Techcrunch.

Though Popego certainly has some challenges ahead of it particularly in the realm of customer acquisition, it has a lot of sharp minds behind it as well as a backer with demonstrated success in the marketplace.  The pain point that Emiliano is attacking is a real one (accelerating clutter and noise on the web) and quite ambitious.  Basically, its all part of a realization that is more obvious today than it was in 1996 when Emiliano started: emerging markets such as Latin America have a role to play in terms of global digital innovation.  It’s no longer a question of access to the global stage, but more a matter of whether Latin American entrepreneurs decide to participate.

As he mentions, in a world where cloud computing is placing enormous processing resources at the disposal of start-ups and the internet at as medium permits global access in an instant, the old paradigms in Latin America (and other markets) of focusing exclusively on local markets are obsolete.   Indeed, I believe that, although he represents an exception today in Latin America, as he and other entrepreneurs in emerging markets continue to prove themselves, they will provide validity to the thesis that the distinction is not so much one of geographic location, but more, as Emiliano explains, risk adversity.

As a mathematician, Emiliano sees no reason to expend the same effort for little return.  He admires entrepreneurs such as Jeff Bezos who didn’t just focus his efforts in offering a percentage more books than his competitors, but thought in terms of orders of magnitude of improvement.   Along these lines, he believes in organizing Latin American talent around solutions that offer orders of magnitude more value.

True to his philosophy, he is focusing on a big, challenging problems.  As he elucidates, IBM won the hardware wars, Microsoft the software wars and Google the information wars.  The next space up for grabs is what he calls, “Information Contextualization” or making the web more meaningful for each user and this is where Popego is making every effort to clear a space for itself.

Similar to the opinions expressed by the CEO of Zoho, Emiliano sees definite advantages to creating start-ups in Latin America and particularly in countries such as Argentina.  In these countries, risk is part of daily life and the vicissitudes of that countries economy only increased the ranks of entrepreneurs looking to create new value.  Also, he, as well as myself, is a fan of the initiatives that Chile is implementing to drive entrepreneurism.  The specific programs were recently detailed by UC-Berkely professor Vivek Wadhwa.

In the end, with entrepreneurs such as Emiliano in Latin America’s ranks, I’m assured to be writing about Digital Innovation in Latin America for quite a while.

Everyday, I’m continually fascinated by new things happening in different areas having to do with digital media such as social networking and the real-time web among others.  Nevertheless, I’ve come to realize from bitter experience that actually getting websites or blogs constructed with a proactive, thorough and customer-oriented developer is virgin territory waiting to be exploited.

Now, I’m not talking about technical challenges and customer-developer brainstorming at the beginning of the project.  I’m talking about incredible lulls in the work schedule where things just stop happening unless you, as the customer, ping your developer.  In some instances, if one were to simply wait for the developer to perform the work that’s on the docket, you’d better wait sitting down ‘cause it’s not unusual for things to slide without continual monitoring. (more…)