Sandwiched between the giant economies of Brazil and Argentina, Uruguay has always been at a disadvantage in attracting foreign investment in its promising tech sector.
But with the recent emergence of the country’s first unicorn and another company developing a sophisticated coronavirus application within a week, the small Latin American economy has placed itself more firmly on the world map.
Google and Apple heaped praise on GeneXus after the Montevideo-based software company launched an effort to develop a sophisticated Covid-19 consulting app, with early success meaning Uruguay was one of the first countries to be chosen by US groups to drive contact tracing technology.
In September, the country’s tech scene was once again in the spotlight after cross-border payment processor dLocal, backed by U.S. private equity firm General Atlantic, raised $ 200 million to become the world’s first unicorn in the world. ‘Uruguay.
“We are setting the bar very high,” Omar Paganini, Uruguay’s industry minister, told the Financial Times. “If Uruguay could become a player in this area, it would be very valuable for the country. This goes beyond our government, it is a state policy, ”he added, explaining that the technological sector is considered of strategic importance.
Uruguay relatively new The Conservative government wants to emulate the success of countries like Israel, another small open economy with a thriving technology sector. While the country’s economic and political stability means that it is often compared favorably to its neighbors, its pandemic management in one of the most affected regions in the world, has further polished its image.
Small countries like Uruguay, which has a population of 3.4 million, should focus on “developing and attracting talent and entrepreneurs, and being a relevant part of the [global tech] ecosystem, ”said Francisco Alvarez-Demalde, Managing Partner of Riverwood Capital, a Silicon Valley-based private equity firm. “The reality is that the most successful companies in technology operate in a parallel universe without geographic boundaries,” he said.
Still, Uruguay’s small size has been a factor in its success, forcing businesses to look beyond its national borders early for growth. This is the case with dLocal, which has almost doubled in size every year since its launch in 2016 and is now valued at $ 1.2 billion.
It started expanding overseas almost immediately and now operates in 20 emerging markets in Latin America, Asia and Africa, providing services to companies like Amazon, Spotify, Uber and Booking.com.
“For us, it is essential to continue to develop. At the end of the day, if you want to be a global emerging market payments company, you have to be in most emerging markets, ”said Jacobo Singer, COO.
They’ve also been successful in attracting talent from elsewhere: earlier this month, dLocal hired two senior executives from Free market – the largest online commerce and payment system in Latin America and based in the buzzier of Buenos Aires – to be its financial and technical directors.
About two-thirds of its roughly 300 employees are based in Montevideo, the laid-back capital of Uruguay on the banks of the River Plate. “Uruguay has played an important role in equipping us with great talents,” Singer said.
Analysts attribute Uruguay’s technological success to several factors, including the concerted efforts of far-sighted governments to promote entrepreneurship and innovation dating back more than half a century. In the 1960s, Uruguay became by far the first country in the region to introduce computer science degrees – just two years after MIT. More recently, it became the first country in the world to implement a one-laptop per child program in public schools in 2007.
Such policies have enabled the country to exceed its weight in technology. “The whole of Uruguay is smaller [in terms of its population] than a district of São Paulo ”, underlined the general manager of GeneXus, Nicolás Jodal.
A well-educated population and the creation of free trade zones in a context of political and economic stability have proven to be fertile ground for the nascent technology sector. One of the early successes was the creation of Scanntech in 1991, which provides retail and payment software, and is supported by Sequoia Capital.
“Covid was just the icing on the cake,” said Ivonne Cuello, executive director of the Association for Private Investment in Latin America (LAVCA). “What normally happens in a decade in Latin America happened in a few weeks.”
Although Brazil, followed by Mexico and Argentina, has always attracted the lion’s share of venture capital to the region, she says Uruguay has shown that it is now possible to produce unicorns and attract global investment funds to smaller countries as well.
Other Uruguayan start-ups that have attracted funding from international investors in recent years include Meitre, a restaurant management platform in which Andreessen Horowitz invested $ 1.6 million last year and the platform -Bankly digital banking form that raised $ 5.3 million from impact-focused private equity firm Elevar. Equity in 2018.
Ms. Cuello argues that Uruguay’s relative minnow status is beneficial in another way: “In the beginning, in Silicon Valley, it was a small ecosystem with a small, highly educated population. So when you have that, and people get to know each other, you start to see a momentum. It’s like you can feel that in Uruguay [now],” she said.
Despite the success of dLocal, the big technology challenge in Uruguay and its neighbors remains funding. There are no venture capital funds in the country and very few elsewhere in Latin America.
For Jodal, the biggest concern is keeping pace with the ever-changing innovation in the world. “Our main goal is to stay up to date. Right now I’m looking at China. I don’t want to be surprised by what’s going on there, ”he said.
But by nurturing the talents that allow the sector to grow, Uruguay could also benefit from continued economic decline.
Many wealthy entrepreneurs – including MercadoLibre co-founder Marcos Galperín – have already chosen to settle in the country. As Mr. Alvarez-Demalde points out: “Once you have the talent in one place, a lot of good things start to happen.”