A mobility startup expansion opportunity
The LaTAM is huge!
Author: Sean Simpson, WIND Ventures
The typical approach for US startups has been to first dominate their home market and then figure out the right international expansion strategy. On the surface, it is not an unreasonable approach. Most US markets use the same language, payment systems, marketing channels, and so on which makes expansion very straightforward and scalable. But once a startup conquers the San Franciscos, New Yorks, and Chicagos, it might be worthwhile to look at whether the next US city is going to net benefit the startup more than an international option.
The common approach of holding off on international expansion until conquering the home market might not stand the test of time. And not to mention that while working on the next US market, a US or local startup competitor might be diligently working on that even better international market. Often there are first-mover advantages for mobility startups in these markets so considering international expansion opportunities along the way is, at a minimum, prudent. For many mobility startups, LatAm should be one of the markets to consider.
Fueling Growth into Latin America
From a mobility startup perspective, many Latin American markets share a lot of the same key characteristics of the best US markets. High population density (and getting higher with urbanization) and frustrating congestion mixed with a relatively young, tech-savvy connected consumer creates a perfect opportunity to find and deploy a better way of doing things. Further, Latin Americans have traditionally viewed private-car ownership as a luxury that many cannot afford but new shared-mobility services enable the benefits of private-car ownership without all the costs and complexities. This is evidenced by the success of US startups that have expanded to Latin America including Uber, Lyft, Didi and many others.
A Unique Cultural and Economic Landscape
And while similarities are important to understand, there are potential opportunities hidden within the differences as well. While large US mobility providers like Uber and Lyft constantly struggle with the costs of their drivers (one of the driving forces behind the push for autonomous), wages in Latin America are significantly lower. For example, Colombian gig workers at Rappi, a Latin American unicorn, earn between $2.30 and $2.90 per hour (Americas Quarterly) during the busiest parts of the day which is double the country’s minimum wage. In the US, the average Lyft or Uber driver wage is approximately five times higher (CNBC). This difference also shows up in the costs associated with many of the other mobility and micromobility support functions like charging, repositioning, maintenance, etc.
Another difference and potential opportunity is the power of brand in developing countries in Latin America versus developed countries like the US and many European countries. In a report on the value of brand in various regions of the world, Nielsen summarized that 68% of developing-market respondents preferred buying products from brands they knew versus 57% for developed-market respondents. Similarly, 22% of developing-market respondents said they purchased a product because it was from a brand they liked versus only 17% for developed-market respondents. (Nielsen) Startups with strong brands or the ability to partner with a strong Latin American brand can benefit from this preference, which continues to grow in importance in Latin America specifically.
An Additional Spark
Mobility startups that leverage electric vehicles (EVs) can additionally benefit from a third difference which is a more collaborative approach between the public and private sectors towards key EV enablers. These enablers include charging infrastructure, incentives, and preferential treatment of EV vehicles on issues like parking. It is also worth noting that Latin America leads the world in the adoption of renewable energy with more than 50% of their energy coming from wind, water, and solar. Individual Latin American countries like Costa Rica, Brazil, and Uruguay each have more than 80% of their energy coming from renewable sources. This is compared to under 15% in the United States. These amazing results are not by accident. Big companies are working closely with the government to remove roadblocks to widespread EV adoption so startups that can help accelerate that combined effort will have powerful winds at their backs.
Conclusion
To be clear, expansion to Latin America is not a one-size-fits-all opportunity; however, it’s definitely an opportunity worth exploring. There are nuanced challenges to be considered before launching in Latin America:
- Understand the similarities and differences between the US and LatAm markers and focus on the differences that could be net positives
- Consider your network and hiring
- Prepare to modify your platform for several different languages and currencies
- Learn the requirements and regulations: regulations can vary in all 33 countries
For a variety of mobility startups that are prepared to embrace the cultural and economic differences of the region, Latin America could not only be the next market on their roadmap, but it could very well end up being among their best markets over time.
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About Sean Simpson
Sean Simpson is a director at WIND Ventures, the newly established CVC arm for COPEC, a leading energy and retail corporation and one of the most valued brands throughout Latin America. Prior to joining WIND, he was an investment manager at GM Ventures where he led investments in the mobility, cybersecurity, digital media, and manufacturing spaces.
About Wind Ventures
WIND Ventures is located in the San Francisco Bay Area and is the newly established corporate venture capital (CVC) arm of COPEC, one of the leading energy companies in Central and South America and one of the most valued brands throughout Latin America (LatAm). WIND Ventures leverages COPEC’s significant resources to accelerate growth, primarily within Latin America, for startups and scaleups across the world within the new mobility, energy and retail sectors.
References:
https://www.un.org/en/development/desa/policy/wesp/wesp_current/2012country_class.pdf
https://www.nielsen.com/us/en/insights/article/2015/understanding-the-power-of-a-brand-name/
