SoftBank Fund in Latin America: Signalling Takeoff

Ana Sofia Almagro
Apr 5, 2019 · 6 min read

“Latin America is on the cusp of becoming one of the most important economic regions in the world, and we anticipate significant growth in the decades ahead,” Masayoshi Son, chairman and chief executive officer of SoftBank Group

Latin America has been giving strong signals to the international community of it’s large potential as an entrepreneurship hub…

… these signals have been attracting some cautious (usually late stage) international participation and investment (Rappi, Nubank), but SoftBank’s $5B LatAm-only fund is a signal that could accelerate the shifting dynamics of entrepreneurship in the region — Hiring is already happening!. What could this announcement mean for the different stakeholders and players in the ecosystem?

São Paulo

To Founders: Think Bigger

  • Differentiate: As with the early Chinese start-up ecosystem, some of LatAm’s startups (and arguably some of the most successful — MercadoLibre, Rappi) are considered copycats, but as the ecosystem matures we will see a rise of a new generation of start-ups from the founders of these successes bringing new and regionally unique business models to local problems (TechCrunch). It is now a good time for the LatAm “PayPal” mafia to launch a new generation of differentiated companies.
  • Come to LatAm: Mature innovation ecosystems have been seeing increased competition, difficulty differentiating but have remained where they are due to the easier access to capital. With potential for large rounds in a less competitive market with a large consumer base starting a new venture in LatAm is a no brainer, lower costs, ample opportunity to solve consumer pain points, and now access to capital, could we see outside talent led start-ups, reverse brain drain? Postmates and Ofo (Chinese ridesharing unicorn) both chose Mexico as their first international expansion market.
  • Act Regionally: “[LatAm] has less unification on both a geographical and legislative context. Overcoming this requires the cash to match the ambition” (Alex Graham). Outside of the Brazilian ecosystem, start-ups that have succeeded have been those with international teams and / or international plans. Latin America remains a difficult region to navigate but with big payoffs if done right — bigger rounds will facilitate navigating these transaction costs and founders should make sure to dedicate funds to navigating these.
Ciudad de México

To VCs: Think Local

Local VCs — Be Leaders

International VCs — Follow the Lead

Santiago

To Enablers: Think Ecosystem

Corporates — Be the Center of the Ecosystem

Accelerators / Incubators — Build Ecosystems

Alongside the wave of optimism and activity that will continue to inspire LatAm, there are some points to consider.

  • Entrepreneurship starts hyper-local: LatAm is not unfamiliar with foreign business interests investing locally; it is often welcomed if done with local-buy in. If SoftBank wants to create a transformation in the region that will spark the kind of win-win growth they speak of, it will require involving local investors, entrepreneurs, and ecosystem players who are familiar with the “jobs to be done” of the region.
  • Then what? As SoftBank deploys large rounds in transformative Series A rounds questions will begin to arise for when those start-ups need Series B or C rounds, if the capital for continued growth is not deployed this initial wave of liquidity could lead to the kind of capital flight the continent has seen before in prior waves of Foreign Direct Investment. Hopefully, international VCs will be paying attention and wanting to be involved in bigger numbers.
Bogotá

For more juicy numbers, region overview, and a look at some of the regions’ best local sources of information see below:

Founders Intelligence

A new type of strategy consultancy, we enable at-scale organisations to reinvent their industries through technology.

Thanks to Hendrik Jandel

Ana Sofia Almagro

Written by

Passionate about entrepreneurship, especially in Latin America

Founders Intelligence

A new type of strategy consultancy, we enable at-scale organisations to reinvent their industries through technology.

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