Peru’s Top Startup Trends

By Ana Sofia Almagro, Associate

About the ‘Peru Startup Snapshot’ Series: In late 2017, we surveyed over 25 startups, investors, ecosystem builders, corporations, and NGOs to take a pulse on Peru’s upcoming startup ecosystem.

In the 2nd article in this series, we present the top trends we’re seeing in Peruvian startups.

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In the previous post, we presented Peruvian startups to watch in 2018, but we couldn’t resist diving deeper into the broader Peruvian startup landscape. PECAP, the Peruvian Seed and Venture Capital Association, has also conducted a mapping of current startups and investment trends, and Finnovista has a fantastic review of Peru fintech.

Here is our (non-exhaustive) mapping that segments startups to reflect the key trends we are seeing on the ground, most notably:

• Plenty of Platforms
• B2C Fintech
• Food Feast

Overview of Peruvian Startups

We’ve taken a sample of Peruvian startups and categorized them to explore their concentration and explore key trends.

Plenty of Platforms

HBR’s “Pipelines, Platforms, and the New Rules of Strategy” advocates for companies to think about strategy and growth centered around network effects that unlock broader resources than those typically obtained alone, and which leverage and optimize external interaction — platforms. The nascent Peruvian startup ecosystem has responded to the demands of a customer base whose demands are not currently being met — the emerging middle class. Startups are leveraging principles of network effects by offering freemium products, and services that are targeted at this broader market segment. Brick-and-mortar banking and mom-and-pop shops have been the norm for financial services and purchasing. By focusing on offering similar but better services, or complementing existing services, startups are creating healthy competition to drive innovation among the existing mature companies. Notably, they are using as their primary levers the reduction of transaction costs and their ability to connect players in the market that had previously not been connected. Some examples of platform startups can be found in fintech (Seguro Simple, Solven), food delivery (PedidosYa), restaurant reservations (Mesa24/7), and online education (Laboratoria, Crehana).

Why is this interesting? Because large Peruvian companies have been late to roll out their own effective platforms (customer facing experiences) and have struggled to grow their customer bases. Due to their advantageous business models, technology, and network effects, platform startups could grow more rapidly by partnering with large companies. In other words, if large companies realize the value of startups for connecting with their customers, and startups can communicate this value proposition, they could both capture new market segments and foment each other’s growth. Could this change the narrative of disruption? More on this theme in the next post.

B2C Fintech

Latin America is generally characterized by high mobile penetration, high economic growth, and a growing middle class, but low financial inclusion. The region is booming with fintech solutions (Finnovista estimates ~700 fintech startups across the continent) led by Mexico, Brazil, and Colombia; and Peru, 6th in the region, is developing home-grown solutions to address Peruvian needs. Although banking is traditionally a conservative sector, fintech is one of the biggest sectors with startups emerging in Peru, highlighting that customer segments and needs are not being addressed by banks. Fintech is such a big segment of the startup ecosystem that some of the most prestigious accelerators have chosen to focus almost exclusively on this segment, in particular Emprende UP led by Javier Salinas, who also hosts the largely attended Lima Fintech Forum.

Interestingly, something that is characteristic of Peruvian fintechs is how many of them are tailored to end consumers and not banks themselves. This highlights a deep customer need that banks aren’t meeting– transparency, liquidity, ease of access, and/or not enough variety of products to suit different consumer demands (meanwhile fintech startups are filling this need by leveraging a marketplace — via a platform model). It also speaks to the maturity of the Peruvian financial ecosystem that few financial enterprise solutions are being developed. One interesting solution that does address internal company needs is Hello Zum, whose vision is to transform insurance in Peru from the inside out, working with corporations and offering them a service to analyze their internal data sources while providing consumers transparency.

Although there is an unmet opportunity to connect with Peruvian consumers, Peruvian fintech startups will have to prove their value proposition to consumers quickly and effectively in their local market and then be able to compete regionally before other regional players view Peru as a market opportunity. There are already regional players in fintech who are eyeing the Peruvian market as an opportunity to expand and test their solution before moving onto bigger markets like Mexico. This includes Pago Flash from Venezuela, which participated in Google Launchpad’s one-week accelerator program in Lima, as well as Startup Grind and Increase from Argentina, which recently scouted Lima as their point of expansion from Buenos Aires.

Food Feast

Peru’s impressive economic growth has been possible in part due to the increase in export-oriented agriculture, and the country has a comparative advantage in “superfoods” — from avocados, blueberries, dark chocolate, and quinoa — that are popular with millennials around the world. Peruvian gastronomy is of course also widely regarded; in Peru it is often said that chefs are celebrities. If Peru is well-known for its food, and an as agriculture hub, it also begs the question: what else can entrepreneurs be doing to marry Peruvian food, agriculture, and tech?

Peruvian entrepreneurs have recognized the market opportunity to embrace Peru’s agriculture, gastronomy fame, and global wellness trends to create value-added products from these inputs. These “startups,” if they can still be labeled as such, can readily compete in an already crowded market with the likes of Cliff Bars and other colorful gluten-free, vegan, protein bars you can find at your local health store or climbing gym. Now, the time is ripe for food, wellness and food tech investors to make their mark, investing in these players to take them to international renown — this is a great opportunity for food entrepreneurship if these Peruvian companies manage to attract food-oriented corporate VC investors, a globally growing sector of VCs. Some of these Peruvian startups have shown impressive traction in a relatively small market such as energy bar, Anku, with sales in the tens of thousands and only a couple of years in operation. With a team of two, they do not have a fancy website or pitch deck, but their product speaks for itself in sales and ability to dominate CrossFit gyms throughout Lima. With the right coaching from players such as Startup Grind (where Anku competed) paired with savvy partners or investors, there is substantial room for growth and the emergence of a new thriving industry, despite its scaling challenges.

Notably, there is a large opportunity for agtech to grow in Peru, though there have been few agtech startups to date relative to its agricultural neighbors Brazil and Argentina (SpaceDat being the most well-known in Peru). This is a growing area where we are seeing entrepreneurs who are willing to step out of Lima to innovate for sectors of the “real” Peruvian economy. Agtech and foodtech pose an opportunity for Peru to rise from its history of mostly raw agricultural production into value-added products and higher margins.

Potential for Impact

In a country where wealth inequality is a problem, the opportunity for businesses to complement or supplement the needs not being met by public institutions is high. This will be an area to watch as some of the high impact businesses that arise also reach the top of the most promising startups for Peru. Two of the startups from our Top 10 list could also be classified as impact-oriented companies!

Many of the startups arising in Peru are also embracing the potential to create impact in the country as part of their value proposition. Notably, Laboratoria (coding school for girls), Sinba (circular economy — from restaurant food waste to animal feed), and Marana (responsible chocolate “bean to bar”) have all embraced the potential for positive impact and responsible enterprise as a core pillar of their business. In Peru, the opportunity for high impact and B-corporations is also being matched with impact-oriented accelerators such as the Fledge Accelerator, which focuses solely on impact businesses. Sistema B also tracks some of the companies in Peru who have sought B-Corporation denomination.

What’s Next?

In our next post, we’ll dive into further analysis of the Peruvian startup ecosystem — What is Peru’s potential for entrepreneurship and how do we get there?

Part 1. Peru Top 10 Startups to Watch in 2018

Part 2. Peru’s Top Startup Trends

Part 3. Peru’s Potential: Driving Innovation & Opportunities

Part 4. Achieving Peru’s Potential for Startup & Ecosystem Success

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About I-DEV International:

I-DEV is a strategy and investment advisor focused on building leading businesses in emerging markets. Across its offices in San Francisco and Nairobi, I-DEV is focused on following and featuring key trends and opportunities for investors and others interested in the local entrepreneurial ecosystems.