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Latam Accelerator Report 2015 - Fundacity

#LatamAcceleratorReport

The region

Startup accelerators play a major role in today’s tech world and new accelerator programs are launched almost everyday. According to Natty Zola (TechStars, MD) they became, “a proven way to quickly grow a startup by learning from experts, finding great mentorship and connecting to a powerful network. They provide resources that reduce the cost of starting a company and the early capital a team needs to get their venture off the ground or to achieve key early milestones. They have become the new business school.” In many ways, accelerators have become a rite of passage for thousands of entrepreneurs across Latin America (Latam) and around the world.

This report from Gust and Fundacity provides an exclusive inside look at accelerator programs in the countries across Latam. This report is a follow-up on the 2014 Accelerator Report and its objective is to understand how the accelerator industry has developed in the region, how accelerators are funded and monetized, while providing insights on the direction of the industry in the near future.

To create this report, we surveyed 100 organizations, out of which 62 qualified as accelerators and shared their data with us.

Total investment in the region

US$31,563,841

in 1,333 startups

by 62 accelerators

  • 442

    297

    306

    105

    61

    67

    32

    13

    10

    Latinamerica
    • Top countries by investment

    • Chile

      US$15,096,929

    • Brazil

      US$5,524,320

    • Uruguay

      US$4,373,900

    • Mexico

      US$2,702,592

    • Argentina

      US$2,385,700

    • Top countries by investment

    • Chile

      US$15,096,929

    • Brazil

      US$5,524,320

    • Uruguay

      US$4,373,900

    • Mexico

      US$2,702,592

    • Argentina

      US$2,385,700

24

Startup Exits Reported by accelerators in 2015

TOP 10 SEED ACCELERATORS

By capital investments

    • Chile

    Start-Up Chile

    US$7,049,130

    Chile | Public fund

    • Latin America

    NXTP Labs

    US$6,500,000

    Latin America | Mix fund

    • Latin America

    Wayra

    US$2,186,700

    Latin America | Private fund

    • Chile

    IncubatecUFRO

    US$1,500,000

    Chile | Mix fund

    • Argentina

    Incutex

    US$1,000,000

    Argentina | Mix fund

    • Mexico

    Startup Mexico

    US$840,000

    Mexico | Mix fund

    • Brazil

    Darwin Starter

    US$800,000

    Brazil | Private fund

    • Mexico

    Smart Impact Accelerator

    US$800,000

    Mexico | Mix fund

    • Argentina

    CITES

    US$750,000

    Argentina | Private fund

    • Chile

    UDD Ventures

    US$750,000

    Chile | Mix fund

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EVOLUTION OF THE ACCELERATOR INDUSTRY IN THE REGION

  • New accelerators

  • Year

  • The growth of the Latin American accelerator industry peaked in 2014.

  • Launched in 2010, Startup Chile is considered by most in the Latin American tech community to be the first pioneer in the Latin American accelerator landscape and one of the largest accelerators in the world.

  • Between 2009 and 2015, the number of Latin American accelerators grew consistently year-over-year.

  • In 2015, several new Latin American accelerator programs launched and this included Ideas Factory (Argentina) and Startup Studio Monterrey. However, some major accelerator programs came to a close in the same year and this includes iconic Brazilian accelerator, 21212.

  • The number of new Latin Americans accelerator launches has fallen in 2015. This may be an indication that the number of accelerator programs in the market has reached a saturation point in relation to the number of innovative ideas and tech companies that exist in the market. Nonetheless, more accelerators are entering the market year-over-year.

PROFIT OR NOT-FOR-PROFIT?


  • 73% of Latin America accelerators are for-profit organizations, one of the highest percentage in the world when compared to other regions.

  • 27% of Latin American accelerators are public not-for-profit organizations focused on economic development through entrepreneurship. Relying on public funds, they either target a specific region (Startup Chile, Softlanding UY) or a specific industry or technology (Emprende Fch). Many universities also run accelerator programs that seek to encourage entrepreneurship and innovation among students (UDD Ventures, Chrysalis in Chile, Macondo Labs in Colombia).

  • For-profit
  • Not-for-profit

SOURCES OF FUNDING


    • 100% Private funding

    • 100% Public funding

    • Mix of both (Public/Private)

    • Other sources


  • Accelerators stimulate growth of companies and this leads to job creation. In addition, they lead to innovations that can solve important problems faced by society both locally and globally.

  • Accelerators are difficult to monetize and fund in the short term (within 12 months) because early stage ideas usually require many years before they provide returns to shareholders. To support this period of growth, governments around the world provide subsidies and grants to stimulate new accelerators and help them operate.

  • Most Latin American governments are involved in growing their innovation economy and strengthening their startup ecosystems. Public investment organizations often use accelerators to channel their investments. INNpulsa in Colombia, MCTIC in Brazil, CORFO in Chile, and INADEM in Mexico are some notable examples.

  • In Latam, 42% of accelerators reported they either received a mix of private and public funding or were 100% publicly funded.

  • 52% of Latin American accelerators reported they are funded through private capital alone. This funding usually come from former successful entrepreneurs who became investors, individual investments or other sources such as angel groups, venture capital funds or corporate investment funds.

HOW DO ACCELERATORS GENERATE REVENUE?


    • Short term

    • Long term


  • Many Latam accelerators follow the traditional “cash for equity” model, first established in 2005 by Y Combinator. In exchange for investing a small amount of seed money into a startup (around $25,000 on average), accelerators will receive equity in the startup (usually between 5% and 10%).

  • Accelerators in Latam are more optimistic about their startups’ exits compared to other regions around the globe: 35% of Latam accelerators reported they expect to earn revenue from startup exits in the short term (within the next 12 months) and 79% reported they expect to earn revenues from exits over the long term (12 months or longer).

  • Since cash flow is typically re-invested by startups to grow the business rather than pay dividends and exits usually do not occur earlier than 3 - 5 years into a startup's lifecycle, accelerators generally would not make a profit on investment for several years. To make up for the expensive day-to-day upfront costs of operating their programs, accelerators have recently begun exploring new models that allow them to generate revenue. These alternatives include mentorship fees, renting out office space, hosting events, and corporate sponsorships and partnerships. 90% of Latin American accelerators plan to increase their revenue in the short-term by incorporating alternative revenue models apart from exits.

  • Similar to other regions in the world, a large number of Latam accelerators rely on corporations for revenue generation. 52% of the accelerators surveyed reported that corporate partnerships are an important revenue channel in the short term, and 50% in the long term (greater than 12 months). Similarly, corporate sponsorship also plays an important role for accelerator revenue generation: 37% of accelerators reported relying on corporate sponsorship in the short term and 35% in the long term.

  • We predict that the relationship between accelerators and corporations will grow significantly in Latam. An increasing number of corporations - both large and mid-sized - are looking to startups as a source of innovation to help improve operational efficiency. Startups are also increasingly looked towards for new or differentiated products that they can bring to market. Accelerators in the region, such as Aceleratech, have hired full-time staff to work on expanding and strengthening collaborations with corporations.

TOP 20 ACTIVE ACCELERATORS

By number of startups accelerated in 2015

    • Country

    • Accelerator

    • Startups accelerated in 2015

    • Chile
    • Start-Up Chile

    • 250

    • Mexico
    • Startup Mexico

    • 84

    • Mexico
    • Venture Institute

    • 38

    • Mexico
    • Angel Ventures Mexico

    • 38

    • Latin America
    • Socialab

    • 33

    • Mexico
    • BlueBox Accelerator

    • 32

    • Mexico
    • New Ventures

    • 30

    • Chile
    • IncubatecUFRO

    • 25

    • Chile
    • UDD Ventures

    • 21

    • Mexico
    • Smart Impact Accelerator

    • 20

    • Chile
    • Imagine Business Lab

    • 20

    • Colombia
    • MACONDO Lab

    • 20

See the full list

    HOT MARKETS

    in the region for the 2016

    % of accelerators that reported an interest in investing in these markets in the next 12 months

    • Internet of things

      74%

    • Education

      71%

    • Fintech

      71%

    • Health

      68%

    • Big data analytics

      66%

    • Saas

      58%

    • E-commerce

      52%

    • Mobile apps

      52%

    • Cloud services

      44%

    • Wearables

      40%

    • Biotech

      34%

    • Adtech

      27%

    • Cleantech

      27%

    • Drones

      27%

    • Social media analytics

      27%

    • Real estate

      19%

    • Others

      15%

    THE LOCAL INSIGHT

    "How do you think accelerators in your country are doing compared to the rest of the world's accelerators and what competitive advantages do you think they have?"

    • Rocio Fonseca - Start-Up Chile
    • Rocio Fonseca

      Start-Up Chile (Chile)

      When accelerators launched, most accepted promising startups based on their own criteria, without necessarily having a clearly defined focus. Now we observe three phenomena of us facing a more mature and focused ecosystem. Volume: there has been a growth in number of startups in the portfolio of accelerators. Focus: Most accelerators have strengthened their offerings in specific markets. Product Market Fit: Better matching of real needs seen in the market with solutions offered by startups

    • Marcus Dantus - Startup México
    • Marcus Dantus

      Startup México (Mexico)

      Several reasons explain the increased activity of the Mexican accelerators: the government has dedicated funds to new accelerators and to grow the number of startups that can be incubated / accelerated. There have also been major reforms, like the creation of SACs, which enable companies to register in one day for free. The number of students in Mexico have more than doubled in the last 10 years and Mexico also has the most number of engineer graduates per capita in the world. The student culture has changed as well: now they want to create businesses, instead of simply being employed in these businesses. Lastly, we are also in a demographic boom in Mexico: under-29 year olds constitute more than 50% of the population and over 50% are of working age.

    • Marcus Dantus - Startup México
    • Pedro Waengertner - Aceleratech
    • Pedro Waengertner

      Aceleratech (Brazil)

      2015 has been a very turbulent year in Brazil, both for the economy and politics. For instance, government startup funding through the program "Startup Brasil" and "Seed" stopped in 2015. Despite that, we have seen the quality of startups applying to our program increase vastly. We believe this is the result of two factors: a wider recognition of scalable entrepreneurship among young professionals and a decrease of attractiveness of traditional employment.

    • Sergio Delgado - daVinci Labs
    • Sergio Delgado

      daVinci Labs (Uruguay)

      Uruguay has positioned itself as a regional launchpad to help entrepreneurs and their businesses. The economic recession in the region has impacted growth in the industry. Public subsidies have been reduced and private sector involvement has decreased. This scenario requires us to be creative and always continuing to professionalize our services.

    • Sergio Delgado - daVinci Labs

    CONCLUSION

    Latin American countries, notably Brazil, Chile, Colombia, Mexico and Uruguay, have remained focused on growing their innovation economy and strengthening their startup ecosystems. Excluding non-cash based services, a total of USD $31,563,841 was invested into 1,333 startups in the region in 2015. Compared to 2014, this represents a fall in investments. However, the currencies of the five most active countries in the region - namely Argentina, Brazil, Chile, Mexico, and Uruguay - have all depreciated on an average of -23% in relation to the USD, causing investment amounts to appear lower than their value.

    In terms of the number of startups supported by accelerators, Brazil, Chile and Mexico have remained far ahead of other Latam countries. Despite a heavy recession and political instability that led to the cessation of two of the largest public sector programs providing funding to startups and accelerators (Startup Brazil and Seed), Brazil has maintained its 2015 ranking. Interestingly, Uruguay, one of the smallest countries in Latam with a population of 3.3M, has shown an incredible performance and accelerated almost twice as many startups in 2015 as in 2014. Additionally, the amount invested through Uruguay accelerators increased by nearly 600%, overtaking Mexico in terms of total cash invested in startups through accelerator programs. Uruguay's stability and business-friendly economic environment help attract investors to set up early-stage investment funds. However, over 50% of the investments in Uruguay were made through a single accelerator program (NXTP Labs).

    The number of new Latin American accelerator launches peaked in 2014 and growth has fallen since then. This may be an indication that the number of accelerator programs in the market has reached a saturation point in relation to the number of innovative ideas and tech companies that exist in the market. Nonetheless, even with several exits, more accelerators are entering the market year-over-year.

    We are seeing a shift from the traditional exit focused model towards a more diversified accelerator business model. Latam accelerators rely heavily on corporate partnerships and/or sponsorships to monetize. 61% and 63% of the accelerators relied on revenues from this channel in the short and long term respectively.

    THE REPORT

    • 100

      Institutions contacted

      12% more than 2014

    • 94

      Replies

      54% more than 2014

    • 62

      Accelerators

      29% more than 2014

    • 9

      Countries

      2 more than 2014

    Due to a current lack of consensus on the exact definition of an accelerator, it was important to define as clearly as possible what an accelerator was to compile the report.

    We used the following definition from Miller and Bound (2011), who define accelerators as having the following 5 features:

    1) An application process that is open to all, yet highly competitive.
    2) Provision of pre-seed investment, usually in exchange for equity.
    3) A focus on small teams and not individual founders.
    4) Time-limited support comprising programmed events and intensive mentoring.
    5) Cohorts or ‘classes’ of startups rather than individual companies.

    To collect data, we reached out to two or more team members from each organization. Not all accelerators replied and thus our data is not complete. Organizations contacted were asked to confirm whether they qualify as an accelerator based on the definition above. The data itself was self-reported by the accelerators via an online form. Fundacity and Gust have neither audited the data nor request any supporting documentation.

    Accelerator programs by country

    • Brazil

      26

    • Chile

      14

    • Mexico

      13

    • Argentina

      7

    • Uruguay

      6

    • Colombia

      5

    • Venezuela

      3

    • Peru

      1

    • Paraguay

      1

    Report by

    • Gust

    Created By Sebastien Brunet, Miklos Grof and Diego Izquierdo

    Collaborators: Julien Tubbs, David Blake, Tina Glickman, Greg Young, Zigis Switzer.

    #LatamAcceleratorReport

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