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New generation of Latin American tech 'unicorns' making mark
[MONTEVIDEO] Nubank is the online bank with the greatest number of clients outside of Asia. Fellow Brazilian startup 99 is a platform that connects 300,000 taxi drivers and chauffeurs to provide a competitive service in which passengers pay less while drivers earn more.
Rappi's orange clad bicycle couriers have sprung up in 27 Latin American cities offering services as varied as delivering cash and pizzas to walking dogs or looking for lost keys.
These are among a new breed of South American "unicorns" - young digital companies that defied struggling economies and flourished to such an extant they are now worth a minimum of one billion dollars.
Since the dot.com boom years, successful tech companies have sprung up all over Asia, the United States and Europe but Latin America remained a relative backwater.
Little by little, that's starting to change with a fistful of companies, mostly based in Brazil and run by dynamic young entrepreneurs, breaking the mold and acting as regional pioneers.
Brazilians 99, Nubank, PagSeguro, ArcoEducacao and Stone Pagamentos, along with Colombian Rappi, are the latest in the region to cross the billion dollar value threshold, and they've done so in ingenious ways.
What's more, their success is attracting unprecedented levels of investment.
500% GROWTH IN ONE YEAR
Six years after its launch, 99 became a unicorn this year after receiving a US$100 million investment from the Chinese Uber: DiDi Chuxing.
It's presence has spread to 500 cities and after riding out the recession from 2015-16, 99 grew 500 per cent in 2017, its 31-year-old president Matheus Moraes told AFP.
In order to do so, 99 had to overcome classic Brazilian problems relating to infrastructure and price competition.
"Our strategy is to offer more competitive fares with greater guarantees for the driver," said Moraes.
He says 99's 300,000 employees earn 20 per cent more than independent drivers, while its 14 million passengers pay 15 per cent less.
Nubank is a financial technology company created in 2013, whose founders - including 37-year-old Colombian David Velez - wanted to "break from the system's inertia" and demonstrate that "there are no sacred industries" without room for innovation.
In March, it surpassed the one billion dollar mark.
"The macroeconomic environment was a huge challenge given that since we launched, Brazil's gross domestic product has shrunk by eight percent," said Mr Velez.
However, legal barriers remain in an industry 90 per cent controlled by banks.
The overall aim, says Mr Velez, is to reach Brazilians excluded from the banking system.
"It's the first minute of the first half of the match," added Mr Velez.
Since launching in 2015, Rappi has spread into Colombia, Mexico, Brazil and Argentina. In September it received a US$200 million investment from a group led by Hong Kong-based venture capitalists DST Global.
Originally picked up by seed accelerator Y Combinator, which previously invested in the likes of Airbnb, Reddit and Dropbox, Rappi has since become the first Colombian unicorn.
Investment in such firms is on the increase with more than one billion dollars shelled out by risk investment funds in 2017, an unprecedented sum, according to Julie Ruvolo, the venture capital director at Latin American Association of Venture and Private Capital (LAVCA).
"In 2018, there were individual investments of more than US$100 million, with greater participation from global investors" such as SoftBank or Tencent, said Ruvolo, who expects new records to be broken this year.
Brazil led the way in 2017, attracting US$859 million spread across 113 agreements.
In the cases of PagSeguro's online payment system and ArcoEducacao's education platform, both gained value after launching on Wall Street.
Soon an Argentine company will be in that crowd, with video games and mobile apps developer Etermax approaching the US$1 billion threshold, according to a ranking list by Surfing Tsunamis and NXTP Labs.
Created in 2009 by Maximo Cavazzani, now 33, Etermax produced the Apalabrados game, which was the most downloaded in Spain in 2012, and Preguntados, which went viral in Finland, Turkey and the US, where it's known as Trivia Crack.
Argentina's economic problems have actually benefited creative entrepreneurs, Cavazzani says.
"In 2009, the global economic crisis wreaked havoc and Argentina was in a difficult financial situation and didn't have access to creditors," he said.
"That forced us to be disciplined from the first day."
Since then, Etermax has expanded into Germany, Mexico, Uruguay and soon Brazil, too.
But expanding a startup in Argentina isn't as easy as in Silicon Valley, where funds are readily available, Cavazzani says.
"We had to generate enough capital to meet the payroll from the beginning."
Added to that was the difficulty posed by a highly sophisticated product that requires a rare expertise.
Even so, Etermax is thriving and well on its way to joining the ranks of the increasingly commonplace Latin American unicorns.