The international success of some technology companies founded in the Argentine capital, innovation support initiatives and investment recovery are strengthening the Buenos Aires ecosystem. The strong entrepreneurial spirit of its people, who are adept at turning challenges into opportunities for innovation, is another contributing factor.
“It turns out that, if you don’t get a move on with changing the world, then it’s the world that will change you!”. It seems that the entrepreneurs of Buenos Aires have heeded the cry of Mafalda, the ingenious Argentine girl who stars in a comic strip devised by the cartoonist Quino. Although the country’s economy has taken a toll in recent years – the pandemic has deepened its main macroeconomic imbalances, according to BBVA Research – the city’s innovation ecosystem has carved out a space on the international scene.
Made up of 285 startups, the entrepreneurial hub in the Argentine capital – with a population of almost three million – is the most prominent of the country, the third largest in Latin America (behind São Paulo and Mexico City) and the sixtieth in the world according to StartupBlink. A unicorn (a startup worth more than €1 billion before being listed on the stock exchange) was also born recently in the capital – the fintech Ualá, which specialises in financial services management.
“There’s a vibrant and solid ecosystem because Argentine entrepreneurs are resilient and find a way to navigate the barriers there. The Argentine entrepreneurial gene has positioned us in a global playing field and there’s a seedbed of companies that are going to grow”, states Julia Bearzi, Executive Director of Endeavor Argentina, an international organisation that selects and supports entrepreneurs. But which factors are affecting that growth, and what are the features of the Buenos Aires hub?
The numbers have not made it easy. Argentina’s GDP contracted by 9.9% in 2020, one of the largest downturns in all of Latin America, according to ECLAC, the UN Economic Commission for Latin America and the Caribbean. Inflation stood at 50.9% in 2021, and the fiscal deficit broke a four-decade record. Despite this economic framework, there are reasons for entrepreneurs in Buenos Aires to be optimistic.
On the one hand, investment in Argentine startups increased from $41.5 million in the first half of 2020 to $210 million for the same period in 2021, according to the Argentine Association of Private Equity, Venture and Seed Capital. 67% of this figure went to companies in Buenos Aires.
On the other hand, success stories are coming thick and fast in the city. Other than Ualá, Technisys, a digital banking platform recently acquired by the US firm SoFi Technologies in a $1.1 billion deal, stands out. There have also been unicorns that have been publicly traded, including Globant, a multinational software company, and MercadoLibre, which has become an e-commerce giant in the region. “When they grow, entrepreneurs have the capacity to influence, inspire, mentor and reinvest in the next generations”, says Bearzi. Organisations that endorse entrepreneurial activity, like Endeavor, work with innovators to support and inspire them throughout their journey via different initiatives, such as programmes tailored to their business challenges, helping them to acquire skills and connect with a local and global network of mentors and experts.
In the public sphere, some progress is being made. In 2018 the country introduced an Entrepreneurs’ Law to streamline the creation of businesses, and recently passed the Law on the Knowledge Economy to promote the tech sector – Buenos Aires has signed up to this. “It offers tax incentives to the industry, which will be one of the major drivers of development in the future”, sums up Diego Fernández, the Secretary of Innovation and Digital Transformation for the City of Buenos Aires.
The local government has its own initiatives in place, having created the Innovation Park to encourage entrepreneurs, students and researchers to come together and generate “an ecosystem of resources and talent”, in Fernández’ words. It has also digitised some administrative processes and implemented a digital identity system, steps that have helped to improve formalities for businesses.
Financial inclusion in Latin America has grown during the pandemic, but there is still room for improvement. Buenos Aires’s Secretary of Innovation points out that much of the population is unaware that they are banked or continues to prioritise the use of cash: “There is huge potential in the fintech and crypto industries to facilitate inclusion, and we’re working to promote that”.
One example of this potential is the Buenos Aires startup Zolvers, a platform that specialises in household cleaning and maintenance. “Workers share a profile and choose the positions they want to apply for, and customers publish their requirements and pay a fee for the service”, explains CEO Cecilia Retegui.
The company started out with the support of the Nxtp Labs accelerator and the WeXchange programme, which is aimed at female STEM entrepreneurs. After closing several rounds of funding, it now connects over 13,000 domestic workers in Argentina, Chile, Colombia and Mexico. In addition, thanks to a partnership with BBVA Mexico based on open banking, Zolvers makes it possible for professionals to access banking services – they can create an account and automate their incoming payments.
The challenge of access to banking services and the depreciation of the Argentine peso have also fostered the use of cryptocurrencies and entrepreneurship in this area – 25 of the 268 fintech startups in Argentina focus on blockchain and cryptoassets according to the Argentine Chamber of Fintech, which confirms growing numbers of emerging financial projects.
Another sector with potential is agrotech, one of the tech trends of 2022 according to BBVA Open Innovation. The scale of Argentina’s agricultural production means that digital transformation is an opportunity, and there are already more than 40 startups dedicated to this.
The biotech sector, logistics and e-commerce are also experiencing an upturn. A benchmark company for the latter is Aper, which develops financial solutions and ran a successful pilot with BBVA Open Innovation in Argentina. “Our expansion accelerated with the pandemic – there were 40 of us before, and now there are 200”, says Santiago Cabanes, its Chief Marketing and Commercial Officer. “Bringing about that expansion remotely was a major challenge”.
Aper already operates in several Latin American countries and has talent of various nationalities working virtually, which has meant that they moved their headquarters from Buenos Aires to Miami. “We are getting into North America, and growing from the US gives us other connections to talk to technology partners. We’re also expanding in Europe and some of the management team has moved to Spain”, explains Cabanes. Their case is not unique – the Buenos Aires unicorn Mural, a digital whiteboard platform, is now based in San Francisco. “Our market is so small that entrepreneurs have to think global from the outset”, notes Julia Bearzi of Endeavor Argentina.
In order to make the Buenos Aires startup ecosystem more robust, StartupBlink and the experts we spoke to believe that specific measures are needed to prevent talent and companies from going elsewhere. Public support also needs to be strengthened, bureaucracy must be reduced and an overall improvement in the economic situation has to happen. All of this leads Bearzi to conclude that “Argentine entrepreneurs are like the lead characters in action films – everything’s a risk, but they have such passion that they keep going”. Although in some ways the world does not change, those in Buenos Aires with an innovative spirit are taking the reins to shape their own future and that of their country.