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Angst about Argentina

Jonathan Ortmans on September 24, 2012 Source: Policy Dialogue on Entrepreneurship

Argentina has been in the news lately for its expropriation of a Spanish oil company and other strong regulatory interference, such as price and import controls. With this image reflected in the media, we decided to check back on activity that Argentine entrepreneurs and the organizations that support them are carrying out to sustain and promote entrepreneurship.

I was glad to find that Argentina’s “bottom-up” entrepreneurship culture I reported on in September 2010 very much alive and well. According to recent data, Argentina saw further increases in its entrepreneurial activity in 2011 and also stood out when it comes to the participation of women in entrepreneurial activities. By 2011 estimates, one-third of Argentina small businesses are started by women who credit aggressive networking. Further, despite the unfavorable environment for foreign investment, global entrepreneurship gurus like Dave McClure with his 500 Startups and Geeks on a Plane, now appear to be looking in Argentina for high-impact start-ups.

There are many organizations trying to increase cultural awareness of entrepreneurship and improve access to capital, information and networks. Endeavor, for example, bet on entrepreneurship in Argentina when it decided to open an office there and develop a structure to cover six provinces of the vast country. Since then, it has selected around 100 local entrepreneurs whose work has created more than 50,000 jobs. The objective of Endeavor, as explained by its executive director, Alejandro Mashad, is to nurture promising businesses by connecting them to the resources they need to move quickly through the crucial stage of scaling up from 50 to more than 250 employees. Endeavor has backed Globant, an Argentinean software development house with major customers around the world, such as Google. Started in 2003, it has grown to have more than 2000 employees and global operations. Its CEO, Martín Migoya, explained to FastCompany that he noticed a negative perception of successful entrepreneurs. "They think that if someone is getting ahead, then they must be cheating or doing something wrong," he said. Other entrepreneurs have felt the same. Perhaps this attitude is a vestige of the country’s history in the second half of the 20th century when leaders clearly concentrated wealth into the hands of “politically connected” people.

Despite cultural barriers, the tech community is growing in Argentina, determined to remain as strong a participant in the field as in the 1990s, when it boasted to the world the country’s creative web startups and a top-notch tech workforce. Even in the early 2000s, despite the currency crisis, Argentina’s lower labor costs attracted high-tech investment. Now the scene has evolved with local and foreign players interacting in Buenos Aires and Cordoba, a city known for its tech businesses. For example, a tech accelerator launched in Buenos Aires in 2011, NXTP Labs, received numerous applications earlier this year for its second batch of startups. This is not surprising since the second highest amount of applications received in neighboring Chile’s Start-Up Chile first round were from Argentina. Earlier this year, NXTP Labs opened its second round to Chilean entrepreneurs. This accelerator targets startup projects focused on social networks, technology, mobile, internet, software, media and entertainment. Last year, it worked with 15 Argentinian startups, 60% of which raised their first round of capital. Encouraged by these results, the accelerator plans to conduct two acceleration cycles every year and nurture 200 startups by 2018, from Argentinean and foreign entrepreneurs wanting to launch their startup in Buenos Aires. They are betting on turning the city into a regional leader in business development with a focus on technology.

Then there is Palermo Valley, an NGO that organizes networking events almost monthly for 500+ entrepreneurs and related tech community. Palermo Valley has helped connect Argentina to other startup ecosystems by, for example, arranging for Argentinean start-ups to carry out pitches in Silicon Valley. Startup Digest Buenos Aires, in turn shows these and other tech events every week. Argentinean tech start-ups brag that the country is the birthplace of some of Latin America’s biggest tech successes, namely Globant, Mercado Libre, and OLX. Mercado Libre is the main e-commerce website in the region, present in 12 countries and in Nasdaq (MELI) since 2007. Hernan Kazah and Marcos Galperin, then students at Stanford, started it in 1999 and it quickly grew to become one of the most successful companies in the region. Olx.com, started in Buenos Aires in 2006, is the main free classified provider in India, Portugal, Mexico and South America. It is used in 96 countries and has classifieds in 40 languages. And pulling all this together is a robust Global Entrepreneurship Week campaign in Argentina aggressively legitimizing entrepreneurs with one voice on the national stage.

Entrepreneurship support is also gaining stronger traction in university education. The Center for Entrepreneurship at the IAE Business School offers one of the most prestigious programs in Latin America. Universidad de Palermo holds talks about entrepreneurship, inviting local and foreign entrepreneurs to share their experiences. The University of San Andres, in turn, is Argentina's top business school and often a case study for entrepreneurship education in the region. This school is proud that Wences Casares, an Argentinean serial entrepreneur, is among its alumni. Despite these advances at the university level, Argentina still seems to be a long way from inserting entrepreneurship education in the curriculum at all levels.

By some estimates, one in seven Argentines are involved in some type of entrepreneurial activity. These entrepreneurs are courageously and decisively facing growing government encroachment on private businesses, corruption and lack of judicial independence, as monitored in the Index of Economic Freedom. Doing Business data shows that establishing a business takes 14 procedures, which is twice the world average of seven procedures and higher than the regional average of 9—and getting necessary permits is costly and time-consuming.

Another downside of this startup ecosystem is that capital is still scarce, particularly these days where not even the President’s strict controls can contain capital flight. Moreover, the country is still recovering from its 2001 crisis and rampant inflation is the norm.

Despite these hurdles, there is hope to increase the number of scalable, high-impact entrepreneurs, who will then become angel investors and mentors, helping and supporting a new batch of entrepreneurs in Argentina. As to the challenges, Vanesa Kolodziej, founder of Palermo Valley saw it as an asset for toughening Argentinian entrepreneurs. Such reality, she said, simply “demands that local entrepreneurs develop a special stamina to deal with uncertainty and chaos”. I am not sure we should seek problems for their gifts, but I like her attitude. Entrepreneurs around the world should take note.

Category:  Global  Tags:  Argentina, Endeavor, Globant, Palermo Valley, NXTP Labs,

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