Historically, Latin America has experienced significantly lower innovation levels than other areas worldwide. The Global Innovation Index 2024 which ranks the most innovative countries in the world has not included a single LatAm nation (excluding Brazil) in its Top 50.
Even the wealthiest countries in the region are lagging behind countries from other emerging regions: Bulgaria in Eastern Europe and Vietnam in South-East Asia are respectively ranked 38th and 44th while Chile, Mexico, Colombia and Argentina find themselves respectively at the 51st, 56th, 61th, and 76th position.
Several factors such as heavy bureaucratic procedures (it takes nearly 40 days to start a business in Bolivia vs. 1.5 days in Singapur[1]) and a solid risk aversion culture have severely hindered the innovation capabilities of the region.
However, the landscape is changing. The 2024 “Corporate Venturing Latam” report, co-written by Global Corporate Venturing (GCV) and Wayra Hispam (Telefónica’s Venture Capital arm and open innovation area, as well as a key partner of the EU-LAC Digital Accelerator), underscores the role of Corporate-Startup partnerships in fostering innovation in Latin America.
What is Corporate Venture Capital (CVC)?
Corporate Venture Capital (CVC) refers to large companies directly investing in startups or smaller firms, typically in exchange for equity.
Corporate Venture hence refers to corporations investing in startups to explore new technologies they can integrate while startups, in return, receive enough cash to move to further development stages (e.g. prototype to MVP) and reach new markets.
Some of the main survey highlights in figures
CVC is fueling innovation across Latin America
Corporate Venture Capital (CVC) in Latin America has witnessed exponential growth. Between 2020 and 2023, CVC activity in the region has doubled, with now 15% of venture capital deals involving corporate investors by 2023.
It is also worth noting that 53% of CVCs have separate venture and partnering programmes given that corporations:
- Understand the need for dedicated teams to find startups (44% of CVCs have tech scouting activities)
- Build ventures (49% of CVCs have programmes leveraging the resources, expertise, and networks of their mother organisation to develop startups).
By way of illustration, Cencosud Ventures, the venture arm of the Chilean retail giant Cencosud, has been actively investing in e-commerce and fintech startups to enhance its digital footprint and improve shopping experience.
Similarly, Krealo, the CVC of Credicorp, a leading financial services holding company, also invests in fintech startups with the medium-term goal of complementing Credicorp’s existing services.
Corporate Ventures embrace different venture strategies
CVCs in Latin America are developing hybrid venture models by blending venture-building strategies with venture-client ones.
Venture building focuses on creating new startups internally or with external entrepreneurs. This involves leveraging corporate resources and expertise to develop new business models that will align with the long-term objectives of a corporation. Spanish multinational company Telefónica, through its CVC Wayra Hispam, has, for instance, invested in several Latin American startups.
On the other hand, venture client involves corporations acting as early customers for startups by purchasing their products or services, providing immediate revenue and market validation without taking equity stakes.
By weaving both strategies together, corporations mitigate risk (a venture client approach does not require as heavy investments as for venture building) and yield short-term as well as long-term results.
Sustainability & Social Responsibility become an investment criterion
In a continent marked by massive gender and economic inequalities (LatAm countries have a Gini coefficient around 0.5[2] vs. 0.3 for EU countries[3] by way of comparison), CVCs increasingly prioritise high societal impact investments.
“Strategic investment holds the potential to deliver not only financial returns but also tangible benefits for communities. From job creation to the development of sustainable solutions, CVC in Latin America can serve as a model for how the private sector can actively contribute to the United Nations Sustainable Development Goals” says Sebastian González, Head of Innovation Services Spanish Latam at Wayra Hispam.
As a matter of fact, the hopefulness about CVC prospects for 2024 (38% rate the future outlook a 7 out of 10) is bolstered by significant capital flowing in particular into sustainability and energy transition themes.
To conclude, Spanish LATAM CVCs lead global peers on gender diversity with 39% of teams being gender-balanced and 22% being primarily or all female.
The Role of EU-LAC Digital Accelerator: Encourage Corporate Ventures across Latin America and Europe
Open Innovation invites organisations to solve their challenges by looking outside their organisations. In the EU-LAC Digital Accelerator, we make this process easy. We provide a multi-sided platform that connects business opportunities from corporates with solutions from startups and innovative SMEs.
You may be:
- A large corporation struggling to solve a challenge internally
- A startup keen on testing and improving your solution with a high-level international client
If so, and if you are based in Europe, Latin America, and the Caribbean, register now on our matching platform to find your next innovation partner.
[1] Source: https://www.indexmundi.com/facts/indicators/IC.REG.DURS/rankings
[2] Source: https://blogs.worldbank.org/en/opendata/key-facts-about-poverty-and-inequality-in-latin-america
[3] Source: https://www.statista.com/statistics/874070/gini-index-score-of-eu-countries/
