This June, after finishing the first year of an MBA program, I moved down to Bogotá, Colombia to become a summer intern at a taxi startup called Táximo. My friends wondered why—after all, I could hardly speak Spanish, and Táximo was far from the kind of company that attracts buzz on TechCrunch and Twitter. The answer, simply: I was drawn to the startup’s mission. Táximo is a taxi operator that aims to disrupt a mature industry in every aspect. For example, it seeks to redefine the customer experience and give drivers a career path. Its founders asked me to advise them on technology issues—Táximo is not strictly a tech firm, but technology systems in its cabs and in the cloud nevertheless are crucial to its operations. I thought this was a unique way to apply the knowledge I had acquired in business school and the experience gained from several years of developing products for San Francisco startups. And while most of my classmates joined large established companies in the U.S. and Europe this summer, I was excited to gain an insider’s perspective on startups in an emerging market.
The startup scene in Colombia is tiny. The Bogotá Internet Startups Meetup has 94 members, whereas a similar Meetup in Evanston—a city 1% of the Colombian capital’s size—has 331. Still, the small community of entrepreneurs in Colombia has a great passion to build businesses that impact millions of people. I learned about the opportunities and challenges that local startups face by working closely with Táximo’s team and also by going outside of the office and participating in technology meetups, attending startup demo events and talking with entrepreneurs based in Bogotá. Here are the three biggest lessons I learned about starting a technology-driven business in Colombia.
1. Mentorship is essential to support startups in markets without a culture of entrepreneurship.
This summer I met several Colombians who were interested in starting ventures but lacked the confidence to follow through. Since the startup scene in Colombia is so small, they didn’t know any successful entrepreneurs that could show them how to take an idea and build a company from it. One young developer in Bogotá I met wanted to launch a mobile app company, but without mentors in his network, he felt compelled to travel all the way to Stanford to attend a startup bootcamp.
Yet in an interesting reversal, entrepreneurial expertise from the U.S. is coming to Colombia. Colombian entrepreneurs who found success in the States are seeing increased interest in startups in their homeland and returning to guide the next wave of founders. I spoke with one such repatriate, Alan Colmenares. Alan is a Silicon Valley veteran who moved back to Colombia and is now the Program Director of Socialatom Ventures, a startup accelerator. I sat in on one of its weekly Pitch Days, which showcase ten ideas for ventures focused on Latin America, and I was impressed by the variety and potential of the ideas. At a tech meetup, I met Alex Torrenegra, who moved to New York from Colombia a decade ago and founded Voice123, a voiceover service based in New York. After that venture took off, Alex returned to Bogotá to create HubBOG, a startup accelerator that also hosts entrepreneurship courses and provides a co-working space. The Kauffman Foundation, the philanthropic organization dedicated to promoting entrepreneurship worldwide, is becoming active in Colombia, too. It has gone all over the country to hold Startup Weekends, and a recent one in the Colombian capital drew over 60 participants and industry experts from around the world. The support of mentors that guide ideas into businesses is critical to catalyzing a nascent startup scene in countries like Colombia.
The author (far left) attending a tech meetup at a Bogotá co-working space
2. A startup boom happens only with the backing of investment institutions.
The CEO of Táximo, Antoine Dumit, lamented to me that venture capital is largely absent in Colombia. Almost all Colombian financial institutions that make private investments consider only enterprises with substantial revenues, and they lack the expertise to evaluate startups. As a result, it is much harder for entrepreneurs to raise capital in Colombia than in the U.S. And while many aspects of building a startup are easy now because of globalization—entrepreneurs anywhere in the world can hire high-quality programmers in another country and use services hosted in the cloud—it’s nearly impossible for a startup in a country like Colombia that lacks a strong entrepreneurial culture to gain the attention of a foreign VC firm. This is true especially when the startup’s business model is focused initially on the local market.
A new model to connect emerging-market startups to capital is materializing—with the help of government. The Chilean government created Start-up Chile, which attracts top-notch entrepreneurs from around the world. The government gives them $40,000 in seed funding, and it has the clout to provide them access to local investment firms. The promise of the program is to make Chile a self-sufficient hub of entrepreneurship funded by local VC’s—and someday even featuring offices of international VC firms. Not content to let Chile attract all the innovation in South America, the Colombian government is getting in the game. It launched Apps.co, a program that helps entrepreneurs bring ideas for mobile apps to market and connects them with investors. As of now, the Colombian government does not grant any of the participants with seed money, so it remains to be seen how seriously VC’s view its commitment to promoting entrepreneurship. Still, Apps.co is certainly a good sign of greater institutional support of startups in Colombia.
3. A climate of distrust hinders startups.
Perhaps the most shocking thing I observed this summer was the epidemic of distrust in Bogotá. I heard dozens of nightmarish stories, from the landlord that kept his tenant’s deposit to the policeman that demanded a bribe to investigate a robbery. But most of the anecdotes revolved around taxis. Many Bogotanos suspect that taxi drivers cheat them by taking indirect routes or tacking on dubious surcharges, and most locals have heard sensational stories of “millionaire rides”, in which accomplices of the cabbie enter the car, point a gun or knife at the passenger and force him to withdraw bundles of money from ATMs around town. (This actually happened in June to an American DEA agent stationed in Bogotá. He resisted his attackers and tragically was stabbed to death.)
I bring up distrust to highlight certain challenges facing Colombian startups. At Táximo, some of the problems I tried to address involved the customer experience in the cab. How could a customer show the driver her Táximo membership to gain access into the vehicle? I suggested using a mobile app. I didn’t know that the average Colombian is afraid to pull out a smartphone on the street for fear of attracting muggers. How could customers pay for rides without using cash (which makes the driver vulnerable to robbers)? The answer wasn’t credit cards, which I learned are seldom used by the middle class because of exorbitant interest rates. We ended up designing a much more complicated system using prepaid accounts, cash-accepting kiosks, NFC cards and in-vehicle card readers.
Indeed, distrust was the most insidious obstacle to entrepreneurship that I encountered this summer. American startups take advantage of an infrastructure that simply doesn’t exist in Colombia because of widespread suspicion of peers and institutions. Uber grew quickly in developed markets where it is remarkably easy to pay for services using your mobile phone. EBay became a billion-dollar company not only because of people’s good faith but also because of a reliable postal system that Colombia’s does not come close to matching.
Amid the climate of distrust, there is hope. Colombia’s systemic problems can be viewed as huge opportunities for startups to address. Certainly, Táximo is seeing the taxi industry that way as it tries to build an operation that customers can trust. What makes emerging markets like Colombia worthy of entrepreneurs’ attention is that they can improve the lives not just of technophiles but also of millions of ordinary people.